Financial Statement Announcement for the Third Quarter Ended 30 September 2018
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Profit & Loss
Consolidated Statement of Comprehensive Income
Review of Performance
CONSOLIDATED INCOME STATEMENT
April - June 2018 ("2Q18")
The Group's revenue increased 2.4% year-on-year ("yoy") from $177.6 million for 2Q17 to $181.9 million for 2Q18.
The Group reported an increase in revenue from all business segments except for the Consumer/IT segment. The decrease in revenue from the Consumer/IT segment was mainly due to certain projects that had reached end-of-life while new projects have yet to commence their production ramp-up phase.
The Group's gross profit decreased 16.8% yoy from $27.7 million for 2Q17 to $23.0 million for 2Q18. Correspondingly, the Group's gross profit margin declined from 15.6% for 2Q17 to 12.7% for 2Q18. This was mainly due to lower utilization levels as a result of the Group's new manufacturing facility in Penang, pricing pressure from customers and preparations for new projects expected to launch in 2H2018. Excluding the impact of the new factory in Penang, the Group's gross profit margin would have been 13.1%.
The increase in other income was due to foreign exchange gain of $3.4 million for 2Q18.
The increase in administrative expenses from $10.0 million for 2Q17 to $10.7 million for 2Q18 was due to higher staff costs and related professional fees.
The decrease in other expenses was mainly due to foreign exchange losses amounting to $2.6 million for 2Q17 whereas the Group reported foreign exchange gain under other income for 2Q18.
The increase in finance costs was due to the loan for the Group's Chuzhou factory which was drawn down in June 2017 and a loan for the Group's new Penang factory which has been drawn down progressively during the first half of 2018.
The Group achieved a net profit of $9.7 million for 2Q18 compared to a net profit of $8.2 million for 2Q17. Excluding foreign exchange gains and losses, retrenchment costs and startup losses incurred in relation to the Group's new plant in Penang, net profit would have been $7.4 million for 2Q18 and $10.9 million for 2Q17, representing a 32.9% yoy decline.
CONSOLIDATED BALANCE SHEET
The Group's PPE amounted to $193.6 million as at 30 June 2018 as compared to $193.9 million as at 31 December 2017. PPE was stated net of depreciation charges of $15.0 million (1H17: $14.1 million), partially offset by currency re-alignment and the addition of $21.8 million (1H17: $17.3 million) in PPE.
The Group maintained a cash balance of $88.3 million as at 30 June 2018 (31 December 2017: $105.3 million). This resulted in a net debt position of $17.3 million (31 December 2017: net cash $1.6 million) after accounting for loans and borrowings amounting to $105.7 million (31 December 2017: $103.7 million). The decrease in net cash was due to the payment of capital expenditure amounting to $23.0 million and the payment of dividends amounting to $8.5 million.
CONSOLIDATED CASHFLOW STATEMENT
April - June 2018 ("2Q18")
Net cash flows from operating activities amounted to $4.2 million for 2Q18 as compared to $12.1 million for 2Q17. Net cash flows used in investing activities amounted to $11.9 million for 2Q18 as compared to $8.4 million for 2Q17 due to payments made for the purchase of PPE.
Net cash flows used in financing activities amounted to $10.0 million for 2Q18 as compared to $3.2 million for 2Q17. This was mainly due to proceeds received from loans used to finance the construction of the Group's Chuzhou factory in June 2017.
Commentary On Current Year Prospects
The Group's operations, which span across 20 manufacturing sites in nine different countries, face challenges in the form of negative market sentiments surrounding the trade war, continued increases in wages, as well as pricing pressure from customers. Given the Group's global footprint, foreign exchange volatility and rising input costs present additional headwinds.
Despite the challenges, the Group remains focused on building the long-term stability of its operations. In this light, the Group continues to sharpen its competitive edge by investing into technology and new machinery to stay ahead of the curve in an ever-changing business environment.
As a result of its leading technological capabilities and global manufacturing footprint, the Group has seen an increasing amount of business queries from both new and existing customers who are confident in the Group's technological prowess and ability to handle global projects. As such, the Group's order backlog across the Automotive, Healthcare, Consumer/IT and Mould Fabrication segments remains stable. Within the Consumer/IT segment, the Group has made the strategic decision to shift from lower-margin projects to focus on high-margin, complex precision engineering parts.
The Group's latest manufacturing site in Penang, Malaysia is now fully operational. The Group is progressively adding capacity to this facility with new contract wins from both new and existing customers.
Similarly, the Group is gradually shifting operations and machinery from its facilities in Shanghai to its 50,000 square meter facility in Chuzhou. The Group will continue its proactive approach to optimising resources across its global manufacturing locations.
As announced via SGXNet on 25 April 2018, the Group has appointed Knight Frank (Shanghai) Property Consultants Limited as its exclusive brokerage team to execute the sale process for its factory in Zhongshan, China. At present, this sale process is still ongoing. Shareholders will be updated on any material developments regarding the potential disposal of the factory in accordance with SGX listing rules.
Heading into the remainder of the year, the Group is vigilant of the continued headwinds such as foreign exchange volatility and an increasingly competitive business landscape. While the Group has substantial operations outside of China, the Group continues to monitor the ongoing trade war situation closely. Looking ahead, the Group remains confident in its resilient business model as the long-term sustainability and profitability of operations remain on track.