Press Releases

• Focus on long-term resilience drives commitment to operational efficiency and improvement
• Declares 1 sen interim dividend

Shah Alam, Malaysia, 27 November 2023 – Kumpulan Perangsang Selangor Berhad (“KPS Berhad” or “the Company” or “the Group”) (KPS, Bursa: 5843; Bloomberg: KUPS:MK; Reuters: KPSB.KL) reported a lower revenue of RM332.9 million, posting a 13% year-on-year ("YoY") decrease from the RM382.8 million recorded in the corresponding quarter last year. Operating profit fell 34% to RM22.5 million as compared with RM34.0 million in the corresponding period last year, as prevalent operational challenges encountered by the manufacturing subsidiaries put pressure on margin. Consequently, profit after tax and zakat (“PAT”) decreased by 49% to RM8.6 million, from RM16.9 million in the same quarter of the previous year.

HIGHLIGHTS FOR THE QUARTER ENDED 30 SEPTEMBER 2023

The Group’s total revenue of RM332.9 million for the quarter was mainly made of its manufacturing business comprising Toyoplas Manufacturing (Malaysia) Sdn Bhd (“Toyoplas”), CPI (Penang) Sdn Bhd (“CPI”), MDS Advance Sdn Bhd (“MDS Advance”), Century Bond Bhd (“CBB”), and King Koil Manufacturing West LLC (“KKMW”), which accounted for 84% of the total revenue. The manufacturing business recorded a revenue decline of 13% YoY, in contrast to the RM323.1 million reported in the same period of the preceding year.

The decline was mainly observed in Toyoplas, CPI, and MDS Advance, consistent with the Group’s exposure on the consumer electronics industry. The industry has been grappling with a deceleration in demand, attributed to weaker consumer sentiment and a subdued macroeconomic environment leading to excess of inventory at the customer's end. Furthermore, in the case of Toyoplas, its revenue growth was further challenged by the transition of a major customer taken place a year before.

Toyoplas led revenue contribution with RM114.1 million, but at 33% or RM55.8 million decrease compared with RM169.9 million recorded in the same period last year. CPI contribution for the quarter decreased marginally by 2% to RM56.1 million from RM57.0 million recorded in the previous year's quarter. MDS Advance contributed RM5.1 million this quarter, primarily from its medical and semiconductors business segments.

CBB saw a YoY growth of 6% in revenue, contributing RM67.9 million as compared with RM64.1 million achieved in the same quarter last year, supported by higher traction from the paper and consumer division. The remaining RM36.9 million was a consolidation from KKMW and its OEM contribution from King Koil Sales Inc. (“KKSI”), which recorded an increase of RM4.9 million or 15% YoY from RM32.0 million.

RM40.7 million of the Group revenue was derived from the trading sector, represented by Aqua-Flo Sdn Bhd (“Aqua-Flo”), whose revenue has shown a YoY reduction of 6% from RM43.3 million in the same quarter last year, due to the lower sales of water meters. The licensing sector, King Koil Licensing Company Inc. (“KKLC”), recorded a 3% higher revenue this quarter, contributing RM10.2 million to the Group revenue compared with RM9.9 million in the same quarter last year. The remaining revenue contribution of RM2.0 million was from property investment sectors.

The Group’s operating profit was RM22.5 million, 34% lower than RM34.0 million recorded in the corresponding period last year, affected by reduced sales stemming from a slowdown in demand, coupled with increased input costs such as raw material, labour, and electricity tariffs. Additionally, finance costs rose to RM6.6 million from RM5.7 million due to a 50-basis point YoY hike in the overnight policy rate (“OPR”). The macroeconomic challenges and persistent operational challenges have collectively impacted the Group's PAT, resulting in a 49% decrease to RM8.6 million compared with the RM16.9 million reported in the same quarter last year.

HIGHLIGHTS FOR THE PERIOD ENDED 30 SEPTEMBER 2023

The Group’s revenue for the nine months of 2023 was RM909.4 million, a 12% drop from RM1,037.5 million in the same period last year (9M’22). The main reasons for the lower revenue were the slower consumer demand and the transition of major customers from Toyoplas and KKMW, which affected the manufacturing business sectors. In addition, the revenue was also impacted by the absence of a one-off upfront payment of RM10.0 million that the Group received in the previous period for renewing a long-term licensing agreement.

Seeing that, the Group’s operating profit decreased by 38% to RM53.2 million in the current period, compared with RM85.9 million in 9M’22. This was mainly due to a lower gross profit caused by a decline in revenue, increased material and labour costs, and higher electricity tariffs. The operating profit was also affected by the additional administrative expenses from the acquisition of MDS Advance and the higher net forex loss, especially at Toyoplas’ operation.

Finance costs escalated by 27% to RM20.6 million in the current period, compared with RM16.2 million in the same period last year. This was due to the higher interest rates that resulted from the rise in the OPR. The Group’s share of profit from associates improved to RM2.2 million, compared with a loss of RM7.4 million in the previous period due to the absence of share of losses from SPRINT Holdings Sdn Bhd. The combination of all these factors resulted in a 52% decrease in the Group’s PAT for the nine months of the year, delivering RM18.3 million, compared with RM38.1 million achieved in 9M’22.

MANAGING DIRECTOR/GROUP CEO’S PERSPECTIVE

“Our performance has been tested by a period of fiscal challenges resulting from weaker consumer sentiment and the macroeconomic environment, both leading to an excess inventory at the customer's end. We are also facing margin adjustment, influenced by the reduced revenue and heightened operating expenses. As we navigate the market dynamics, our commitment to sustaining our business resilience is unwavering.

Our immediate focus involves cushioning the impact of more subdued revenue streams, improving manufacturing plant utilisation, and implementing measures to optimise costs.

We have initiated efforts for Toyolas to further growth in high-potential and less-cyclical sectors such as healthcare and renewables. Similarly, MDS Advance is also adopting a comparable diversification strategy and actively prospecting customers in the oil & gas sector. Our plan also includes increasing the utilisation of our manufacturing plants in general - the high-tonnage machines, in particular. To this end, Toyoplas Indonesia has made progress in prospecting customers from the consumer and renewable sectors; it has recently acquired a new customer in the consumer sector.

Having the right labour mix is integral in managing our input cost. Optimising the composition of full-time employees and shorter-term contract workers allows us to adapt more efficiently to fluctuations in demand. Finally, as part of the Group’s climate adaptation strategy, we will be installing solar panels at Toyoplas and CPI this year, following the success of the same initiative at CBB, with the target to achieve significant cost savings from electricity consumption within the Group.

As we continue to foster growth, business development efforts remain a priority for sustained progress.”

DIVIDENDS

The Board resolved today to pay an interim dividend amounting to RM5.4 million, or, 1 sen per ordinary share for the financial year ending 31 December 2023, reflecting KPS Berhad's financial commitment to its shareholders. It will be payable on 29 December 2023 to shareholders registered in the Records of Depositors at the close of business on 12 December 2023.

GROUP PROSPECT

KPS Berhad's forward trajectory would likely be marked with caution for the remainder of the year amid the complexity of managing business operations in a still-evolving global economic environment. Notwithstanding that, KPS Berhad is committed to continuously strengthening revenue traction and refining all aspects of operations across its businesses to ensure sustainable value creation. Central to the Group’s strategy is building its capacity to support existing and future businesses while optimising operational and financial performance in the future, at the same time adeptly navigating the business landscape by staying agile and responsive to market shifts.

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About KPS Berhad (www.kps.com.my)

Incorporated on 11 August 1975, Kumpulan Perangsang Selangor Berhad (“KPS Berhad” or “the Company” or “the Group”) is a global investment holding company listed on the Main Market of Bursa Malaysia Securities Berhad under the Industrial Products & Services Sector. KPS Berhad has core investments in the Manufacturing sector. While enhancing shareholder value by optimising returns, KPS Berhad is committed to contributing toward sustainable economic, environmental, and social development.

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