SERN KOU RESOURCES BERHAD: Navigating Market Headwinds with a Return to Profitability
Greetings, fellow investors! Today, we’re diving into the latest financial performance of SERN KOU RESOURCES BERHAD (SKRB), a key player in Malaysia’s furniture and wood processing industries. Their recently released third-quarter report for the period ended 31 March 2025 offers a fascinating glimpse into how the company is navigating a challenging economic landscape, marked by a significant swing from loss to profit, partly aided by a substantial insurance payout.
While revenue saw a slight dip, SKRB managed to turn a loss into a profit, showcasing resilience amidst softer market demand and persistent cost pressures. This report highlights not just the numbers, but also the strategic adjustments SKRB is making to ensure its long-term sustainability. Let’s unpack the details!
Core Data Highlights: A Closer Look at the Numbers
Quarterly Performance: Turning the Tide
For the three months ended 31 March 2025, SKRB demonstrated a remarkable turnaround, moving from a loss-making position to profitability compared to the corresponding quarter of the preceding year. This was significantly bolstered by an insurance compensation of RM1.9 million received during the quarter.
3 Months Ended 31 March 2025
Revenue: RM99.814 million
Gross Profit: RM4.646 million
Profit Before Taxation (PBT): RM1.474 million
Profit After Taxation (PAT): RM0.389 million
Profit Attributable to Owners: RM0.241 million
Basic Earnings Per Share: 0.02 sen
3 Months Ended 31 March 2024
Revenue: RM104.368 million
Gross Profit: RM1.748 million
Loss Before Taxation (PBT): (RM1.917 million)
Loss After Taxation (PAT): (RM2.674 million)
Loss Attributable to Owners: (RM2.467 million)
Basic Loss Per Share: (0.23) sen
This represents a 166% surge in Gross Profit and a significant swing from a RM1.917 million loss to a RM1.474 million profit before tax compared to the same period last year. The earnings per share also turned positive, from a loss of 0.23 sen to a profit of 0.02 sen.
Cumulative Performance: A Positive Trend
Looking at the cumulative nine-month period ended 31 March 2025, the positive momentum is evident, with the company successfully converting previous losses into profits.
9 Months Ended 31 March 2025
Revenue: RM338.141 million
Gross Profit: RM17.892 million
Profit Before Taxation (PBT): RM1.474 million
Profit After Taxation (PAT): RM0.389 million
Profit Attributable to Owners: RM1.098 million
Basic Earnings Per Share: 0.10 sen
9 Months Ended 31 March 2024
Revenue: RM359.056 million
Gross Profit: RM10.812 million
Loss Before Taxation (PBT): (RM1.917 million)
Loss After Taxation (PAT): (RM2.674 million)
Loss Attributable to Owners: (RM2.081 million)
Basic Loss Per Share: (0.19) sen
Despite a 6% decline in revenue over the nine-month period, SKRB saw its Gross Profit jump by 65%. More impressively, the company swung from a RM1.917 million loss to a RM1.474 million profit before tax, and from a loss of 0.19 sen to a profit of 0.10 sen in earnings per share.
Performance Against Immediate Preceding Quarter
Comparing the current quarter to the immediate preceding quarter (ended 31 December 2024), revenue saw a 6% decline, primarily due to softer market demand for logs in the Processing and Trading of Wood segment. Gross Profit also decreased by 24%. However, PBT and PAT saw increases, though profit attributable to owners declined.
It’s worth noting that excluding the insurance compensation, the Group would have recorded a normalised loss before taxation of RM1.2 million for the current quarter, indicating that while operational improvements are underway, the one-off compensation played a crucial role in the reported profitability.
Business Unit Performance: Mixed Fortunes
SKRB operates primarily through two segments: Manufacturing and Trading of Furniture, and Processing and Trading of Wood. Their performances in the current period tell a story of varying challenges and successes.
| Segment | Revenue (9M Ended 31 Mar 2025) | Revenue (9M Ended 31 Mar 2024) | Segment Profit/(Loss) (9M Ended 31 Mar 2025) | Segment Profit/(Loss) (9M Ended 31 Mar 2024) |
|---|---|---|---|---|
| Manufacturing and Trading of Furniture | RM32.810 million | RM32.401 million | (RM1.826 million) | (RM3.320 million) |
| Processing and Trading of Wood | RM312.569 million | RM333.366 million | RM14.245 million | RM9.456 million |
Manufacturing and Trading of Furniture
This segment’s revenue for the current quarter remained consistent at RM12 million compared to the corresponding quarter of the preceding financial period. However, it continued to record a normalised loss before taxation of RM6.2 million (excluding insurance compensation). This persistent loss is attributed to ongoing cost pressures impacting operations.
On a positive note, the segment’s wholly-owned subsidiary, Sern Kou Furniture Industries Sdn. Bhd. (SKFI), received the final fire insurance compensation payment of RM1.8 million during the quarter. This brings the total fire insurance and consequential loss compensation received to RM11 million, which will be used to offset expenses for factory construction and machinery purchases.
Processing and Trading of Wood
This segment experienced a decline in revenue, recording RM88 million for the current quarter and RM306 million for the nine-month period, down from RM92 million and RM327 million respectively in the corresponding periods last year. This dip was mainly due to softer market demand for logs.
Despite the lower revenue, the segment managed to significantly improve its profit before taxation to RM650,000 for the current quarter (up from RM400,000 previously) and RM5.4 million for the cumulative period. This improved profitability was primarily driven by the successful sale of high-value wood species, which positively impacted the segment’s operating profit margin.
Financial Health: Managing Liabilities
SKRB’s financial position shows an increase in both total assets and liabilities. Total assets stood at RM379.224 million as of 31 March 2025, up from RM368.881 million a year ago. Total liabilities increased to RM144.001 million from RM122.509 million in the same comparative period.
The company’s total borrowings also saw an increase, reaching RM109.762 million as of 31 March 2025, compared to RM99.499 million a year earlier. This increase is largely in short-term secured borrowings like Banker Acceptance and Term Loans. Additionally, corporate guarantees given to licensed banks for banking facilities to subsidiaries also increased, reflecting higher utilization.
Risks and Prospects: Navigating a Shifting Global Landscape
SKRB acknowledges the prevailing uncertainties in both local and global economies, particularly citing the latest tariffs imposed by the new U.S. administration. These trade policies can significantly impact the export-oriented sectors, including furniture and wood products.
In response, the Group states it will closely monitor U.S. trade policies and adjust its strategies accordingly to navigate potential challenges and identify emerging opportunities. Their strong relationships with key customers are seen as a vital asset, providing insights into market trends and helping to anticipate the impact of external factors on their operations and business sustainability.
The company emphasizes its commitment to leveraging its competitive strengths to meet these challenges head-on, particularly in light of the challenging outlook and geopolitical uncertainties that lie ahead.
Dividends: No Payout This Period
For the financial period under review, SERN KOU RESOURCES BERHAD did not declare or pay any dividends.
Summary and Outlook
SERN KOU RESOURCES BERHAD’s latest quarterly report paints a picture of a company making strides towards profitability despite facing significant external pressures. The swing from a loss to a profit, especially for the cumulative nine-month period, is a notable achievement. This turnaround was largely supported by the substantial insurance compensation received, alongside the strategic focus on high-value wood species in their Processing and Trading of Wood segment, which significantly boosted its profitability.
However, challenges remain. The Furniture segment continues to grapple with cost pressures, and overall revenue has seen a decline due to softer market demand for logs. The increase in borrowings and contingent liabilities also warrants attention.
Looking ahead, the global economic environment, particularly U.S. trade policies, will be crucial factors influencing SKRB’s performance. The company’s proactive stance in monitoring these trends and leveraging customer relationships is a positive sign. Their ability to adapt and capitalize on their core strengths will be key to sustaining this positive momentum.
Key points to monitor for the future include:
- The company’s ability to mitigate cost pressures within its Furniture manufacturing segment.
- The ongoing demand for logs and high-value wood species in the Processing and Trading of Wood segment.
- The impact of global trade policies, especially U.S. tariffs, on their export markets.
- Management of increasing borrowings and liabilities.
What Are Your Thoughts?
SKRB’s journey back to profitability, albeit aided by an insurance payout, is a compelling narrative. Do you think the company can maintain this growth momentum in the next few years, especially as they navigate global trade uncertainties and internal cost challenges?
Share your insights and perspectives in the comments section below! Let’s discuss how SKRB might continue to evolve in this dynamic market.
For more in-depth analyses of Malaysian companies, check out our other recent articles on [Related Article Link 1] and [Related Article Link 2].
