Tan Chong 2Q net profit slips 11.3% to RM56.4m

KUALA LUMPUR: TAN CHONG MOTOR HOLDINGS BHD []’s earnings fell 11.3% to RM56.46 million from RM63.65 million a year ago following slower sales due to the disruption in supplies from Japan due to the earthquake in the country.

It said on Thursday, Aug 18 it was upbeat about the remainder of the year as it was seeing stability and consistency in terms of complete knock down deliveries for the first time since the disaster in Japan.

“However, the supply side recovery is met with end-demand risks due to teething problems relating to the enforcement of the amended HPA (Hire Purchase Act) on June 15,” it said.

Tan Chong Motors said that barring a protracted resolution by the Ministry of Domestic Trade, Cooperative & Consumerism, “our performance should catch-up in 3Q after the slowdown in 2Q”.

It expected that with most of the bad news behind and the economy indicating stability, if not mild acceleration, it said consumers were returning to showrooms even without an increase in incentive levels.

On the financial performance in the 2Q, it said revenue was just 1.6% higher at RM942.99 million from RM927.92 million. Earnings per share were 8.65 sen compared with 9.75 sen. It declared a dividend of six sen per share.

For the first half, its net profit was marginally higher at RM130.54 million compared with RM128.32 million in the previous corresponding period. Revenue increased by 15.6% to RM2.07 billion from RM1.79 billion.

It said the first half results showed improved top and bottom-line despite an earthquake that disrupted the global supply chain after March 11.

“Cost to income ratios may appear out of alignment due to the first year of consolidation of Nissan Vietnam Limited (NVL) which has yet to break-even after taking into account translation losses in a weaker Vietnamese Dong against a stronger denominated Ringgit,” it said.

When compared with the first quarter, it said the second quarter lost some sales momentum seen in 1Q but it managed to “control the fall by quickly running down existing inventory as shortages in select models emerged”.

Tan Chong Motors said despite the obvious stock constraints, the company was amongst the first to replenish inventories by June to meet backlogs in the coming quarter.

“Our inventories stood at RM789.8 million (June 30) against RM878.8 million as at March 31, (the preceding

quarter immediately after the earthquake) on the back of RM943 million turnover for April to June,” it said.

The company said, when compared with the peak in 1Q, the 2Q “appears to have bottomed with declines of 16.7% and 23.1% in terms of revenue and net profit”.