SMART ASIA CHEMICAL BHD: Navigating Q1 FY2025 Amidst Strategic Shifts
The Malaysian stock market is always abuzz with activity, and for retail investors, understanding the underlying performance of listed companies is paramount. Today, we’re diving into the latest financial report from SMART ASIA CHEMICAL BHD (SAC), a prominent player in the chemical industry, specifically paints and coatings. The company recently released its First Quarter 2025 (Q1 FY2025) financial report, offering a glimpse into its operational health and strategic direction.
This report reveals a mixed bag of results with a notable dip in revenue and profit compared to the same period last year. However, it’s crucial to look beyond just the numbers. SAC is actively implementing proactive strategic maneuvers, including a significant joint venture and market expansion efforts, which are key takeaways for investors looking at the company’s long-term trajectory. Let’s break down the details.
Key Highlight: While Q1 FY2025 saw a decrease in revenue and profit, SMART ASIA CHEMICAL BHD is strategically positioning itself for future growth through a new joint venture and continued market expansion initiatives, aiming to capitalize on Malaysia’s growing construction sector.
Core Data Highlights: A Closer Look at Q1 FY2025 Performance
The first quarter of 2025 presented some headwinds for SAC, as evidenced by its financial figures. Here’s a comparative breakdown of the key financial metrics for Q1 FY2025 against Q1 FY2024:
Revenue Performance: A Dip in Demand
Q1 FY2025 Revenue
RM20.68 million
Q1 FY2024 Revenue
RM23.96 million
SAC recorded a revenue of RM20.68 million for Q1 FY2025. This represents a 13.69% decrease compared to the RM23.96 million achieved in the same period last year. The primary driver for this reduction was a decrease in demand for paints from local customers.
Profitability: Facing Cost Headwinds
Q1 FY2025 Gross Profit
RM6.10 million
Q1 FY2024 Gross Profit
RM7.88 million
A significant 22.57% decline in gross profit was observed, with the gross profit narrowing from RM7.88 million to RM6.10 million. Consequently, the gross profit margin dropped from 32.88% in Q1 FY2024 to 29.49% in Q1 FY2025. This margin compression was mainly attributed to higher labour costs incurred during the quarter.
Q1 FY2025 Profit Before Tax (PBT)
RM1.05 million
Q1 FY2024 PBT
RM3.27 million
The PBT saw a substantial drop of 67.88%, from RM3.27 million to RM1.05 million. This sharp decline was a direct consequence of the reduced gross profit and an increase in selling and distribution expenses, driven by the expansion of SAC’s sales team.
Earnings Per Share & Financial Health
Q1 FY2025 Basic/Diluted EPS
0.22 sen
Q1 FY2024 Basic/Diluted EPS
0.93 sen
Correspondingly, the basic and diluted earnings per share also saw a notable decrease, reflecting the overall reduction in profitability for the period.
From a balance sheet perspective, while total assets saw a marginal decrease from RM158.124 million at the end of 2024 to RM157.753 million as of March 31, 2025, total equity slightly increased to RM112.189 million, leading to a rise in Net Assets Per Share from 30.12 sen to 30.33 sen. However, cash and short-term deposits decreased from RM13.929 million to RM9.337 million, and total loans and borrowings increased from RM19.058 million to RM22.699 million. Operating cash flow also turned negative, from a net cash used of RM0.229 million in Q1 FY2024 to RM2.571 million in Q1 FY2025, indicating challenges in generating cash from core operations during the quarter.
Segmental Insights
A look at the segmental performance reveals specific areas of impact. The Manufacturing Segment, which is SAC’s core business, saw its revenue drop from RM21.86 million to RM18.85 million. Conversely, the Sale and Trading Segment showed growth, increasing its revenue from RM0.98 million to RM1.60 million. Geographically, revenue from Malaysia decreased, while sales in Brunei showed an increase. Singapore and other international markets (Indonesia, Myanmar, Vietnam) experienced mixed results.
Strategic Outlook: Opportunities and Future Direction
Despite the challenging quarterly results, SAC is not resting on its laurels. The company is actively pursuing strategic initiatives to bolster its market position and drive future growth, particularly by aligning with robust industry trends.
Capitalizing on Construction Growth
Malaysia’s construction sector is booming, with the value of completed construction work increasing by 16.6% to RM42.9 billion in Q1 2025. This growth, supported by ongoing government infrastructure development initiatives, is expected to significantly drive demand in the paints and coatings industry. This presents a substantial opportunity for SAC to enhance its market presence and capture a larger share of this expanding market.
Strategic Joint Venture and Market Expansion
To capitalize on these opportunities, SAC has strategically entered into a joint venture with Keshun International Construction and Trading Sdn Bhd, a specialist in waterproofing and construction chemicals. This partnership, formalized on May 16, 2025, aims to diversify SAC’s product offerings and expand its market reach. By combining SAC’s local market insights with Keshun’s global expertise, the joint venture is set to deliver sustainable and effective construction chemical solutions, supporting SAC’s long-term growth in Malaysia’s paints and coatings sector.
In parallel, SAC is also actively pushing its Smart Colour POS Tinting Machines, with 67 out of a targeted 250 units already distributed to wholesalers and dealers. This initiative, coupled with the “Negaraku, Jenama Ku” campaign, aims to strengthen SAC’s brand presence and promote locally produced paints as an emerging leader among local brands.
Challenges and Outlook
Despite these strategic moves, the quarter’s performance highlights challenges such as decreased local demand and rising operational costs, including labour and overheads. The reliance on the construction sector means the Group is susceptible to economic slowdowns or policy changes impacting infrastructure development. The Board of Directors remains cautiously optimistic about the Group’s future performance, anticipating steady progress as these strategic initiatives mature and market conditions improve.
Summary and
SMART ASIA CHEMICAL BHD’s Q1 FY2025 report presents a snapshot of a company navigating a challenging market environment. While top-line and bottom-line figures experienced a contraction, the Group is not standing still.
Key positive factors include its strategic joint venture with Keshun, the ongoing rollout of Smart Colour POS Tinting Machines, and a proactive approach to brand building. These initiatives are designed to diversify revenue streams, enhance market penetration, and improve operational efficiencies in the long run.
However, the report also highlights several challenges that impacted performance during the quarter:
- A significant decrease in demand for paints from local customers.
- Higher labour costs, leading to a notable compression in gross profit margin.
- Increased selling and distribution expenses due to the expansion of the sales team.
- A shift to negative cash flow from operating activities, indicating pressure on liquidity from core operations.
- An increase in total loans and borrowings, reflecting potential funding needs or strategic investments.
The Malaysian construction sector’s growth provides a strong backdrop for SAC’s future, and the company’s strategic positioning aims to capture this growth. Investors should monitor how effectively these strategies translate into improved financial performance in the coming quarters.
As a professional financial blogger, I must reiterate that this analysis is for informational purposes only and does not constitute any investment recommendation. Investors should conduct their own due diligence and consult with a licensed financial advisor before making any investment decisions.
What Are Your Thoughts?
From an objective standpoint, SAC’s Q1 FY2025 results underscore the competitive nature of the paints and coatings industry, coupled with the immediate impact of cost pressures and demand fluctuations. However, the proactive steps taken, particularly the strategic joint venture and expansion of tinting machine distribution, suggest a clear long-term vision to build resilience and new growth avenues.
Do you think SMART ASIA CHEMICAL BHD’s strategic initiatives will be enough to overcome the current headwinds and drive significant growth in the coming quarters? Share your thoughts in the comment section below!
