Hong Leong Asia, the listed trading and manufacturing arm of the Hong Leong Group, has announced earnings of $42.6 million for the 1HFY2022 ended June, 4.5% higher y-o-y.
However, revenue for the same period fell by 26.1% y-o-y to $2.10 billion due to the lower revenue recorded by its diesel engines unit Yuchai and partly offset by the higher revenue from the group’s building materials unit (BMU).
The decline in Yuchai’s revenue was due to the lower number of engines sold, as well as a decline in truck and bus unit sales, in addition to lower off-road unit sales. The declines were attributed to the Covid-19-related lockdowns, supply chain disruptions and slower economic growth in China, which led to lower demand for commercial vehicles.
BMU’s revenue increased y-o-y on the back of higher sales volumes and average selling prices (ASPs) as construction activities in Singapore and Malaysia continued to recover thus driving demand for concrete and related products.
Gross profit fell by 7.3% y-o-y to $360.1 million mainly due to the lower gross profit from the group’s Yuchai unit. During the period, the group’s gross profit margin (GPM) increased 3.5 percentage points y-o-y to 17.2% mainly due to improved margin in National VI engine sales and the increase in sales mix in the off-road segment for Yuchai.
Other income fell by 17.4% y-o-y to $33.3 million mainly due to lower interest income, lower government grants and absence of gain on debt assignment in 1HFY2021.
Selling and distribution expenses fell by 15.4% y-o-y to $128.5 million, while research and development (R&D) expenses increased by 32.0% y-o-y to $85.9 million. The lower selling and distribution expenses were due to lower staff costs and lower warranty expenses and delivery costs, while the increase in R&D costs were due to an increase in experimental costs primarily for the engines used for marine and power generation applications.
Earnings per share (EPS) increased by 4.4% y-o-y to 5.69 cents.
As at June 30, cash and bank balances stood at $1.18 billion.
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Looking ahead, the group is “cautiously optimistic” that its main business units will continue to remain resilient in a difficult operating environment in the 2HFY2022.
“While challenges such as higher input costs and energy costs and issues with global supply chains are expected to linger, our push towards innovation and productivity improvements with automation and digitalisation will help to mitigate some of these pressures,” says the group in its Aug 11 statement.
In addition, the group sees that the market conditions for diesel engines in China will remain challenging. Meanwhile, it expects to see “modest improvement” at BMU Malaysia as Malaysia’s economy continues to recover.
Shares in Hong Leong Asia closed flat at 74.5 cents on Aug 11.
