HPP Holdings’ 3QFY24 results dips into the red

KUCHING: HPP Holdings Bhd’s (HPP) results for its third quarter of financial year 2043 (3QFY24) are out and its earnings during the period have slipped into the red with a reported core net loss of RM0.6 million.

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research) the slip into the red in its latest quarterly results were due to weak orders and higher input costs.

During the quarter under review, HPP’s revenue had fallen by 19 per cent quarter over quarter (q-o-q) to RM14.4 million as orders from all of its major segments such as corrugated packaging, noncorrugated packaging, rigid boxes and others slowed.

Only the group’s paper pulp moulded packaging segment recorded a positive growth during the period with an almost 2-fold q-o-q growth in revenue.

However, the analyst guided that this was not very impactful as paper pulp moulded packaging revenue in 3QFY24 only came in at RM0.3 million.

The group’s core net loss fell at a wider 1120 per cent qo-q due to higher input costs during the period.

Cumulatively, HPP’s first nine months (9M) of FY24 revenue also fell by 18 per cent due to weaker sales volumes and lower average selling prices (ASPs) from its noncorrugated packaging and rigid box segment despite observed increased sales to customers in the pharmaceutical space.

“Its 9MFY24 core net profit plunged by a steeper 72 per cent on higher labour cost and, a sub-optimal utilisation rate resulting in loss of economies of scale,” the research arm shared.

They added that the group’s 9MFY24 core net profit of RM1.7 million had disappointed as it only met 16 and 15 per cent of theirs and consensus fullyear estimates, respectively.

Looking ahead, the research arm points out that HPP is not short of earnings drivers as generally higher paper product prices globally of late should lift its ASPs while the introduction of high-margin recyclable paper pulp moulded packaging products should uplift its margins.

Additionally, there is also an expectation that there will be a pick-up in orders, especially from customers in the E&E segment who are expected to undergo restocking activities and new product launches soon.