VS Industry 1QFY17 earnings drop 44 per cent to RM34 million
KUCHING: VS Industry Bhd’s (VS Industry) earnings for the first quarter of financial year 2017 (1QFY17) ended October 2016 dropped by 44 per cent year-on-year to RM33.51 million from RM60.18 million recorded in 1QFY16 ended October 2015.
The company in its accounts notes explained that the lower earnings recorded for 1QFY17 was attributed to high initial start up cost incurred by its Malaysian operations in preparation for the upcoming substantial box built order for the second half of financial year 2017.
In addition, VS Industry noted the lower earnings was also due to the net foreign exchange loss of RM0.4 million in 1QFY17 against net foreign exchange gain of RM14.6 million in 1QFY16.
Apart from that, VS Industry observed that the group’s profit before tax for 1QFY17 stood at RM45.5 million, dropped by 39.2 per cent or RM29.4 million as compared with 1QFY16.
It expounded that the lower profit before tax was owing to high initial start- up cost incurred in preparation for the upcoming substantial box built order anticipated from a key customer.
To further elaborate, VS Industry said the group hired close to 1,000 new foreign factory operators in 1QFY17.
It explained that more costs were incurred arising from the new hiring, the hiring agency costs, foreign employee levies, training costs and salary costs.
At the same time, VS Industry noted the corresponding revenue stream from the batch of workers would only commence gradually from second financial quarter onwards.
Apart from increased salary costs, hiring and training costs, VS Industry also noted the group also incurred some setup costs in preparing the plant for the forthcoming new orders.
Nonetheless, VS Industry revealed that the group’s revenue for 1QFY17 increased by 11 per cent y- o-y to RM680.02 million from RM612.47 million generated in 1QFY16.
Geographically, VS Industry revealed that its Malaysian segment recorded an increase of 17 per cent or RM73.8 million in revenue for 1QFY17 as compared with 1QFY16 due to higher sales orders from its key customers.
It added the group’s Indonesian segment continued to perform well and recorded higher profit before tax in tandem with higher sales orders from key customers.
However, VS Industry noted its China’s segment recorded higher loss in 1QFY17 against 1QFY16 due to lower sales and higher raw materials costs incurred arising from a weaker renminbi against the US dollar during the quarter ended October 2016.
Commenting on the group’s prospects, VS Industry said, “Following the award of the vertical integration status by the group’s key customer based in the UK in May 2016, the group expects to gradually receive much more box built orders which on a col lective basis are expected to contribute to substantial growth in revenue.
“However, in the initial period, the group would incur some costs as explained above.
“In this respect, the group expects to perform much better in the second half of financial year 2017 as the production volume and efficiency will pick up.
“On the operations in China, the group expects improved performance going forward as it has since commenced mass production of a new product for a key customer in China and this contributes to higher plant utilisation rate.
“On a macro basis, the group is also aware of the increasing challenging op e r a t i n g environment in view of the volatile US dollar against the ringgit exchange rate.
“Not w it h s t a n d i n g t he challenging environment, with prudent management, coupled with continued strong support from existing as well as newly acquired customers, the board is optimistic that the group will achieve better performance for the current financial year ending July 2017,” the company said.