DRB-Hicom’s performance hinges on Proton and Pos Malaysia

The conglomerate will see improved performance in tandem with the progress of Proton, says group MD


DRB-HICOM Bhd’s financial performance this year will mostly depend on the success of Proton Holdings Bhd’s turnaround plan and Pos Malaysia Bhd’s operational cost management amid the pending postal tariff hike.

Group MD Datuk Seri Syed Faisal Albar said the conglomerate would see an improved performance in tandem with the progress of Proton, which is currently boosted by the carmaker’s flagship SUV, the X70.

“Its (bottom line) has been choppy. I think a lot of it, without any doubt, would rest on Proton. The carmaker has shown signs of turning around. As long as it is being addressed, we are going to get better,” Syed Faisal said at a recent briefing in Melaka.

DRB-Hicom, which holds a 50.1% stake in Proton, while Zhejiang Geely Holding Group Co Ltd has 49.9%, returned to the black in the third quarter ended Dec 31, 2018 (3Q19) with a net profit of RM73 million against a net loss of RM70.03 million in the same period a year ago, attributable to Proton’s success.

Improvement across its automotive, services and property businesses saw revenue increasing 9.31% year-on-year to RM3.17 billion.

At present, Proton is bullish on its volume with the X70, but more Geely-based models will be introduced in the next few years to entice the market.

Existing models such as the Persona and Iriz are being facelifted to enhance the carmaker’s portfolio.

Proton delivered over 9,900 X70s as at the end of March, and more than 25,000 bookings have been made to date.

Syed Faisal said the X70’s completely knocked-down (CKD) programme is on track, though the company has anticipated a lot of reworking which may be needed in the manufacturing level to produce a supreme quality CKD version of the X70.

He added that localisation is targeted at high-value items including the “Hi Proton” intelligent cockpit interaction system, the GKUI.

On foreign markets, Syed Faisal said Proton is still doing due diligence on its distribution plan in Egypt with prospective local partner Alpha Group Ezz Elarab.

He said Egypt could be a gateway for Proton to penetrate into surrounding countries.

For Pakistan, he said the market opportunity is wide as the country’s motorisation rate is still low, which is at 17 cars per 1,000 population, compared to 350 cars per 1,000 population in Malaysia.

Meanwhile, on DRB-Hicom’s 54%- owned unit Pos Malaysia, Syed Faisal said cost concern has remained in the national postal service provider due to the long overdue postal rates increase.

“It (loss in Pos Malaysia) is a worry for us. It is all about the tariff increase. The price of a stamp was 30 sen in 1992 and it then increased in 2010. No business can survive if its revenue does not increase for 18 years,” Syed Faisal said.

He said the postal rates should be increased despite declining mail volume to support the company’s operations, mainly stemming from its social obligation to have post offices in some areas that may barely pass the population threshold.

Additionally, he said cost is also higher for mail postages via flights, as needed in some areas in Sabah and Sarawak.

He added that the company is awaiting a decision by the government on the proposed postal tariff hike.

As it is, Syed Faisal said Pos Malaysia is providing mobile post offices and community postal boxes to manage its fixed cost.

Pos Malaysia posted a net loss of RM13 million in 3Q19 compared to a net profit of RM9.48 million in the corresponding quarter a year ago, due to lower mail volume and contribution from the logistics business.

Pos Malaysia and Proton are among two of over 50 operating companies under the DRB-Hicom group.