Warehousing space provider GKE has reported a 41.5% y-o-y drop in earnings to $3.8 million, on the back of a 8.4% decline in revenue to $55 million for its 1HFY2022 ended 30 November 2021.
The significant earnings drop was partly due to the reduction of some $2.2 million in government wage support compared to last year, while staff and administrative costs increased from $6.53 million to $8.27 million in the same period.
The company also booked an allowance of expected credit loss of $0.9 million for its China operations in 1HFY2022, as compared to a year ago.
Its warehousing segment posted a 16.2% y-o-y increase in revenue to $36.11 million in 1HFY2022, on the back of strong demand as customers require more space to stock up.
“Having achieved optimal occupancy at our existing warehouses, we have been taking proactive initiatives to seek viable opportunities to broaden our earnings base, further enhance our business capabilities and diversify our industry risk,” says CEO Neo Cheow Hui.
“Our recent acquisition of Fair Chem Industries Pte Ltd (“FCI”) is synergistic to the Group, and together with our specialty chemicals team, we strive to maximise the potential of FCI and improve our capabilities to serve our customers better,” he adds.
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On the other hand, its revenue from infrastructural materials and services fell 35.2% y-o-y to $18.77 million.
Gross profit in 1HFY2022 decreased by 5.7% y-o-y to $13.7 million from $14.5 million, due to lower revenue from its China ready-made concrete (RMC) manufacturing plant.
“Whilst GKE registered lower sales revenue for our infrastructural materials and services segment in the first half of FY2022, we managed to minimise our credit risk exposure,” says Neo.
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The country’s real estate sector has been under scrutiny by regulators, with their eye especially on over-leveraged property developers. GKE’s China management team is monitoring the situation closely, adds Neo.
“We believe that the situation in the real estate sector is stabilising and China’s urbanisation plans will continue to drive demand for construction materials,” says Neo.
“Our ready-mixed concrete manufacturing plants in Wuzhou City and Cenxi City, as well as the construction waste material recycling plant are well placed to benefit in the long term,” he adds.
At 12.41pm, shares of GKE traded at 11.8 cents, down 0.3 cents or 2.48% lower than its previous close.
