MCO, forex losses hit DRB-Hicom’s 1Q earnings

by SHAZNI ONG/ pic by ARIF KARTONO

THE Movement Control Order (MCO) to contain the Covid-19 pandemic and foreign-exchange (forex) losses impacted DRB-Hicom Bhd’s earnings for the first quarter as the company warned of a tougher operating environment due to the lasting impact of the virus.

DRB-Hicom posted a net loss of RM173.27 million in the first quarter ended March 31, 2020 (1Q20), on the back of RM2.74 billion in revenue.

The conglomerate stated that the forex losses arose from translation of certain payables and borrowings denominated in foreign currencies.

Revenue for the period was impacted by operations ceased temporarily due to the MCO measures imposed by the government which began on March 18, 2020.

Its automotive sector made revenue of RM1.81 billion in the quarter derived from sales of vehicles and components by Proton Holdings Bhd, other automotive distribution companies, and manufacturing, engineering and aerospace companies.

“The sales performance for the current quarter was adversely affected as the automotive business operations were temporarily ceased during the MCO,” it said.

DRB-Hicom said the automotive sector sales continued to be led by national carmaker Proton, as the locally assembled Proton X70 SUV continued to lead the category.

In the quarter under review, Proton delivered 21,757 units, with the iconic Saga leading its siblings with some 8,800 units, while over 4,100 units of the X70 finding new homes. Its services sector revenue amounted to RM830.48 million for the quarter derived mainly from the postal and logistics, and banking businesses.

“The MCO also impacted these companies even though they are classified as essential services,” DRB-Hicom added.

Pos Malaysia Bhd’s parcel volume rose on the back of e-commerce and online marketing activities, the group noted.

“Mail revenue also saw a slight rebound, especially in February, although the impact of Covid-19 was apparent in March as revenue shrunk,” the company said in a statement yesterday.

DRB-Hicom’s property business made revenue of RM93.34 million mainly from construction-related projects but was impacted by the temporary closure of construction sites due to the MCO.

“The properties sector had lower billings in the construction sub-sector and thus saw revenue coming in lower,” it said.

The group further said the Sales Tax exemption for passenger vehicles until the end of December 2020 is expected to boost total industry volume (TIV), but the prospects of a full recovery to pre-Covid-19 level is unlikely.

“The group will, however, respond with consumer promotions and new model launches to recover lost ground,” DRB-Hicom added.

The Malaysian Automotive Association revised its 2020 TIV forecast downwards from 607,000 in 2019 to 400,000 units.

DRB-Hicom noted that the prospects for the group’s other businesses in defence, aerospace, postal and logistics, banking, services, and construction remain volatile as these have also been impacted by the uncertainty of a prolonged battle against Covid-19.

The company’s share closed yesterday unchanged at RM1.75, valuing the group at RM3.38 billion.