KUALA LUMPUR, Sept 1 (Bernama) — The prolonged Covid-19 pandemic had a significant impact on UMW Holdings Berhad’s financial results for the first six months of 2020.
The Group’s revenue reduced by 36.6% to RM3,648.9 million.
The Group was also impacted by share of losses of RM44.1 million from one of its associate companies which involves in leasing and hire purchase financing business due to the present value impact of the loan moratorium and unfavourable mark-to-market valuation of interest rate swaps.
Accordingly, the Group recorded a lower profit before taxation (PBT) of RM4.2 million for the first six months of 2020 compared to a PBT of RM290.9 million a year ago.
Consequently, the loss attributable to owners of the company for the first half of 2020 was RM34.1 million compared to a profit of RM143.7 million registered for the same period of 2019. Excluding the substantial loss made by its associate company, the Group reported a profit attributable to owners of the company of RM10.0 million for the first half of 2020.
UMW Holdings Berhad Acting President and Group CEO, Azmin Che Yusoff said, “The Group was severely impacted by disruptions caused by the implementation of MCO/lockdowns to combat the Covid-19 pandemic.
“All three core business segments recorded lower revenue in the first six months of 2020. On a more positive note, sales are gradually improving since the relaxation of the MCO/lockdown, spearheaded by our automotive segment. Both UMW Toyota Motor (UMWT) and Perodua staged a strong upturn in July following disruptions to sales earlier this year.
Sales of vehicle, parts and services were disrupted, leading to a 40.9% decline in the Automotive segment’s revenue for the first half of the year compared with the corresponding period in 2019.
Following the decrease in revenue and a lower share of results from an associated company, the segment reported a PBT of RM12.0 million for the first 6 months of 2020 compared to a PBT of RM275.3 million a year ago.
Encouragingly, automotive sales rebounded strongly in July following the government’s announcement of the sales tax exemption on CKD vehicles (100%) and CBU vehicles (50%) effective from 15 June to 31 December 2020 aimed to spur the growth of the local automotive industry. UMWT sold 7,509 units in July, its highest for the year, 70.0% more than the 4,417 units registered in June.
Meanwhile, the month of July marked Perodua’s highest monthly sales for the year, with registered sales of 23,203 vehicles, a 9.2% increase from the 21,250 units sold in June.
The segment is expected to continue to benefit from this tax exemption measure.
The Equipment segment’s revenue of RM522.4 million for the first six months of 2020 was lower than the RM726.5 million recorded in the first half of 2019, mainly due to the economic impact of MCO/lockdowns and Covid-19 to heavy and industrial equipment sub-segments.
In line with the decrease in revenue, the segment’s PBT of RM50.4 million was lower than the RM77.6 million reported in the corresponding period.
Despite the challenging outlook for the Heavy Equipment sub-segment due to intense competition in a contracting market, encouraging demand in mining and construction sectors in its overseas operations as well as the introduction of new government initiatives and stimulus packages could help soften the impact.
The Heavy Equipment sub-segment is working with its principal to extend recovery packages to its customers affected by the Covid-19 pandemic while the Industrial Equipment sub-segment will continue to focus on expanding its equipment rental business.
The leasing of industrial equipment provides recurring revenue to the Industrial Equipment sub-segment thus minimising the impact from the Covid-19 pandemic.
The Group had also secured distribution rights for collaborative robots (Cobots) from Universal Robots S/A. The new addition to the Group’s product line is expected to contribute positively to the sub-segments performance.
This was due in part to the implementation of MCO which led to lower sales in its Lubricants and Auto-components sub-segments.
However, despite the MCO, the Aerospace sub-segment recorded higher revenue from the increased volume of fan cases delivered, which softened the impact from the other two sub-segments.
Subsequently, PBT increased to RM18.5 million from RM15.6 million a year ago.
Moving forward, the domestic sales of auto-components are projected to gradually increase following the recent announcement of sales tax exemption as well as lower interest rates, which is expected to spur the local automotive market.
The lubricants sub-segment will continue to leverage on its OEM partners and strengthen its domestic sales and export to ASEAN countries.
While the Group expects the Aerospace sub-segment to be impacted negatively following the outbreak of Covid-19, it is partially cushioned by fan case orders that have been received for the rest of the year.
Azmin added, “As evidenced by the contraction in Malaysia’s GDP in 1H2020, the disruptions caused by the Covid-19 outbreak are wide-reaching across business segments and will continue to impact the overall business environment in 2020.
However, we are confident of the resilience of the Malaysian economy and are cautiously optimistic of the improved performance across segments in the second half of the year and in delivering superior value to our shareholders.”