Bermaz Auto Q1 net profit slides 51%

Lower sales and stiff competition weigh on company

PETALING JAYA: Lower sales and intense competition, as well as lower contribution from an associate, led to Bermaz Auto Bhd’s net profit for the first quarter falling 50.8% from a year ago to RM20.2mil.

The automotive player also saw revenue for the period ended July 31 slid 20.7% to RM391.2mil.

In a filing to the stock exchange, the company said the drop in revenue was mainly due to lower domestic sales volume, particularly the CX-5 run-out model and the ageing Mazda3 model, which faces intense competition from new models launched by other brands.

However, the lower domestic sales wwew partially mitigated by an improved sales performance from the company’s Philippines operations. The company, primarily engaged in the distribution of Mazda vehicles in Malaysia and the Philippines, said lower net profit for the quarter was impacted by the reduced revenue, compressed gross profit margins from the intense competition and lower profit contribution from associate company, Mazda Malaysia Sdn Bhd (MMSB).

“The drop in profit margin in the domestic market was partly caused by the Mazda CX-5 run-out programme as more sales incentives were given for this model since the preceding quarter in anticipation of the new CX-5 model to be launched in October this year,” it said.

The company added that the lower profit contribution from MMSB was mainly due to lower unit sales and lower margin as the company phases out the current CX-5 model to gear up for the new CX-5.

Compared to the preceding quarter, Bermaz saw a 10.5% improvement in revenue, mainly due to higher domestic sales volume on the CX-3 model, which it attributed to attractive sales incentives.

The marginal decrease in pretax profit, meanwhile, was due to lower contribution from MMSB, although it was offset by an improvement in unit sales in both domestic and Philippines operations.

Bermaz has recommended a first interim single-tier dividend of 1.5 sen per share for the financial year ending April 30, 2018, payable on Oct 27. For the period ended July 31, it declared a 1.5 sen single-tier dividend per share.

In a statement, the company said market trading conditions remain challenging with the competitive trading environment and weak consumer sentiment, despite a marginal 5% improvement in the country’s total industry volume during the first seven months of the year.

“The group is optimistic that the new CX-5 to be launched in October this year will help to improve unit sales as well as the profit contribution from associated companies for the second half of the financial year 2018,” it said.

In Philippines, the company expects improved demand for passenger cars, in line with the country’s economic growth projections of 6.4% for both 2017 and 2018.