Permaju Industries Berhad Q1 2025: Navigating Challenges with Strategic Shifts and Legal Victories
Permaju Industries Berhad has just released its financial results for the first quarter ended 31 March 2025. While the numbers reflect a challenging period, the report also highlights the company’s strategic initiatives and a significant legal development that could reshape its immediate future. Let’s dive into the details to understand what’s driving Permaju’s performance and what lies ahead.
The core takeaway from this quarter’s report is a notable increase in loss before tax compared to the same period last year, alongside a dip in revenue. However, a closer look reveals the impact of strategic inventory clearance and a positive turn in a long-standing legal battle, offering a glimmer of optimism.
Financial Performance Overview: A Mixed Bag
Permaju’s first quarter saw a decline in revenue when compared to the same period last year, primarily due to lower sales volume in its automotive division. This, combined with a significant reduction in gross profit margins, contributed to an expanded loss.
Quarter-on-Quarter Comparison (Q1 2025 vs. Q1 2024)
Current Quarter (31 March 2025)
Revenue: RM 7,064,000
Loss Before Tax: RM (6,891,000)
Loss for the Period: RM (6,891,000)
Basic Loss Per Share: (0.38) sen
Preceding Year Corresponding Quarter (31 March 2024)
Revenue: RM 10,516,000
Loss Before Tax: RM (5,245,000)
Loss for the Period: RM (5,247,000)
Basic Loss Per Share: (0.29) sen
As illustrated, revenue for the current quarter decreased by approximately 32.8% from RM10.52 million to RM7.06 million. This was largely attributed to a drop in Ford Ranger sales, from 56 units in the previous corresponding quarter to 33 units this quarter. Consequently, the Group’s loss before tax widened to RM6.89 million from RM5.25 million in the same period last year.
The report highlights two key factors for this increased loss:
- A significant reduction in gross profit margin from 21% to 12%, primarily due to the clearance of electric vehicles (EVs) and additional incentives offered to expedite inventory movement.
- An increase in depreciation and amortization on property, plant, and equipment by RM0.4 million.
Comparison with Immediate Preceding Quarter (Q1 2025 vs. Q4 2024)
Current Quarter (31 March 2025)
Revenue: RM 7,064,000
Loss Before Tax: RM (6,891,000)
Previous Quarter (31 December 2024)
Revenue: RM 5,750,000
Loss Before Tax: RM (138,000)
While revenue improved by RM1.3 million (a 22.8% increase) compared to the immediate preceding quarter, mainly due to higher Ford vehicle sales, the loss before tax surged significantly from RM0.14 million to RM6.89 million. This substantial increase in loss was primarily due to:
- A decline in gross profit margin from 19% to 12% resulting from aggressive inventory clearance, including additional incentives.
- A fair value loss of RM4.0 million on quoted investments.
- Professional fees of RM0.1 million incurred for a proposed share capital reduction.
Financial Health: Balance Sheet and Cash Flow
Looking at the balance sheet, Permaju’s total assets decreased slightly to RM267.36 million as of 31 March 2025, from RM276.52 million at 30 September 2024. Total liabilities also saw a reduction, moving from RM30.13 million to RM27.95 million. This resulted in a slight decrease in net assets per share from RM0.14 to RM0.13.
A positive highlight from the report is the significant improvement in cash flow from operating activities. The Group recorded net cash generated from operating activities of RM2.28 million for the period ended 31 March 2025, a strong turnaround from the RM11.06 million net cash used in the previous period. This led to a net increase in cash and cash equivalents of RM1.16 million, bringing the total cash and cash equivalents to RM12.28 million at the end of the period.
Strategic Outlook and Key Developments
Despite the current financial headwinds, Permaju is actively pursuing strategic initiatives across its core divisions and has achieved a crucial legal victory.
Automotive Division
The Group is consolidating its automotive resources to focus on Ford vehicles and Electric Vehicles (EVs), aiming to revitalize this division. A new luxury car rental business, particularly for EVs, has been launched, with the long-term vision of transforming Permaju into a comprehensive automotive service provider.
Property Division
Permaju remains cautiously optimistic about its property division. The Group is currently reviewing its existing gross development costs (GDC), gross development value (GDV), and land values. The intention is to proceed with current plans and actively seek new property development markets.
Plantation Division
Significant progress is being made in the new cocoa plantation venture through the Cocoa Smart Farming collaboration with the Malaysian Cocoa Board. Land clearing is complete, and earthworks, nursery development, and grass planting are underway, expected to be finished by the end of the next quarter. Similar progress is reported with the cooperation with Felcra Bekalan & Perkhidmatan Sdn. Bhd. This division is anticipated to grow its involvement and contribute positively to the Group’s future profitability.
Corporate Proposals and Utilisation of Proceeds
Permaju has proposed a reduction of its Share Capital by RM258 million. Furthermore, the report provides an update on the utilisation of proceeds from past corporate exercises:
- From the 2020 Rights Issue of ICPS with Warrants (RM46.82 million gross proceeds), RM16.40 million remains unutilised for the Mydin Project, pending negotiation for a new design and build model. This fund is expected to be used within the next 18 months. Other allocations for automotive funding, bank repayments, and expenses have been fully utilised.
- From the 2021 Rights Issue (RM67.19 million gross proceeds), RM10.38 million is still unutilised for the establishment of an EV showroom and after-sales service centre, with negotiations ongoing. This fund is expected to be used within the next 12 months. RM4.92 million also remains for advertising and promotional activities. Funds for EV importation, working capital, and expenses have been fully utilised.
Material Litigation Update: A Significant Win!
A major positive development is the recent resolution in a long-standing civil suit by an architect claiming RM11.4 million. The Court of Appeal recently allowed Permaju’s subsidiary’s appeals, setting aside the High Court’s decision and the Arbitrator’s Partial Award No. 3. The matter has been referred back to arbitration. Crucially, the Court of Appeal ordered the claimant to pay global costs of RM30,000 and, more importantly, granted a consequential order for the release of RM2.95 million, previously held in a joint account, back to Permaju’s subsidiary’s solicitors. This is a substantial positive outcome that alleviates a significant contingent liability.
Dividends
No interim ordinary dividend was declared for the financial period ended 31 March 2025, consistent with the previous corresponding period.
Summary and
Permaju Industries Berhad’s Q1 2025 results reflect a period of transition marked by operational challenges, particularly in its automotive segment due to inventory clearance. The increased loss before tax is a concern, driven by lower margins and fair value adjustments. However, the substantial improvement in cash flow from operations indicates better underlying operational efficiency.
The company’s strategic focus on Ford vehicles, the expansion into EV luxury car rentals, and the progress in the plantation division are positive indicators of future growth avenues. The ongoing review of the property division also suggests a proactive approach to optimizing assets.
The most significant positive news from this report is the favorable outcome in the long-standing litigation, which has not only reduced a substantial contingent liability but also resulted in the recovery of a significant sum of cash. This legal victory provides much-needed financial relief and clears a major overhang for the company.
Key points to consider:
- **Operational Headwinds:** The automotive division faced margin pressure due to inventory clearance, impacting overall profitability.
- **Cash Flow Improvement:** A strong positive cash flow from operations suggests better management of day-to-day business activities.
- **Strategic Realignments:** The focus on EVs, luxury car rentals, and the progress in the plantation division are crucial for future diversification and revenue streams.
- **Litigation Resolution:** The favorable court ruling is a significant de-risking event, improving the company’s financial standing and outlook.
- **Capital Management:** The proposed share capital reduction and ongoing utilisation of past fundraising proceeds indicate active balance sheet management.
While the immediate financial performance shows an expanded loss, the strategic moves and the positive legal resolution provide a more optimistic outlook. The company is actively working to transform its business model and address past challenges.
What are your thoughts on Permaju’s strategic shifts and the impact of the recent legal victory? Do you think these initiatives are enough to steer the company back to profitability in the coming quarters?
Share your views in the comments section below!
