ABLEGLOB: Profitability Holds Amid Revenue Decline, ‘Trading Buy’ Maintained

Able Global Berhad (AGB) reported a 4.7% year-on-year increase in core net profit to RM19.2 million for the second quarter of FY2025. While its first-half core net profit of RM33 million was slightly below internal estimates, it aligned with consensus expectations. This performance was largely driven by improved contributions from its Food & Beverage (F&B) segment and its Mexico joint venture.

Performance Review

Despite the positive profit growth, the company’s revenue for 2QFY25 experienced an 8.1% year-on-year decline to RM164.6 million. Both the Tin manufacturing segment, which saw a significant 34.4% drop, and the F&B segment, with a 4.3% decrease, contributed to the lower sales, partly attributed to an unfavourable forex rate impact on revenue. However, AGB’s profit margins were robust, boosted by lower raw material costs, particularly for milk powder and sugar. The depreciation of the US Dollar also played a role in enhancing margins, leading to a 3.4 percentage point expansion in the F&B segment’s pre-tax profit (PBT) margin to 16.6%. The Mexico plant continued to operate at approximately 40% utilisation, benefiting from tariff-free exports to the US under the USMCA agreement.

Challenges and Outlook Adjustment

The research firm noted a slowdown in global trade due to tariff-related uncertainties, prompting a downward revision of AGB’s sales assumptions for FY2025-2027 by 4-8%. This adjustment reflects anticipated weaker sales from North America and Africa, as exports constitute approximately 70% of the group’s revenue.

Future Outlook

Despite these revisions, the outlook for AGB remains optimistic. The company anticipates continued earnings growth, underpinned by the resilient demand for its defensive consumer staple dairy products and the positive contributions from its Mexico operations. To counter anticipated weaker sales in established markets, AGB plans to deepen its presence in Southeast Asia. Furthermore, the firm expects lower input costs for key raw materials like sugar (down c.17% year-to-date) and milk (down c.15% year-to-date), combined with the appreciation of the Ringgit, to lead to an uptick in AGB’s future profit margins.

Public Investment Bank maintains its “Trading Buy” recommendation on Able Global Berhad, with a revised target price of RM1.70, down from the previous RM1.80.