Financial Statement Announcement for the Third Quarter Ended 30 September 2019
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Profit & Loss
Consolidated Statement of Comprehensive Income
Review of Performance
CONSOLIDATED INCOME STATEMENT
July - September ("3Q19")
The Group's revenue decreased 4.2% year-on-year ("yoy") from $191.8 million for 3Q18 to $183.8 million for 3Q19. This decrease was attributed to a decline in revenue from each of the Group's business segments.
Revenue from the Group's Automotive segment decreased 3.0% yoy to $64.1 million. This was mainly due to a decrease in orders from customers as a result of weakening demand across global automotive markets and certain projects reaching end-of-life, partially offset by new projects launched.
Revenue from the Group's Consumer/IT segment declined 6.2% yoy to $73.9 million. This was due to the deliberate exit of business from one customer in February 2019 and a decrease in demand due to weak market sentiment. The decline in revenue within the Consumer/IT segment was partially offset by new business from new customers.
Revenue from the Mould Fabrication segment declined 3.0% yoy to $31.4 million. This was due to a decrease in demand from customers in the Automotive and Consumer/IT industries, partially offset by an increase in orders from existing and new customers from Healthcare industries.
The Group's gross profit decreased 2.3% yoy from $23.5 million for 3Q18 to $23.0 million for 3Q19. Gross profit margin improved marginally from 12.3% for 3Q18 to 12.5% for 3Q19. This was mainly due to tightening cost controls and the completion of the relocation of the Group's parts operations from one plant in Shanghai to Chuzhou.
The decrease in other income was mainly due to the Group reporting a foreign exchange gain of $0.4 million for 3Q19 as compared to $2.3 million for 3Q18.
The increase in other expenses was due to onerous rental* of $0.2 million (3Q18: nil) and retrenchment costs amounting to $0.2 million (3Q18: nil).
The increase in finance costs was due to accounting for finance costs on lease liabilities of $0.3 million following the adoption of SFRS(I) 16.
The Group reported a net profit of $5.6 million for 3Q19 compared to a net profit of $7.5 million for 3Q18. Excluding the impact from net foreign exchange gain, retrenchment costs, onerous rent, net (gain)/loss on the disposal of property, plant and equipment ("PPE") and finance costs on lease liabilities, net profit would have been $5.6 million for 3Q19 compared with a net profit of $5.3 million for 3Q18, representing a 4.9% yoy increase.
*Onerous rent refers to rent paid at the Group's operations in Shanghai and Thailand despite the shifting of operations from these locations. The Group was required to pay rent at these vacant premises during 3Q19 as the rental agreements will expire at a later date.
CONSOLIDATED BALANCE SHEET
The Group's PPE amounted to $173.3 million as at 30 September 2019 as compared to $190.4 million as at 31 December 2018. PPE was stated net of depreciation charges of $20.8 million (9M18: $21.8 million), partially offset by currency realignment, reclassification of land use rights to right-of-use assets and additions of $23.4 million (9M18: $28.4 million). During the quarter, the Group had purchased a building for $5.7 million in Singapore to consolidate external renting warehouses inhouse and to expand the Group's manufacturing capacity in Singapore.
Upon the adoption of SFRS(I) 16, the Group recognised right-of-use assets and lease liabilities as of 1 January 2019.
The Group maintained a cash balance of $92.3 million as at 30 September 2019 (31 December 2018: $88.7 million). This resulted in a net debt position of $13.2 million (31 December 2018: net debt position of $21.0 million) after accounting for loans and borrowings amounting to $105.5 million (31 December 2018: $109.7 million). The decrease in net debt was mainly due to the collection of proceeds from the disposal of property and cash generated from operations. This was partially offset by the payment of PPE, and payment of dividends and retrenchment costs.
CONSOLIDATED CASHFLOW STATEMENT
July - September ("3Q19")
Net cash flows from operating activities amounted to $12.1 million for 3Q19 as compared to $7.0 million for 3Q18. Net cash flows used in investing activities amounted to $9.9 million for 3Q19 as compared to $3.9 million for 3Q18 mainly due to payments for the purchase of PPE.
Net cash flows used in financing activities amounted to $2.6 million for 3Q19 as compared to $0.9 million for 3Q18.
Commentary On Current Year Prospects
The Group faces headwinds in the form of rising labour costs, utility costs, price pressure and negative market sentiment amid global trade tensions. In addition, the Group continues to be impacted by a slowdown across global automotive markets, especially in China and India.
Mass production at the Group's latest manufacturing facility in Penang has begun. Moving forward, the Group expects utilisation at this new Penang facility to gradually improve. Similarly, the Group has completed the relocation of its parts operations from one plant in Shanghai to Chuzhou in 3Q2019.
The Group continues to monitor the slowdown in the global automotive market closely while aggressively pursuing new projects. Similarly, the Consumer/IT segment has become challenging due to slowing demand from customers. In the Healthcare segment, the Group remains positive as it has secured new projects from new and existing customers.
Looking ahead, the Group will focus on tightening cost controls, enhancing capacity utilisation and aggressively pursuing new projects. While remaining vigilant of the headwinds, the Group is confident in its resilient business model as the long-term sustainability of its operations remain on track.