SINGAPORE (Nov 14): Hong Leong Asia saw losses in 3Q17 widened 26.2% to $17.6 million from a loss of $13.9 million in 3Q16.
Revenue for the quarter was up by 16.1% to $963.2 million from $829.8 million a year ago, mainly due to revenue growth recorded by Yuchai which was partially offset by the revenue decline of BMU and Xinfei.
Yuchai’s revenue increased by $172.3 million or 28.8% as compared to 3Q16. It sold 82,839 engines in the quarter, an increase of 25.5% or 16,826 units as compared to 66,013 units sold in 3Q16. The increase in engine sales was mainly due to the rebound in the sales of truck and off-road engines, while bus engines sales softened.
BMU’s revenue decreased by $14.0 million or 12.2% as compared to last year, due to lower sales from the precast division in Singapore. In Malaysia, the decrease in revenue was mainly due to lower demand for cement in the domestic market and price competition.
Xinfei’s revenue decreased by $24.4 million or 24.5% as compared to 3Q16, mainly caused by price competition and excess capacity in China, which resulted in lower average selling price.
Similarly, cost of sales increased by 18.6% to $783.5 million compared to $660.6 million last year.
Hence, gross profit for 3Q17 stood at $179.7 million, 6.2% higher than $169.2 million recorded in the same period last year.
Gross profit margin dropped to 18.7% in this quarter from 20.4% in the previous year, mainly due to the drop in gross profit margin for BMU in a price competitive environment in Singapore and Malaysia.
Other income increased by 46.5% to $11.6 million from $7.92 million in the previous year, due to higher interest income and net fair value gain on investment recorded in 3Q17.
Selling and distribution expenses decreased 19.2% to $69.6 million from $86.1 million last year.
General and administrative expenses increased by 62.1% to $58.5 million compared to $36.1 million a year ago, mainly due to higher staff costs in Yuchai arising from redundancy exercise.
Finance costs also increased 55.9% to $11.9 million from $7.63 million in 3Q16, due mainly to higher bank interest expenses incurred by Yuchai and the comapny which had increased bank borrowings arising from higher working capital requirement.
In view of the challenging business environment, the group expects that its performance will be weak for the remaining part of 2017.
Hence, it will monitor the market environment closely and endeavor to mitigate adverse effects accordingly, while exploring other strategic options and potential alliance opportunities, such as the restructuring exercise of Xinfei, whilst maintaining its cost control discipline and continuing its organisational restructuring initiatives.
See: Hong Leong Asia says Xinfei unit to undergo restructuring exercise
Shares in Hong Leong Asia closed 3 cents lower at $1.22 on Tuesday.
