Navigating Choppy Waters: A Deep Dive into the Latest Quarterly Performance

Greetings, fellow investors and market enthusiasts! Today, we’re unrolling the latest quarterly report for the period ended 31 March 2025. This report offers a candid look into the performance of a prominent Malaysian diversified group, primarily operating in the steel manufacturing and food trading sectors. While the numbers reflect a challenging quarter marked by significant market headwinds, they also shed light on the strategic resilience and future outlook of the company.

The core takeaway? The Group faced a tough quarter, seeing a notable dip in revenue and a shift from profit to loss. However, understanding the underlying factors and the company’s strategic responses is key to grasping its true position. Let’s break down the details.

Quarterly Performance Snapshot: Q3 2025 vs. Q3 2024

The third financial quarter, ending 31 March 2025, presented a challenging landscape for the Group when compared to the same period last year. Revenue saw a significant contraction, impacting profitability across the board.

As you can see, revenue for the current quarter was down by 32% compared to the same quarter last year. This decline was primarily due to lower sales volumes in both the Cold Rolled Coil segment (down 29%) and the Steel Tube segment (down 10%). The festive periods of Chinese New Year and Ramadan contributed to fewer business days. More critically, the Cold Rolled Coil segment faced a sharp decline in exports due to new US tariffs, while the Steel Tube segment battled intensified competition from Chinese imports. Average steel selling prices also fell by 11% for Cold Rolled Coil and 9% for Steel Tube, reflecting a broader downturn in steel prices.

The impact on profitability was stark. Operating profit plummeted by 88% to RM1.0 million. The Group recorded a pre-tax loss of RM1.4 million, a significant reversal from the RM6.6 million profit in the prior year’s corresponding quarter. Similarly, the post-tax results shifted from a RM6.6 million profit to a RM1.9 million loss.

Sequential Performance: Q3 2025 vs. Q2 2025

Comparing the current quarter to the immediate preceding quarter (Q2 2025, ended 31 December 2024) also reveals a downward trend, albeit with some segment-specific nuances.

Revenue declined by 26% from the preceding quarter, again largely due to lower sales volumes in both Cold Rolled Coil (down 26%) and Steel Tube (down 22%), compounded by fewer working days. While selling prices remained stable, margin pressure and lower throughput in the Cold Rolled Coil segment led to a 22% decline in its adjusted gross profit. The quarter also saw a fair value loss on quoted share investments of RM1.4 million, contributing to the overall pre-tax loss.

Business Unit Performance (Year-to-Date)

Looking at the year-to-date segmental performance provides a broader picture of each business unit’s contribution. The Group operates primarily in Steel Tube, Cold Rolled Coil, Investment Holding, and Others (including food trading).

The Cold Rolled Coil segment remains the largest revenue contributor, followed by Steel Tube. However, the Investment Holding segment reported a significant pre-tax loss, impacting overall group profitability. Geographically, while the majority of sales are to Malaysia, the Group’s Steel Tube and Cold Rolled Coil segments also serve ASEAN and Non-ASEAN foreign markets, with a notable portion of Cold Rolled Coil exports going to Non-ASEAN regions (RM109.2 million year-to-date).

Financial Health and Gearing

The Group’s financial position remains robust. Its gearing ratio (total interest-bearing debts over adjusted shareholders’ equity) stood at 0.16 times as at 31 March 2025, a reduction from 0.29 times as at 30 June 2024. This is well within its policy to maintain gearing below 1.5 times, consistent with bank covenants. Total interest-bearing debts were RM96.6 million, primarily linked to trade financing for its steel subsidiaries.

Foreign Currency Exchange (FX) Risks

The Group faces FX risks mainly from USD-denominated raw material imports and USD/SGD export sales. It employs a strategy of natural FX hedging between subsidiaries where possible to optimize savings. Excess exposure from imports is hedged using forward foreign currency exchange contracts. While there was a small net gain from fair-value-hedged positions, unhedged SGD receivables resulted in a realized loss of RM0.7 million year-to-date, highlighting the impact of currency fluctuations.

Risks and Prospects: Navigating a Complex Global and Local Landscape

The report provides a candid assessment of the challenging environment the Group faces and its strategies moving forward. Global economic uncertainty, driven by major trade policy shifts and China’s prolonged property downturn, has intensified. The Malaysian steel industry, in particular, is feeling the heat from intensified import undercutting, margin pressure, and rising operational costs.

Key Challenges and Risks:

• Trade Tensions: New United States tariffs and retaliatory measures, particularly the “Liberation Day” tariffs imposed on April 2, 2025, are creating market uncertainty, dampening steel demand, increasing foreign exchange volatility, and encouraging steel dumping into Malaysia.
• Domestic Steel Market: Limited upside due to subdued demand and fierce competition from Chinese imports, especially for pipes.
• Operational Disruptions: A major fire at a Petronas gas pipeline on April 1, 2025, caused a complete halt in cold rolled coil and pipe galvanizing production for over 16 days, which will impact Q4 results.
• Cost Pressures: While the food trading sector expects modest growth, it faces potential cost pressures from subsidy reforms and electricity hikes.
• Litigation: The ongoing judicial review proceedings regarding the removal of anti-dumping duties on Cold Rolled Coil from South Korea and Vietnam, while a “Stay of Proceedings” is in place, represents an uncertainty for the CRC segment.

Strategies and Outlook:

To navigate these challenges, the Group plans to stay agile, focusing on value-driven strategies, reevaluating its pricing approach to balance market share and margin, and addressing long-term issues like sustainability and rising costs. While government support (accelerating National Plan projects, easing bank reserve requirements, delaying expanded sales and service tax) is noted, its effectiveness hinges on prompt execution.

The outlook remains volatile, driven by ongoing trade negotiations and geopolitical tensions. However, Malaysia’s Electrical and Electronics (E&E) sector and resilient domestic demand may offer some cushioning. The food trading sector is projected for modest growth, supported by stable employment and easing inflation.

Summary and

This latest quarterly report paints a picture of a Group grappling with significant external pressures, particularly within its core steel manufacturing segments. The sharp decline in revenue and shift to a net loss reflect the immediate impact of global trade policies, intense competition, and domestic market softness. The proactive measures to manage gearing and FX risks are commendable, showcasing a prudent financial management approach.

Despite the current headwinds, the Group’s strategic focus on agility, value-driven approaches, and reevaluating pricing signals a proactive stance. The modest growth projected for the food trading sector also offers a degree of diversification and stability. The challenges, especially those related to tariffs and steel dumping, are substantial, and the effectiveness of government support will be crucial.

Key risk points highlighted in the report include:

1. Intensified import undercutting and margin pressure in the steel industry.
2. Rising operational costs impacting profitability.
3. Market uncertainty and dampening steel demand due to new US tariffs and retaliatory measures.
4. Increased foreign exchange volatility.
5. Risk of steel dumping into Malaysia, potentially overwhelming local producers.
6. Operational disruptions from unforeseen events (e.g., gas supply disruption).
7. Potential for insufficient government support despite minor initiatives.
8. Ongoing material litigation regarding anti-dumping duties, which could impact market fairness if the stay is lifted.

While the immediate future appears challenging, the Group’s long-term resilience will depend on its ability to adapt to these dynamic market conditions and effectively execute its strategies. Investors should closely monitor the impact of geopolitical developments and domestic policy responses on the steel sector.

Final Thoughts and Your Perspective

This report truly underscores the complexities of operating in today’s global economy, especially for industries like steel that are sensitive to trade policies and commodity prices. While the numbers for this quarter are sobering, the detailed explanations and forward-looking strategies provide a valuable lens through which to view the company’s path forward.

What are your thoughts on these results? Do you believe the Group’s strategies are sufficient to navigate the current market turmoil? Share your insights in the comments below!

For more in-depth analyses of Malaysian companies and market trends, be sure to check out our other articles.