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Micro-Mechanics Q1 profit down 12.9% to S$4.5m

OVERHEADS ate into Micro-Mechanics (Holdings) bottom line for the first quarter, with the group also warning of "longer and more costly development cycles" ahead for the semiconductor industry.

Net profit was S$4.5 million for the three months to Sept 30, down by 12.9 per cent on the previous year, according to unaudited results released on Monday afternoon.

Revenue slipped by 4.6 per cent to S$16.9 million on lower sales from Singapore and Malaysia, while the gross profit margin was down to 59.5 per cent from 60.9 per cent for the same period the year before, on the back of a higher headcount and higher depreciation costs on machines purchased.

China remained the largest market for Micro-Mechanics, contributing one-third of revenue for the quarter - to the tune of S$5.5 million, from S$5.2 million previously.

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The group said in its financial statements that it expects to spend about S$6 million in FY2019 to boost operational productivity by upgrading its machines and increasing automation.

It added that it has been pursuing the development of new materials and processes, such as proprietary materials for devices for chips at 10 nanometres and below.

But it warned: "While we have begun deriving maiden revenue from these initiatives during Q1 2019, we believe that this pattern of longer and more costly development cycles will become the norm as the chip industry moves below 10-nano device geometry and into increasingly difficult processing methods."

Micro-Mechanics also noted that the worldwide forecast for the semiconductor industry is for growth to moderate towards the end of 2018.

Earnings per share was 3.24 Singapore cents, against 3.72 Singapore cents previously, while net asset value was 46.18 Singapore cents a share, compared with 43.37 Singapore cents as at June 30.

No dividend was recommended for the period, unchanged from the year before.

Micro-Mechanics went into the mid-day trading break down by S$0.02, or 1.12 per cent, at S$1.76, before the results were announced.