NANOFILM Technologies said on Thursday (Feb 2) that it expects net profit for its financial year ended Dec 31, 2022 to be around 30 per cent lower year-on-year, with revenue expected to fall 4 per cent.

It said in a bourse filing that this was based on a preliminary review of information currently available to the board, including the management accounts of the group.

Nanofilm said the percentage decrease in revenue is lower than the decrease in net profit due to one-off costs of around S$2.5 million related to Covid-19 restrictions, a net loss of around S$1.6 million incurred by its subsidiary, Sydrogen Energy, and fixed indirect costs that could not be reduced in tandem with the reduction in revenue. 

The company noted that the decrease in revenue and net profit were due to five factors, including softer end-consumer demand due to recessionary fears, and change in China’s Covid-19 policy in December – which resulted in a spike of infections that interrupted the group’s operations.

Other factors include the “challenging operating environment resulting from macro headwinds, supply chain disruptions, and customers’ capital investment slowdown” and increased operating expenses from higher salary expenses due to increased headcount, as well as higher depreciation expenses.

However, the group added that it remains focused on achieving its targeted S$500 million revenue and S$100 million in net profit by 2025. For the full financial year ended Dec 31, 2021, Nanofilm reported net profit of S$62.2 million and revenue of S$246.7 million.

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“The group is cautiously optimistic that some of the operational risks and costs associated with the Covid-19 restrictions would not recur in 2023,” Nanofilm said.

The group will announce its financial results for FY2022 on Feb 21, where further details of the financial performance would be disclosed.

Nanofilm shares rose 4.2 per cent on Thursday to close at S$1.50, before the earnings announcement.