CHUAN HUAT RESOURCES BERHAD: Navigating Headwinds in Q3 FY2025
Greetings, fellow investors! Today, we’re diving deep into the latest unaudited condensed consolidated financial statements of CHUAN HUAT RESOURCES BERHAD (CHRB) for the third quarter and nine months period ended 31 March 2025. This report offers a crucial glimpse into the company’s performance amidst a dynamic market environment. While the numbers reveal a challenging quarter with increased losses, it’s essential to understand the underlying factors and the strategic pivots CHRB is making. Let’s break down the key takeaways and see what this means for the company’s path forward.
Q3 FY2025 Performance: A Closer Look
The third quarter has presented some significant challenges for CHRB. Both revenue and profitability saw a decline when compared to the same period last year. Let’s examine the core figures:
Quarter-on-Quarter (QoQ) Performance (3 months ended 31 March 2025 vs 31 March 2024)
Revenue
RM 167.999 million
Previous Year Quarter
RM 201.223 million
This represents a notable 16.51% decrease in revenue.
Loss Before Tax
RM (3.341) million
Previous Year Quarter
RM (1.613) million
The loss before tax widened by a significant 107.13%, indicating increased operational pressures.
Basic Loss Per Share
(1.33) sen
Previous Year Quarter
(1.05) sen
The loss per share increased from 1.05 sen to 1.33 sen, reflecting the impact on shareholder value.
Year-to-Date (YTD) Performance (9 months ended 31 March 2025 vs 31 March 2024)
Revenue
RM 569.861 million
Previous Year Period
RM 589.036 million
Revenue for the nine-month period saw a modest 3.26% decrease.
Loss Before Tax
RM (6.166) million
Previous Year Period
RM (2.094) million
The year-to-date loss before tax expanded significantly by 194.46%.
Basic Loss Per Share
(3.32) sen
Previous Year Period
(2.13) sen
Similarly, the year-to-date loss per share also widened to 3.32 sen from 2.13 sen.
Diving Deeper: Segmental Performance
To understand the overall financial picture, let’s break down the performance of each business segment.
Quarter-on-Quarter Segment Analysis (3 months ended 31 March 2025 vs 31 March 2024)
| Segment | Revenue (RM’000) | Revenue Change (%) | PBT (RM’000) | PBT Change (%) | Key Reason |
|---|---|---|---|---|---|
| Trading of Steel & Building Materials | 134,816 | -16.11% | (323) | +61.36% (Loss Reduced) | Lesser trading days (festive, Ramadan), but higher selling margins. |
| Steel Service Centre | 23,716 | -15.77% | (1,427) | -2,742.59% (Profit to Loss) | Volatility in global steel prices significantly affected gross margin. |
| Trading of IT Related Products | 6,279 | -5.81% | (154) | +80.02% (Loss Reduced) | Lower distributor sales, but improved due to lower operation costs. |
| Food & Beverage | 2,908 | -4.31% | (218) | -54.61% (Loss Increased) | Termination of 2 PappaRich franchisees. |
| Others | 280 | -89.46% | (1,219) | -1,604.94% (Profit to Loss) | Closure of manufacturing unit, gratuity payments, term loan interest. |
Year-to-Date Segment Analysis (9 months ended 31 March 2025 vs 31 March 2024)
| Segment | Revenue (RM’000) | Revenue Change (%) | PBT (RM’000) | PBT Change (%) | Key Reason |
|---|---|---|---|---|---|
| Trading of Steel & Building Materials | 450,544 | -3.96% | 1,336 | +331.54% (Loss to Profit) | Significant improvement due to RM 1.50 million compensation from land acquisition. |
| Steel Service Centre | 89,311 | +4.18% | (3,719) | -359.53% (Profit to Loss) | Loss mainly due to closing stock variance from declining steel prices. |
| Trading of IT Related Products | 19,716 | -9.99% | (1,053) | +38.64% (Loss Reduced) | Lower distributor sales, improved due to lower operation costs. |
| Food & Beverage | 9,452 | +4.80% | 18 | -88.16% (Profit to Loss) | Increased revenue from promotions, but profit decline due to higher promotion costs and franchisee termination. |
| Others | 838 | -74.18% | (2,748) | -98.27% (Loss Increased) | Similar reasons as QoQ: manufacturing unit closure, gratuity, interest payments. |
The segment analysis clearly shows that the Steel Service Centre and “Others” divisions were major contributors to the overall loss, primarily due to challenging steel price volatility and one-off costs related to business restructuring. However, the Trading of Steel & Building Materials segment showed resilience, particularly in the year-to-date figures, thanks to a land acquisition compensation.
Financial Health Check: Balance Sheet & Cash Flow
Let’s briefly look at CHRB’s financial position and how its cash is moving.
Statement of Financial Position (as at 31 March 2025 vs 30 June 2024)
- Total Assets: Decreased from RM 638.382 million to RM 612.217 million.
- Total Equity: Decreased from RM 324.666 million to RM 318.550 million.
- Net Assets Per Share: Declined from RM 1.85 to RM 1.81.
- Total Liabilities: Decreased from RM 313.716 million to RM 293.667 million, largely due to a reduction in borrowings.
- Cash & Cash Equivalents: Decreased from RM 27.876 million to RM 23.786 million.
The reduction in total liabilities, particularly borrowings, is a positive sign, indicating some deleveraging efforts.
Cash Flow Performance (9 months ended 31 March 2025 vs 12 months ended 30 June 2024)
- Net cash inflow from operating activities: RM 5.389 million (down from RM 14.065 million).
- Net cash inflow from investing activities: RM 1.078 million (a significant improvement from an outflow of RM 1.262 million, mainly due to proceeds from disposal of investment properties).
- Net cash outflow from financing activities: RM (12.863) million (reduced from RM (15.780) million).
While operating cash flow saw a dip, the positive shift in investing cash flow is encouraging, indicating strategic asset management.
Risks and Prospects: Navigating a Complex Landscape
CHUAN HUAT RESOURCES BERHAD operates in sectors facing both headwinds and tailwinds.
The Malaysian Steel Industry: A Balancing Act
The steel industry, a core business for CHRB, is at a crossroads. On one hand, there’s an overcapacity in long steel products, leading to price pressures and low plant utilization. Malaysia also faces a supply gap in flat steel products, relying heavily on imports. This imbalance necessitates a structural shift within the industry.
However, demand fundamentals remain robust, fueled by significant government infrastructure projects like MRT3, Penang LRT, and the Sabah-Sarawak Link Road. The National Automotive Policy (NAP 2020) also promises long-term demand for higher-grade automotive steels.
Challenges persist, including rising input costs, global supply chain disruptions, and intense competition from lower-cost imported steel. The government’s two-year moratorium on new steel projects and its push for higher-value, sustainable production (aligned with NIMP 2030) are critical. Global climate policies, such as the EU’s Carbon Border Adjustment Mechanism (CBAM), further pressure Malaysian producers to decarbonize.
CHRB’s Strategy: The Group is focused on operational efficiencies, inventory management, and value-added steel products. Success will hinge on their ability to pivot towards flat and specialty steel, embrace sustainability, and align with national and international policy trends.
IT and F&B Divisions: Mixed Outlooks
- IT Division: The outlook is challenging due to pressure from new products and fierce margin competition from online sales. CHRB’s strategy here is to be prudent in inventory procurement and vigilant on operational costs.
- Food & Beverage (F&B) Division: The “PappaRich” brand shows promising signs. The company received encouraging responses from potential franchisees at the “International Franchise Exhibition and Convention 2025,” and is confident of adding 5 new PappaRich franchisees by the end of 2025.
Overall Group Strategy: CHRB plans to adapt dynamic pricing mechanisms, enhance cost management, tap into niche markets, develop new product offerings, and aggressively use digital platforms and social media to promote both its IT and F&B businesses.
Summary and Investment Considerations
CHUAN HUAT RESOURCES BERHAD’s Q3 FY2025 report paints a picture of a company navigating a complex economic landscape. While the increased losses in the quarter and year-to-date are a concern, particularly in the Steel Service Centre and “Others” segments, it’s crucial to look beyond the immediate numbers. The steel industry faces structural challenges, but government-led infrastructure projects and strategic shifts towards higher-value products offer future opportunities. The F&B division, especially PappaRich, shows potential for growth through franchise expansion.
The company’s efforts to reduce borrowings and its strategic focus on operational efficiencies, inventory management, and exploring new growth avenues are positive steps. The one-off compensation from land acquisition also provided a much-needed boost to the steel trading segment’s year-to-date performance.
Key points to consider for the future include:
- Steel Industry Volatility: How well can CHRB manage the impact of fluctuating global steel prices and intense competition?
- Strategic Pivots: The success of shifting towards value-added and specialty steel products will be critical.
- F&B Expansion: The ability to successfully add new PappaRich franchisees and capitalize on positive market reception.
- Cost Management: Continued vigilance on operational costs across all divisions, especially in the challenging IT sector.
- Economic Headwinds: The broader economic environment and consumer sentiment in Malaysia will play a role in demand across all segments.
From a professional standpoint, while the losses are a clear setback, CHRB’s proactive strategies to address industry challenges and explore growth in other segments like F&B are noteworthy. The reduction in overall liabilities also indicates prudent financial management. The road ahead for CHRB appears to be one of strategic adaptation and careful execution.
What are your thoughts on CHRB’s latest performance? Do you believe their strategies are robust enough to navigate the current market challenges and capitalize on future opportunities, especially in the steel and F&B sectors? Share your insights in the comments below!
For more in-depth analyses of Malaysian companies, stay tuned to our blog and check out our other articles on [Link to related article 1] and [Link to related article 2].
