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CDW Holding Q2 loss widens to US$818,000 despite revenue rise

MAINBOARD-LISTED consumer electronics maker CDW Holding on Wednesday posted a loss attributable to owners of US$818,000 for the second quarter ended June 30, more than four times the US$188,000 loss in the year-ago period.

This was despite revenue rising 8.8 per cent to US$24.2 million. With cost of sales up 13.7 per cent, gross profit fell 8.7 per cent to US$4.4 million.

Administrative expenses, the largest category of expenses, narrowed marginally to S$4.42 million from S$4.43 million previously. But distribution expenses and share of losses of associates both rose.

The latest quarter's figures took the first-half's loss to US$1.97 million, widening from US$1.13 million.

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Gross profit margin for the first half of the year was 17.8 per cent, down from 22 per cent, which CDW attributed to an overall lower utilisation rate and higher material costs for the production of larger LCD backlight units.

Loss per share for the quarter was 0.36 US cent, compared with 0.08 US cent in the year-ago period.

CDW has declared a dividend of 0.4 US cent per share, the same as in the year-ago period.

It noted an increasingly challenging business environment for its core business of LCD backlight units due to price competition and short product life cycles, and said its results were also affected by "escalating US-China trade tensions and the performance of the group's key customer".

In order to mitigate the risk of US tariffs on products made in China, "which will adversely affect the group's performance", CDW will be opening a new factory in the Philippines to benefit from the proximity to its customers who also have factories there.

The lease agreement has been signed, renovation will start soon, and the factory is on track to begin operations in late-2019, CDW said.

It added: "Although the group envisages an improving operating result with increasing orders in the second half of this year, it is still too early to warrant a profitable operating result for the full year. The group continues to remain cautious for FY2019 due to the challenging operating environment it operates in and the tumultuous global economic environment."

CDW shares closed down 0.2 Singapore cent or 1.16 per cent at 17 Singapore cents on Wednesday before the results release.