HG Metal Manufacturing Ltd

Financials

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Second Quarter Financial Statements and Dividend Announcement for Financial Period Ended 30 June 2017

Financials Archive

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Statement of Comprehensive Income

Financials

Balance Sheet

Financials

Review of Performance

  • Review of Performance

    Results for 2Q2017 versus 2Q2016

    The Group recorded revenue of S$38.2 million in 2Q2017 as compared to S$33.7 million in 2Q2016, mainly contributed by 27% increase in average selling price in 2Q2017, led by the change in sales mix and increase in steel prices.

    However, the gross profit dropped by 7% in 2Q2017 compared to 2Q2016, due to the increase in weighted average cost of inventory.

    Other Operating Income

    Other operating income declined from S$2.2 million in 2Q2016 to S$2.0 million in 2Q2017. This was mainly due to the decline in warehousing and rental income, reduced gain from disposal of fixed assets and other miscellaneous income amounted to S$0.5 million. These reductions were partially offset by the increase in fair value gain on forward currency contracts of S$0.3 million.

    Distribution, Administrative, Other Operating and Finance Expenses

    The Group's distribution expenses increased in line with higher revenue achieved in 2Q2017.

    There were no significant changes in administrative expenses compared to previous corresponding quarter. Other operating expenses increased from S$1.9 million in 2Q2016 to S$2.2 million in 2Q2017, mainly due to higher foreign exchange loss incurred in 2Q2017, arising from the revaluation of net foreign currency monetary assets and liabilities which were affected by the weakening of the US Dollar against the Singapore Dollar.

    Lower finance expense was incurred in 2Q2017 as compared to 2Q2016 as a result of repayment of bank borrowings.

    Share of loss from associate was S$0.3 million in 2Q2017 as contrast to a share of profit of S$1.3 million in corresponding period last year, on account of weak business performance in an associate, BRC Asia Limited

    Profitability

    The Group posted a net loss after tax of S$0.8 million in 2Q2017 as compared to a net profit after tax of S$1.4 million in 2Q2016.

    Results for 1H 2017 versus 1H 2016

    Revenue and Gross Profit

    The Group achieved revenue of S$83.8 million in 1H2017 as compared to S$55.6 million in 1H2016, contributed by 13% increase in sales volume and 34% increase in average selling price in 1H2017.

    Gross profit increased to S$4.3 million in 1H2017 from S$3.6 million in 1H2016, driven by higher revenue registered in 1H2017.

    Other Operating Income

    Other operating income decreased from S$4.9 million in 1H2016 to S$4.5 million in 1H2017. This was mainly due to lower warehousing and rental income, reduced gain from disposal of fixed assets and other miscellaneous income amounted to S$0.8 million. These reductions were partially offset by the increase in fair value gain on forward currency contracts of S$0.4million.

    Distribution, Administrative Expenses, Other Operating and Finance Expenses

    The Group's distribution expenses increased to S$0.2 million in 1H2017 from S$0.1 million in 1H2016, in tandem with the increase in revenue in 1H2017.

    There was no significant increase in administrative expenses as compared to previous corresponding period.

    Other operating expenses increased from S$5.1 million in 1H2016 to S$5.5 million in 1H2017, primarily due to the increase in foreign exchange loss of S$0.7 million arising from weakening of the US Dollar against the Singapore Dollar, but partially offset by the reduction in other miscellaneous expenses of S$0.3 million.

    The Group made full repayment of certain bank loans in last financial year. This led to the significant decline in finance expenses in 1H2017 as compared to 1H2016.

    The Group recorded a share of loss from associates of S$0.3 million in 1H2017 as contrast to a share of profit of S$1.1 million in 1H2016.

    Profitability

    The Group posted a net loss after tax of S$1.2 million in 1H2017, compared to a net profit after tax of S$0.3 million in 1H2016, mainly due to the decline in share of profit from associates.

  • Balance Sheet

    As at 30 June 2017, the Group's inventory on hand increased to S$21.1 million as compared to S$14.2 million as at 31 December 2016 in view of stock replenishments in 2Q2017.

    Trade and other receivables increased in line with higher revenue to S$42.6 million as at 30 June 2017 as compared to S$34.8 million as at 31 December 2016.

    Total bank borrowings increased from S$2.0 million as at 31 December 2016 to S$2.2 million as at 30 June 2017.

  • Statement of Cash Flows

    The net cash flows used in operating activities was S$15.5 million in 1H2017 as compared to net cash flows generated from operating activities of S$8.0 million in 1H2016. This was mainly attributable to the increase in trade and other receivables and inventories of S$8.6 million and S$7.0 million respectively.

    Net cash flows generated from investing activities for 1H2017 was S$0.9 million, mainly derived from dividends received from a quoted investment.

    Net cash flows used in financing activities for 1H2017 was S$0.4 million, primarily for dividend payment of S$0.6 million and partially offset by the net proceeds from bank borrowings.

    The Group's cash and cash equivalents was S$15.8 million as at 30 June 2017 in comparison to S$52.6 million as at 30 June 2016.

  • Commentary

    Based on the latest data released by the Ministry of Trade and Industry on 11 August 2017, the Singapore economy expanded 2.9% on a year-on-year basis in the second quarter of 2017, mainly on the back of greater manufacturing activity, led by growth in the electronics and precision engineering clusters. The service sector reported growth from Q1's 1.4% to 2.4% in Q2 on a year-on-year basis. On the downside, the construction sector continued to contract in annual terms in Q2, decreased by 5.7% which represents a slight improvement from the contraction of 6.3% in Q1. Weakness in both private and public sector construction activities continued to weigh on the negative performance of the construction sector.

    Looking ahead, Singapore's economic growth is likely to remain modest, benefiting from the ongoing recovery in the external sector but suffering from weak domestic demand. Latest data released by the Building and Construction Authority(BCA) indicated that the value of construction contracts awarded to-date remains lagging behind the total value of construction contracts of $28 billion to S$35 billion per year forecasted by BCA for 2017.

    Against this backdrop, the Group expects the operating environment for the steel industry to remain challenging as the demand from various industry sectors remain weak. The volatility in US Dollar, rising import prices of steel stems from China's reduced steel output and shrinking export volume, intensifying local competition are factors that will continue to pose challenges to the businesses of the Group.

    The Group will therefore continue to work on optimizing its balance sheet, managing its credit exposure and seek to build on its competitive positioning by expanding its product range, customer base and value added services.

    The Group will continue to seek business opportunities, locally and overseas.