The segment registered higher sales in the quarter following strong sales achieved by UMW Toyota and Perodua

by RAHIMI YUNUS / pic credit: toyota.com.my

UMW Holdings Bhd is expected to derive better earnings in the third quarter ended Sept 30, 2020 (3Q20), driven by stronger contribution from its automotive segment.

The group’s equipment, and manufacturing and engineering (M&E) segments continue to remain under pressure due to slower economic activities induced by the pandemic.

JF Apex Securities Bhd analyst Nursuhaiza Hashim said the automotive segment’s financial performance shall improve, banking on stellar sales achieved by UMW Toyota Motor Sdn Bhd and its 38%-associate company, Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

“I think its automotive segment will register better earnings towards the end of the year as consumers want to benefit from the sales tax exemption. Group earnings may be offset by the equipment segment due to less industrial activities that could have an impact on the demand for heavy and industrial equipment. The M&E segment is expected to be moderate given fewer deliveries in its aerospace business,” Nursuhaiza told The Malaysian Reserve (TMR).

UMW’s automotive segment registered higher sales in 3Q20 following strong sales achieved by UMW Toyota and Perodua, gaining a new record high of market share for the group at 53.7% in August, up from 51.4% last year.

The company attributed the higher volume to the sales tax exemption announced by the government on June 5, effective from June 15 to Dec 31.

UMW Toyota sold 5,605 units in September 2020 with Toyota Vios, Yaris and Hilux being the top sales contributors for the month.

In 3Q20, UMW Toyota recorded an increase of 13.5%, or 2,242 units, in sales with a total of 18,870 units sold compared to 16,628 units delivered in the same quarter of 2019.

For the first nine months of 2020 (9M20), UMW Toyota sold 37,339 units, 70.5% of its revised target to sell 53,000 units for the year.

In September, Perodua recorded its highest ever monthly sales in its 26-year history by delivering 25,035 vehicles, an increase of 10.8% from the 22,604 units sold in August 2020.

Perodua sold 70,842 units in 3Q20 compared to 56,972 units in the same period a year ago, an increase of 13,870 units or 24.3%.

For 9M20, Perodua sold 145,012 units, 69.1% of its target of 210,000 units for the year.

UMW said Perodua is increasing production at both its assembly plants in Sungai Choh, Rawang, to meet the strong demand.

“We are pleased with the encouraging sales achieved by both UMW Toyota and Perodua in 3Q20 despite the challenging market environment as a result of the Covid-19 outbreak.

“We are also thankful to the government for introducing economic stimulus packages and for implementing the sales tax exemption to boost the automotive industry in Malaysia. We are confident the strong sales momentum will continue into the final quarter of the year,” acting president and group CEO Azmin Che Yusoff said in a statement yesterday.

An analyst said UMW’s higher market share in 3Q20 could be a result of customers holding back purchases expected for Proton Holdings Bhd for the upcoming all-new Proton X50.

The analyst added that Honda Malaysia Sdn Bhd also posted a lower sales volume in 3Q20 as customers are expecting the release of all-new Honda City RS.

“Toyota sales is expected to trend lower in 4Q20 in favour of new launches of other brands,” the analyst, who requested anonymity, told TMR.

In 2Q20, UMW slipped into the red with a net loss of RM78.44 million against earnings of RM57.19 million last year due to disruptions caused by the movement restrictions.

Revenue declined 48.5% to RM1.53 billion from RM2.97 billion previously, dragged by lower sales in all business segments comprising automotive, equipment and M&E.