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Hong Leong Asia Q3 earnings down 36.4% to S$2.8m, hit by construction decline

HONG Leong Asia has reported a weaker third-quarter net profit of S$2.8 million, down 36.4 per cent from S$4.4 million as it has been hit by the decline in the construction industry in Singapore while its Malaysian subsidiary faced keen price competition due to fewer property projects and excess cement capacity.

The construction sector in Singapore contracted by 3.1 per cent on year-on-year, extending the 4.2 per cent decline in the previous quarter. The decline has led to fewer projects and keen price competition for Hong Leong Asia. In Malaysia, the group’s subsidiary, Tasek Corporation, faced intense price competition due to excess cement capacity and reduced number of private property projects.

Revenue for the three months ended September contracted 14.8 per cent year-on-year from S$887.4 million to S$756.2 million.

Earnings per share (EPS) for the quarter was 0.84 Singapore cent, reversing a loss (restated) of 4.87 Singapore cents for the third quarter a year ago.

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Profit year-to-date was 9.5 per cent lower at S$18.1 million from S$20 million a year ago, while revenue dipped 3.3 per cent to S$2.77 billion from S$2.87 billion a year ago.

No dividend has been declared.

On its outlook, the group expects the operating environment for its diesel engines unit in China to continue to be challenging.

In Malaysia, some major infrastructure and government construction projects had been cancelled or deferred with the announcements made by the new Malaysian government. This will affect the demand for cement and concrete products for Tasek Corporation, and therefore the subsidiary is expected to continue to operate in challenging market conditions.

In Singapore, the private property market in Singapore has been weighed down by the latest property cooling measures which were implemented in July 2018. Notwithstanding, Hong Leong's building materials unit has witnessed an improvement in sales volumes and pricing in recent tenders. Its precast manufacturing facility, when ready, will enable the business unit to continue to be a significant player in Singapore.

The counter was trading at 56.5 Singapore cents, up one Singapore cent, before the results were released.