Hong Leong Asia H1 net profit up 4.5% to S$42.6 million despite lower revenue

INDUSTRIAL conglomerate Hong Leong Asia’s net profit rose 4.5 per cent year on year to S$42.6 million for the first fiscal half ending Jun 30, up from S$40.7 million in the year-ago period.

However, revenue was down 26.1 per cent to S$2.1 billion from S$2.84 billion previously, as the group’s key business segment - diesel engines in China - recorded lower sales volume and revenue for H1 2022, Hong Leong Asia noted in its bourse filing on Thursday (Aug 11).

Earnings per share stood at S$0.057 against H1 FY2021's S$0.054.

Revenue from the diesel engines unit Yuchai declined 30.9 per cent to S$1.8 billion with 180,911 engine units sold. A steeper decline of 56.8 per cent was recorded in engines for on-road commercial applications compared to a 12.7 per cent fall in engines for off-road applications. The group attributed this to renewed Covid-related lockdowns in cities across China which had impacted commercial vehicle demand.

Although the diesel engine market conditions remain challenging in China, Yuchai is focused on making available its portfolio of Tier-4 compliant off-road engines for implementation as China transitions towards a more stringent emissions standard in late-2022. It will also develop “New Energy” solutions, the group added, citing its hydrogen engine development and range extender ventures as recent examples.

The building materials unit (BMU) revenue increased 26.5 per cent to S$282 million with reportable segment net profit of S$28.7 million, compared with S$10.7 million previously as construction activities in Singapore and Malaysia continue to recover, driving demand for concrete and related products.

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“BMU Singapore performed satisfactorily, led by the ready mix concrete business and the supply for precast products recovering. While the operating environment for BMU Malaysia has improved, the construction-related segment remains challenging given higher input costs, a shortage of labour and tighter credit conditions,” the group noted.

Hong Leong Asia said it is cautiously optimistic that the main business units will continue to demonstrate their resilience in a difficult operating environment in the second half of 2022.

“While challenges such as higher input costs and energy costs and issues with global supply chains are expected to linger, our push towards innovation and productivity improvements with automation and digitalisation will help to mitigate some of these pressures,” the group noted. The counter closed flat at S$0.745 on Thursday, before the results announcement.