UMW Holdings Berhad’s (“Group”) profit after taxation and minority interests (“PATAMI”) surged by 26.8% to RM101.2 million for the first quarter ended 31 March 2022 (“Q1 2022”), compared with the RM79.8 million registered in the corresponding quarter ended 31 March 2021 (“corresponding quarter”), mainly attributed to the increase in revenue of 23.6% to RM3,650.8 million. The improved performance is attributed to the strong contribution from its Automotive and Equipment segments as demand improved following the economic recovery under the National Recovery Plan (“NRP”).
Automotive segment
The Automotive segment’s revenue for Q1 2022 grew by 28.1% to RM3,070.2 million compared with the corresponding quarter, supported by the higher number of vehicles sold which was driven by the sales tax exemption as well as the introduction of new models. In line with the higher revenue and higher share of profit from an associated company, the segment’s profit before taxation and zakat (“PBTZ”) soared by 41.4% to RM205.8 million. As Malaysia transitions to the endemic phase of Covid-19, demand for vehicles is expected to improve progressively. The Malaysian Automotive Association (“MAA”) projected the total industry volume (“TIV”) to increase by 18% to 600,000 units in 2022 mainly driven by the extension of sales tax exemption until 30 June 2022 and the improving consumer confidence. The introduction of all-new and facelift models, coupled with sales promotion campaigns, are expected to drive sales and contribute positively to the Group in 2022.
Equipment segment
The Equipment segment’s revenue increased by 11.8% to RM371.8 million in Q1 2022 mainly due to the higher demand for the segment’s products and services in the local and overseas markets as businesses are gaining momentum due to the expected transition to the endemic phase. The higher revenue, coupled with cost optimisation initiatives, resulted in the segment’s PBTZ to surge by 44.8% to RM31.8 million for Q1 2022. Business activities are expected to gradually recover in line with the projected economic growth in 2022. The Heavy Equipment sub-segment stands to benefit from the increase in construction activities, as infrastructure spending picks up. The high commodity prices could also potentially increase the demand for heavy equipment. Meanwhile, the Industrial Equipment sub-segment will continue to focus on growth sectors, while it continues to expand its forklift refurbishment business.
Manufacturing & Engineering (“M&E”) and Aerospace segments
While revenue declined marginally to RM227.1 million in Q1 2022 for the M&E segment, PBTZ improved by 26.9% to RM10.6 million, mainly due to lower operating costs. Going forward, the projected strong growth in TIV and a higher global demand for vehicles augur well for the segment.
The Auto Components sub-segment is expected to benefit from the rebound of the original equipment (“OE”) and replacement equipment (“RE”) markets to pre-Covid-19 levels. The Lubricants sub-segment will be increasing its production capacity to expand its footprint in the industrial lubricant sector both locally and regionally.
The Aerospace sub-segment expects demand for fan cases to improve with the resumption of international air travel. It is also continuously exploring opportunities to improve its plant utilisation and diversify its manufacturing capabilities in line with its products and customer diversification strategy.
Overall prospect
UMW Holdings Berhad President and Group CEO, Dato’ Ahmad Fuaad Kenali said, “We are encouraged by the Group’s results in the first quarter of 2022 despite the challenging business environment. The transition to the endemic phase of Covid-19 is expected to intensify economic activities locally and globally, as restrictions are further eased, and international borders reopen. Consistent with Bank Negara Malaysia’s higher GDP forecast of between 5.3% and 6.3% for Malaysia in 2022, the Group anticipates its performance for 2022 to be satisfactory. Nevertheless, the Group remains cautious of the various external headwinds, including the lingering threat of Covid-19, the persistent and prolonged supply chain disruptions, as well as the impact of further escalation of geopolitical conflicts. In view of the headwinds, the Group will continue to execute its strategic initiatives focusing on driving operational efficiencies and undertaking cost optimisation activities to improve its resilience.”