Thriving in difficult times
Drb-hicom ready for tough decisions in pandemic
PETALING JAYA: Drb-hicom Bhd is prepared to make “difficult decisions” that could impact its interim performance, as it navigates the challenges brought on by the global Covid-19 pandemic.
In the company’s annual report that was released yesterday, chairman Mohammad Zainal Shaari said the focus of the group will be to “thrive in unprecedented times”.
“The current pandemic crisis has broad reverberations across the globe and is cutting across all sectors as it compels companies, organisations and institutions to make significant changes in the way they operate.
“We are all affected by this global pandemic which has led to devastating health consequences, multiple social restrictions and substantial economic uncertainties. Nonetheless, there continue to be rays of hope for recovery and better times ahead.”
Zainal acknowledged that Drb-hicom has had a long history of navigating myriad challenges.
“While our performance in this financial period has been respectable, contributed mainly by our automotive sector, going forward, our imperatives and endeavours to address these adversities may involve difficult decisions impacting our performance in the interim as we chart the path to recovery.”
At the onset, Zainal said Drb-hicom would direct all its efforts on risk-management practices to limit any potential downside and ensure its people are safe.
“We thenceforth reassess the business models and the strategic assumptions underlying our businesses amidst evolving industry structures, consumer behaviours, market positions and sector attractiveness.
“We refocus our strategic execution to thrive in turbulent times, continuing to place the customers and our key stakeholders at the core, while bringing the organisation along, adjusting and accelerating our rate of learning as we move forward and always, in conformance to our highest ethical standards and shared values.”
Drb-hicom returned to the black with a net profit of Rm358.97mil for the nine-month period ended Dec 31, 2019, from a net loss of Rm5mil in the previous corresponding period, driven by the group’s automotive segment and led by a stronger sales volume from its subsidiary, Proton Holdings Bhd.
Going forward, analysts expect Proton to continue driving sales for Drb-hicom.
Proton sold 5,676 vehicles last month, accounting for an estimated market share of 23.3%.
During the same month in 2019, the company sold 10,611 units, marking a difference of 46.5% and a reflection of the impact of the Covid-19 pandemic.
The national carmaker however said the 5,676 units sold last month were an improvement of 73.2% compared with March 2020. All businesses were forced to shut down in April due to the government’s movement control order.
Year-to-date in May, Proton’s volume reduced by 23.3% for the first five months of the year.
In terms of total industry volume (TIV) in the country, a total of 22,960 vehicles were sold last month, with nearly 60% of the units comprising national marques.
According to the Malaysian Automotive Association (MAA), TIV fell 62% year-on-year last month from 60,760 units in the previous corresponding period, as generally people were still fearful of coming out and consumer sentiment remained cautious.
Last month, MAA announced that it was revising downward its 2020 TIV forecast to 400,000 units from 607,000 previously.
In a recent report, RHB Research said it was maintaining a “buy” on the stock with a target price of RM2.45 as it expects the move to exempt buyers from paying sales tax on passenger cars starting mid-june until end-december to improve sentiment on the stock. It said Proton’s hopes to expand local market share and break into regional markets remained intact.
“The introduction of the Proton X50 will likely be in the second half, and could be a potential earnings re-rating catalyst. Additionally, various attractive embedded assets within Drb-hicom provide significant value accretion potential,” it said. Shares of Drb-hicom closed two sen lower to RM1.75, giving the stock a market cap of Rm3.38bil.