SINGAPORE (Feb 28): Yongnam Holdings reported FY16 losses widened to $31.6 million from losses of $3.3 million a year ago on lower margins.
In a Tuesday filing to the SGX, the engineering and construction services provider says its depressed gross margin was mainly due to its Senoko Food Hub project, which incurred cost-overrun and provisions made in anticipation of lower negotiated awards in variation orders for certain projects in Singapore and Hong Kong.
In addition, the overall lower level of strutting and other activities in Singapore and Hong Kong also resulted in overhead costs not being fully absorbed.
Cost of sales rose by a steeper 34.1% to $335.1 million.
Revenue for the year grew by 19.2% to $321.4 million from $269.6 million in FY15, due mainly to higher revenue contributions from the group’s structural steelwork and mechanical engineering businesses, which grew to $215.6 million and $32.1 million respectively.
Revenue from specialist civil engineering projects, however, fell by 23% to $66.2 million during the year, mainly attributable to the tailing down of the MRT Downtown Line 2 and Downtown Line 3 projects at the end of FY15.
Singapore continued to be the core contributor to Yongnam’s revenue, accounting for 90.1% of total revenue compared to 87.6% in FY15. The other contributor was Hong Kong.
General and administrative expenses increased marginally to $19.4 million in FY16 from $19 million in FY15, mainly due to higher professional fees from the group’s right issue exercise in mid-2016.
Finance cost increased marginally as well to $5.6 million as compared to $5.5 million in the previous year, due to higher bank charges.
“The challenging operating environment has resulted in lower margins for a number of our projects, which impacted our bottomline in FY2016. We are monitoring the situation closely together with our customers while watching closely costs and expenses,” comments CEO Seow Soon Yong.
“To enhance cost competitiveness and operational efficiency, Yongnam will be relocating part of its factory operations in Singapore to a new site in Johor, Malaysia, in 2018. The highly automated fabrication processes will continue to be carried out in Singapore.
Additionally, the group is also reviewing its cost structure to better manage costs and achieve greater efficiencies,” says Seow.
Shares of Yongnam closed at 20 cents on Tuesday.
