Lower revenue and compressed profit margin pushes down BAuto earnings

PETALING JAYA: Bermaz Auto Bhd (BAuto) registered a net profit of RM22.21mil for the fourth quarter ended April 30, 2017 (Q4FY17), bringing its full year net profit to RM119.05mil.

Net profit for Q4FY17 was a 57% drop from the corresponding period last year due to lower revenue and compressed profit margin as the ringgit continues to weaken against the yen.

According to a press release, BAuto said the contraction in profit margin during the quarter was also partly caused by the Mazda CX-5 run-out programme as more sales incentives were given for this model during the current quarter, in anticipation of the arrival of the new CX-5 model in the last quarter of 2017.

However, this was mitigated by the higher profit contribution from associate companies and cost saving initiatives which kept the group’s operating expenses low.

Similarly, the 40% lower net profit for FY17 as compared to the previous financial year, was largely attributed to the drop in revenue and profit margin compression, following the persistent weakness of the ringgit against the yen.

Revenue fell to RM1.66bil from RM2.1bil in the previous financial year mainly due to lower sales volume recorded by both the domestic and Philippine operations.

“Local sales were impacted by soft demand as Malaysia’s total industry volume (TIV) contracted by 13% in calendar year 2016.

“In the Philippines, the drop in sales volume was primarily due to new model launches by competitors and supply constraints on a certain Mazda model,” said BAuto.

Going forward, the domestic automotive industry outlook for the next financial year is expected to be challenging, as evidenced by Malaysian Automotive Association’s TIV forecast of only 590,000 units for calendar year 2017. Demand for passenger cars is expected to be soft as the weak job market and uncertainties in the local and global economic landscape will likely cause customers to defer their purchases.

“Although the group is currently operating under a very challenging environment, it will continue to focus on driving sales at full selling price with value offerings as this will augur well for the Mazda brand image and popularity in the longer term.

“The group is optimistic that new model launches planned for the second half of FY18 will help mitigate the impact from an expected soft domestic market,” said BAuto.

The board has recommended a fourth interim dividend of 3.15 sen single-tier dividend per share in respect of FY17 to be payable on July 26, 2017.

This brings the total dividend declared for FY17 to 11.65 sen single-tier dividend per share. The entitlement date has been fixed on July 11, 2017.