UMW Holdings says market starting to recover

All of its segments generated an increase in revenue for the 3Q20, driven by sales tax exemption

by AFIQ AZIZ / pic by MUHD AMIN NAHARUL

UMW Holdings Bhd forecasts higher sales projection for the remainder of the year as consumer sentiment is gradually improving following the stimulus measures implemented by the government.

In a filing to Bursa Malaysia yesterday, the company announced its improved third-quarter results for 2020 (3Q20) compared to the preceding quarter, with lower profit and revenue generated from each segment compared to 3Q19.

Overall, the company posted a net profit of RM101.3 million compared to RM110.3 million in 3Q19, down 8.1%. Revenue also slumped by 7.69% to RM2.66 billion in 3Q20.

All of the segments generated an increase in revenue for the 3Q20, led by its automotive revenue of RM2.13 billion, doubling the RM1.1 billion reported in the preceding quarter.

UMW attributed this to a higher number of vehicles sold in the current quarter.

“The improved performance during the Recovery Movement Control Order (RMCO) period was driven by the sales tax exemption effective from June 15 to Dec 31, 2020,” the company said.

In June, the government announced the sales tax exemption on complete knocked-down at 100% and 50% for the complete built-up to spur the growth of the local automotive market.

Following the announcement, the Malaysian Automotive Association has revised its total industry volume projection for the year upwards to 470,000 units from its previous forecast of 400,000 units announced in April 2020.

“The segment is expected to continue to benefit from this measure. UMW Toyota Motor Sdn Bhd has revised its sales target upwards to 53,000 units from 45,000 units. Likewise, Perusahaan Otomobil Kedua Sdn Bhd has also recorded the highest sales in the quarter,” it noted.

In the coming quarter, the group’s new product offering, as well as sales and marketing initiatives are expected to cushion the impact of the Conditional MCO on consumer sentiment.

The company added that the domestic sales of auto components are expected to further improve following the sales tax “holiday” period given to locally assembled cars until the end of the year, as well as lower interest rates, which is expected to spur the local automotive market.

Its lubricants subsegment will continue to leverage on its original equipment manufacturer partners and strengthen its domestic and overseas sales.

Despite the adverse impact of the Covid-19 pandemic on the aviation sector, UMW’s aerospace subsegment made its maiden delivery of Trent 7000 fan case in October, aligning its strategies on products and end-customer diversification.

The group expects the segment to contribute satisfactorily in 4Q20. The company reported revenue of RM242.3 million, lower than the RM252.4 million reported in the corresponding quarter last year.

The lower revenue is mainly due to lower contribution from the aerospace subsegment on the back of lower deliveries of fan cases in the current quarter.

“The group will continue to focus on strengthening its core business segments and implementing its strategic cost optimisation initiatives to improve business performance and productivity.

“Amid the challenging business environment, the group will strive to maintain its performance for the remainder of the year,” the group added.

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