ECS ICT earnings down on lower margins

PETALING JAYA: ECS ICT Bhd’s net profit for its third quarter ended Sept 30 dropped 20% to RM4.89mil from RM6.15mil in the previous corresponding period.

The reduced earnings were mainly due to lower gross profit margins that were directly impacted by its range of product mix.

Revenue in the third quarter, however, increased to RM446.16mil from RM436.91mil a year earlier due to a higher contribution from its information and communications technology (ICT) distribution segment.

“Despite higher sales, the distribution expenses decreased by 6.4% to RM8.9mil from RM9.5mil last year due to a lower doubtful debt provision by RM768,000,” ECS ICT said in a filing with Bursa Malaysia.

“With lower gross profit and higher administrative expenses, pre-tax profit decreased by 13.5% to RM7.2mil from RM8.3mil last year.”

For the nine-month period, ECS ICT’s net profit dropped to RM14.72mil from RM17.57mil in the previous corresponding period, while revenue grew to RM1.35bil from RM1.27bil a year earlier.

Despite the current challenging market conditions, chief executive officer Soong Jan Hsung said in a statement that the business outlook would be better for the company in the fourth quarter of its current financial year.

He said the projection is attributable to higher consumer spending in the coming festive season, as well as year-end budget spending by public sectors for enterprise systems.

“In addition, the Digital Free Trade Zone initiatives tabled in Budget 2018 will spur the growth of e-commerce for online sales of ICT consumer products.

“With our business-to-business platform already established for supplying to retailers, as well as the e-commerce players selling to consumers via the business-to-consumer (B2C) platform, we have recently commenced our B2C brand stores by partnering with our principals and e-commerce players.”

ECS ICT, in its note to Bursa Malaysia, said the ICT market remained sluggish in the second half of this year to-date due to the weak consumer sentiment and cautious spending of the private and public sectors for enterprise systems.

“Following the improved gross domestic product growth reported in the first half of 2017, the Malaysian economy is expected to have higher growth for 2017.

“However, International Data Corp has reported that sales of PCs, notebooks and servers have dropped for the first half of 2017 compared to the same period last year.”

Separately, ECS ICT has declared a single-tier interim dividend of 2.5 sen per ordinary share amounting to RM4.5mil, which will be payable to shareholders on Dec 14.