BRC posts S$10.2m Q3 net profit, reversing year-ago loss

STEEL-solutions provider BRC Asia recorded a S$10.2 million net profit for Q3 ended June, reversing its loss of S$2.5 million a year ago, thanks to the recovery in the construction sector.

BRC's revenue for the quarter surged to S$340.2 million, up from S$36.6 million a year ago. The dramatic rise was due to the low base effect last year, when the circuit breaker to curb the spread of the coronavirus led to the suspension of construction activities. BRC's order book was about S$1.1 billion as of end-June.

The company's net profit for the nine months ended June stood at S$29.3 million, up 46 per cent from a year earlier. Its revenue for the same period was up 68 per cent to S$832.9 million, with other income rising 42 per cent to S$6.7 million due to fair-value changes on derivatives.

Its operating expenses inched down 4 per cent, partly due to lower finance costs amid lower interest rates. However, BRC's 9M gross margins came in at a lower 6.9 per cent, compared to 10.3 per cent a year ago. This was due to provisions for "onerous contracts" of S$40.4 million, it said.

"These provisions should be reversed when deliveries under such sales contracts are executed, or when the contractual obligations no longer exist, or when the costs to meet the obligations no longer exceed the sales value," the company added.

BRC also recorded a provision for an impairment loss on trade receivables of S$3 million. Trade receivables rose amid higher sales after the circuit breaker ended.

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Looking ahead, BRC remains cautious. It said: "While it is encouraging to see a broad-based recovery for the construction sector, recovery to pre-pandemic levels could be impeded by any re-tightening of foreign labour supply by the Singapore government and border controls, as the Covid-19 situation remains fluid."

The sector continues to suffer a foreign labour crunch and a greater number of foreign workers looking to return to their home countries, it added.

Malaysia's third movement control order (MCO 3.0), implemented to control the spread of the virus, has also disrupted the production of precast concrete components. The progress of some Singapore construction sites could be affected if MCO 3.0 continues.

"In the longer run, this pandemic may also have seeded certain substantial structural changes to how the sector operates," said BRC chief executive Seah Kiin Peng. He added that the company will strive to stay ahead of the changes.

Shares of BRC closed at S$1.45 on Wednesday, down 0.69 per cent.