DRB-Hicom’s earnings hit by impairments, soft market

By IZZAT RATNA / Pic By MUHD AMIN NAHARUL

Impairment provisions and slower car sales dragged DRB-Hicom Bhd into the red for the third quarter ended Dec 31, 2017 (3Q18), but revenues for the nine-month period improved by 13%, helped by stronger revenues from the services and property divisions.

For the October-December 2017 period, net loss at the conglomerate was RM58.15 million compared to a net profit of RM351 million a year ago.

The group told Bursa Malaysia that the operating results for the quarter under review was adver s ely affected by one-off impairment charges of certain intangible assets and potential claims thereon relating to Proton Holdings Bhd.

Revenues dropped 11% to RM3.05 billion in 3Q18 compared to RM3.43 billion recorded previously, due to lower sales revenue from automotive companies and a banking subsidiary company.

For the nine-month period ended Dec 31, 2017 (9M18), under review, the group’s revenues rose to RM9.73 billion against RM8.58 billion in the same corresponding period a year ago.

DRB-Hicom’s services sector saw turnover rise 35% to RM3.28 billion in 9M18, driven by improved Pos Malaysia Bhd’s courier and logistics segments.

The property sector contributed revenue of RM638.8 million for 9M18, with the sector’s construction-related projects boosting performance.

DRB-Hicom said the automotive sector’s revenue mirrors the industry’s soft climate, with the anticipated traditional December sales slipping by almost 16% compared to the year before.

In December 2017, the industry sold 10,104 units less than the same month of 2016.

For the calendar year 2017, the total industry volume slipped by some 3,500 units year-on-year.

Lower loan approvals and higher interest rates continue to affect sales for the industry, the company said in a statement.

As such, the 3Q18 performance was also impacted by a one-off impairment at Proton, where charges for certain product development costs as well as potential claims related to the same were recognised in the quarter.

DRB-Hicom said with the improving economy, the group wi ll cont inue to strengthen its core businesses and pursue various opportunities to expand its business interests with a key focus on growth in logistics, e-commerce, aerospace and banking.

Nevertheless, the company said the automotive industry is expected to remain challenging due to stiff market competition, stringent hire purchase approvals, coupled with higher interest rates.

“In this light, the ongoing cost and financial management efforts across all sectors will provide stability for the long-term prospects of the group.

“The financial year ending March 31, 2018, results are expected to be better than the previous year, as a result of cost management and operational efficiency initiatives that are currently ongoing in the group,” it said.

Its share price closed at RM2.62 yesterday with a market capitalisation of RM5.07 billion.

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