DRB-Hicom returns to the black with RM737m profit

Losses at Proton had dragged DRB-Hicom’s profit over the last few years


DRB-Hicom Bhd posted a stunning recovery to profitability as the corporate move to trim its shareholding in Proton Holdings Bhd, amid better automotives sales including for Proton and recognition of the research and development (R&D) grant from the government.

Losses at Proton had dragged DRB-Hicom’s profit over the last few years and analysts have been buoyed by the company’s future prospects following the disposal of the Lotus Group, and a 49.9% stake sale in Proton to China’s Zhejiang Geely Holding Group Co Ltd.

For the quarter ended Sept 30, 2017, DRB-Hicom’s profit jumped to RM736.57 million for the July to September 2017 period, compared to the RM309.63 million net loss recorded in the same period a year ago.

The results were also helped by the better performance of its operating companies. The leading automotive company’s revenue for the current year quarter increased by 27% to RM3.34 billion from RM2.64 billion, mainly driven by the services, and property, asset and construction (PAC) sectors.

For the six months ended Sept 30, 2017, DRB-Hicom’s revenue improved by 29.8% to RM6.68 billion compared to RM5.14 billion in the corresponding period ended Sept 30, 2016, due to higher sales revenue across all business sectors.

DRB-Hicom said the increase in the revenue for the six-month period was mainly due to higher sales achieved by Proton and other automotiverelated companies.

As for the services sector, the improved performance was mainly derived from the courier and logistics businesses of Pos Malaysia Bhd, and higher sales recorded by banking and waste management subsidiary companies.

DRB-Hicom added that the increase in PAC sector was mainly attributed to revenue recognised from constructionrelated projects.

The group continues to see improvement in its overall businesses.

“The services sector remains a key contributor to the group, driven by rapid expansion in the logistics businesses besides the ongoing growth in concession and financial services.

“The recent roll-out of the regional logistics hub Digital Free Trade Zone by the government, and key collaborations between Pos Malaysia group and major e-commerce players, such as Lazada Malaysia, is projected to chalk an upward trajectory for the business and further strengthen the group’s services sector,” DRB-Hicom said in the statement.

It also said the group’s automotive sector’s better performance was due to higher sales volume on improved consumer sentiments.

Honda Malaysia Sdn Bhd remains dominant in the foreign brand segment, while defence and aviation continue to contribute positively to the overall growth.

The property sector, meanwhile, is expected to improve with ongoing construction projects.

Moving forward, DRBHicom will continue to focus on its group-wide initiatives to reduce cost and improve efficiency as part of its efforts to strengthen resilience amid volatility and challenges in the external environment.

The board, hence, expects the company’s performance for the financial year ending March 31, 2018 (FY18), to improve against the previous year’s results.

RHB Research Institute Sdn Bhd in a recent note said DRBHicom is set to achieve non-recurring gains from the recognition of the RM1.1 billion R&D grant as income for the quarter ended Sept 31, 2017, and some reversal of provisions.

The company will further enjoy financial gains from the Geely deal and reduce share of Proton’s losses from the third quarter of FY18.