Two thumbs up for CMS in 3QFY22
Analysts saw that Cahya Mata Sarawak Bhd’s (CMS) net profit jumped to RM154.36 million for the third quarter of its financial year 2022 (3QFY22) from RM53.88 million in the same period last year.
Revenue grew by 50 per cent to RM278.39 million from RM185.87 million previously, attributable by recognition of negative goodwill arising from the acquisition of Oiltools group, reversal of impairment on investment and loan to an associate recorded in the third quarter.
On the first nine months of Fy22 (9MFY2), the group said net profit has increased by 49 per cent to RM265.95 million from RM179.06 million recorded in 9M 2021, while revenue climbed to RM702.17 million from RM572.93 million previously.
“As for the share of results of associates, the profit contributions were higher in 9M 2022 compared to 9MFY21, mainly due to the better performance of an associate by RM34.27 million,” it said in a filing with Bursa Malaysia.
On the outlook, it said marginal reduction in material costs should augur well for the next financial year, with the infrastructure and rural development projects in Sarawak remaining intact.
“The management continues to hold a longer-term view that once logistical bottlenecks and raw material costs stabilise, activities will further pick up and will benefit the group’s businesses,” it said.
CMS added that the group foresees a positive contribution from this division in the coming quarters with the completion of the acquisition of the Oiltools business.
Researchers at MIDF Amanah Investment Bank Bhd (MIDF Research) said that CMS’ performance exceeded expectations on the back of improving cement cost efficiency.
“The cement division saw a 23.9 per cent year on year (y-o-y) spike in revenue to RM438 million for nine-month period, delivering an operating profit of RM261.4 million, which was 47.3 per cent y-o-y higher,” it cited. “This was due to higher sales volume and improved cost efficiencies.”
“Recall that CMS has been improving its clinker production to reduce reliance on imported clinker and the removal of transportation subsidies to its dealers, which helped to drive its margins.”
Meanwhile, CMS’ upcoming phosphate business via its 60 per cent stake in Malaysian Phosphate Additives Sarawak (MPAS) Sdn Bhd saw its losses
widen to minus RM33.5 million as compared to minus RM15.8 million in the same period last year due to higher unrealised foreign exchange losses from the strengthening of the US dollar, of which its borrowings are denominated in.
“In line with management’s guidance during our visit to the plant in Bintulu last month, we expect the four furnaces to be fully commissioned by the year end,” it said. “The MPAS plant is projected to be cash neutral in 2023 and optimistic expectations would see profits trickling in by 2024.”
MIDF Research remained positive on CMS’sprospects moving into FY24, in line with projects that may be rolled out in the state as the newly formed federal government commits to develop East Malaysia.
“The state government had previously projected a capital injection of about RM100b by 2030, which would translate into strong job flows. This is where CMS is positioned to benefit both ways, through construction projects and also through the supply of building materials, as it is the sole cement manufacturer in the state.
“We are also positive on its upcoming phosphate business in the longer-term, which is set to take on Kazakhstan and Vietnam, the two powerhouses that have dominated the yellow phosphorus industry for years.”
The management continues to hold a longerterm view that once logistical bottlenecks and raw material costs stabilise, activities will further pick up and will benefit the group’s businesses.
Cahya Mata Sarawak Bhd