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Hong Leong Asia ends 2Q with net loss of $18.2 mil on tough operating environment

PC Lee
PC Lee • 2 min read
Hong Leong Asia ends 2Q with net loss of $18.2 mil on tough operating environment
SINGAPORE (Aug 12): Hong Leong Asia has reported a 2Q net loss of $18.2 million compared to a net loss of $18.3 million a year ago as the operating environment in China and Asia continued to be challenging.
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SINGAPORE (Aug 12): Hong Leong Asia has reported a 2Q net loss of $18.2 million compared to a net loss of $18.3 million a year ago as the operating environment in China and Asia continued to be challenging.

The group’s gross profit was $180.8 million in 2Q17, a decrease of $13.6 million or 7.0%, from $194.4 million in 2Q16. Gross profit margin was 17.6% compared to 19.6% in 2Q16, a decrease of 2.0%.

Hong Leong Asia says this was mainly due to the drop in gross profit margin for Building Materials Unit (BMU) in a price competitive environment in Singapore and Malaysia.

In addition, gross profit margin of Xinfei, the consumer appliance arm of the group which manufactures fridges and freezers, was lower due to continual price competition in China.

Revenue in 2Q rose 3.5% to $1.02 billion from $994.2 million a year ago. Revenue for Yuchai, its diesel engine manufacturing arm, increased by $64.2 million or 8.3% as compared to 2Q 2016.

While China recorded a GDP growth of 6.9% in 2Q17, Xinfei’s revenue decreased by $2.3 million or 2.6% as compared to 2Q16. This was mainly caused by price competition in China, which resulted in lower average selling prices.

Similarly, although the Singapore economy grew by 2.9% in 2Q17, the republic’s construction industry has been declining since 3Q16. This slow growth had an adverse impact on the operating performance of BMU which saw revenue decreased by $29.7 million or 24.7% compared to 2Q16.

In Malaysia, Tasek Corporation, the group’s subsidiary and cement producer, faced intense price competition due to excess cement capacity and the lower net income in 1Q17 continued into 2Q17.

For the 1H, losses narrowed 19.5% to nearly $28 million as profits from Yuchai were not sufficient to offset the loss incurred by Xinfei.

In its outlook, Hong Leong Asia expects the market conditions to remain challenging.

Shares in Hong Leong Asia closed at $1.08 on Friday.

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