‘US-China trade war impact on KESM only temporary’

KUALA LUMPUR: KESM Industries Bhd is unperturbed by the trade war between the United States and China — the world’s two largest economies — saying the impact on its operations is only temporary.

The semiconductor industry “burn-in and test” service provider, whose production volume has declined about 15 per cent over the last six months as customers turned cautious, believes that the growing demand for semiconductor chips and sensors in the automotive industry will drive the company’s growth in the long term.

“I don’t expect the trade war impact to continue and KESM’s growth is not dependent on the personal computer market, phones or appliances.

“The automotive market, which has seen a rise in autonomous cars, has brought in new technologies and, therefore, the need for testing, and this is the main business we are in.

“So we look forward to continued growth. Our growth fundamentals are strong,” said KESM executive chairman and chief executive officer Samuel Lim Syn Soo after its annual general meeting, here, yesterday.

KESM achieved a revenue of RM349.8 million in the financial year ended July 31, 2018, a three per cent increase from RM338 million recorded in 2017.

However, its net profit of RM39.3 million saw a decline of 11 per cent from RM44 million posted in 2017, mainly due to supply issues and higher taxes.

In the first quarter ended October 31, 2018, its net profit fell to RM2.64 million from RM11.38 million in the previous year. Group revenue dropped 10 per cent to RM81.56 million from RM90.71 million previously.

CIMB Investment Bank said in a report KESM’s utilisation fell below 60 per cent in the first quarter mainly due to inventory adjustment, in light of the escalating trade war.

KESM was also impacted by higher raw material costs related to electronics manufacturing services, said the research firm. However, it expects stronger demand and the adoption of electric vehicles to drive semiconductor component demand for KESM.