Frencken Q1 net profit dips 12.6 per cent on higher costs

FRENCKEN Group’s : E28 0% : E28 0%net profit fell 12.6 per cent year-on-year to S$12.8 million in Q1 due to higher costs and heightened supply chain challenges in the second half of FY2021.

“Higher prices of materials, freight and energy in 1QFY22 compared to 1QFY21 have driven up input costs and the group is working on cost mitigation actions,” the mainboard-listed company said in a business update on Tuesday (May 17).

Revenue went up 9.3 per cent year-on-year to S$198.4 million, driven primarily by double digit sales of the group’s mechatronics division, which accounted for 87.1 per cent of the manufacturer’s revenue in Q1.

Gross profit eased 2.5 per cent year on year to S$30.5 million in Q1, while gross profit margin fell 1.9 percentage points to 15.4 per cent. Frencken attributed this to rising raw material prices amid supply chain disruptions and increased production overhead costs.

Frencken said it expects supply chain pressures to show signs of easing from the second half of this year as it works on mitigating cost inflation through operational initiatives.

The group added that it has made “significant capital investments” in FY2021 to add capacity and enhance capabilities as well as expand its pool of skilled workers.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

“These investments for the future will see increased costs in the interim as the group sets up and qualifies new facilities to grow potential revenue drivers,” said Frencken.

Barring any unforeseen circumstances or deterioration in the business environment, the manufacturer expects a “moderate increase” in its revenue for 1H22 as compared to 2H21.

The counter closed S$0.02 or 1.5 per cent higher at S$1.33 on Tuesday.