Ecoscience International Berhad’s Q1 2025: Navigating a Challenging Quarter Amidst Strategic Shifts
Greetings, fellow investors! Today, we’re diving deep into the unaudited interim financial report for the first quarter ended 31 March 2025, from Ecoscience International Berhad (Ecoscience). Known for its expertise in constructing palm oil mills, fabricating equipment, and supplying materials, Ecoscience plays a crucial role in the Malaysian and regional agricultural sectors.
This quarter’s report presents a mixed bag, highlighting a significant drop in revenue and an increase in losses compared to the same period last year. However, it also sheds light on strategic maneuvers and a positive breakthrough in a key litigation case that could shape the company’s trajectory moving forward. Let’s unpack the numbers and the narrative behind them to understand what this means for Ecoscience.
Key Takeaway: Ecoscience faced a tough Q1 2025 with revenue halving and losses widening, primarily due to lower project progressive claims. Yet, strategic plans for expansion and a recent legal victory offer a glimmer of optimism.
Core Financial Performance: A Closer Look
The first quarter of 2025 saw Ecoscience’s top-line revenue shrink considerably. This was largely attributed to a slowdown in project progressive claims across its segments, particularly in the construction of plants and facilities.
Current Year Quarter (Q1 2025)
Revenue: RM22,362k
Loss Before Tax: RM(4,935)k
Loss After Tax: RM(4,935)k
Basic Loss Per Share: (1.32) sen
Preceding Year Quarter (Q1 2024)
Revenue: RM45,471k
Loss Before Tax: RM(4,316)k
Loss After Tax: RM(3,250)k
Basic Loss Per Share: (0.87) sen
As you can see, revenue plummeted by approximately 50.82% from RM45.47 million to RM22.36 million. This significant decline directly impacted profitability, with the loss before tax widening by 14.34% from RM4.32 million to RM4.94 million. The increase in gross loss, stemming from additional costs due to modification and rectification work on projects, coupled with realised foreign exchange losses from a strengthening Ringgit, were key contributors to the higher losses.
Segmental and Geographical Breakdown
A deeper dive into the segments reveals where the impact was most felt:
| Segment | Q1 2025 (RM’000) | Q1 2024 (RM’000) | Change (RM’000) | Change (%) |
|---|---|---|---|---|
| Construction of Plants and Facilities | 18,137 | 44,112 | (25,975) | -58.88% |
| Fabrication of Equipment | 3,658 | 1,265 | 2,393 | +189.17% |
| Supply of Materials and Equipment | 510 | – | 510 | N/A |
| Other Activities | 57 | 94 | (37) | -39.36% |
| Total Revenue | 22,362 | 45,471 | (23,109) | -50.82% |
The construction segment, Ecoscience’s largest revenue contributor, experienced a substantial drop. Geographically, the decline was broad-based, with Malaysia, Gabon, and especially Indonesia seeing lower progressive claims. Indonesia’s revenue contribution shrunk from RM17.26 million to a mere RM30 thousand, highlighting a significant challenge in that market during the quarter.
Financial Health and Cash Flow
On the balance sheet, total assets decreased slightly from RM150.98 million at 31 December 2024 to RM142.15 million at 31 March 2025. Total equity also saw a decline from RM48.32 million to RM43.53 million, pulling down net assets per ordinary share from RM0.13 to RM0.12.
Cash flow from operations turned negative, with a net cash outflow of RM9.29 million for the current year-to-date, a stark contrast to the RM0.95 million inflow in the preceding corresponding period. This indicates the operational challenges faced during the quarter, requiring the company to manage its liquidity carefully. Total borrowings increased from RM56.56 million to RM66.37 million, reflecting increased reliance on debt.
Navigating Risks and Charting Future Prospects
Despite the challenging quarter, Ecoscience remains cautiously optimistic about its future. The company is actively pursuing several strategies to mitigate risks and seize opportunities:
- Core Competency Focus: Ecoscience will continue to leverage its strengths in palm oil mill construction, equipment fabrication, and material supply.
- Market Expansion: The Group aims to grow its customer base by exploring new geographical markets and engaging with prospective new clients.
- Strategic Business Plans: Key initiatives include establishing a physical presence in Indonesia and expanding into the environmental and energy efficiency business, aligning with global sustainability trends.
- Order Book Management: The company is focused on tendering for and securing new projects to bolster its order book and ensure sustained performance in the coming quarters.
A notable positive development is the stable political situation in Gabon, where Ecoscience has significant operations. Management is confident that business activities there will gradually return to normality, minimizing disruptions.
Legal Victory: In a significant win for Ecoscience, the company’s wholly-owned subsidiary, Ecoscience Manufacturing & Engineering Sdn Bhd (EMESB), successfully obtained a Summary Judgment against RDS Marketing Malaysia Sdn. Bhd. on 15 May 2025. The judgment awarded EMESB a sum of RM2,377,844.15 plus interest and costs, resolving a long-standing payment dispute and potentially boosting cash flow.
Furthermore, Ecoscience has almost fully utilized its IPO proceeds, with a remaining balance of RM359k earmarked for business expansion. This demonstrates a disciplined approach to capital management, even as the company adjusts its plans, as seen with the variation to allocate RM4.5 million from business expansion to bank borrowings repayment.
Summary and
Ecoscience International Berhad’s Q1 2025 report clearly indicates a period of significant headwinds, marked by a substantial revenue contraction and wider losses. The slowdown in project claims, particularly from Indonesia, and increased operational costs were primary drivers. However, the company’s proactive strategies to diversify its business, expand geographically, and a recent favorable outcome in a material litigation case provide some positive momentum.
While the immediate financial performance poses challenges, the management’s focus on securing new projects and stabilizing operations in key markets like Gabon, coupled with the strategic push into new business areas, suggests a forward-looking approach. The successful litigation outcome is a welcome development, potentially improving the company’s financial position.
- Revenue Contraction: A 50.82% decline in revenue compared to the prior year’s corresponding quarter, mainly due to lower project progressive claims.
- Widening Losses: Loss before tax increased by 14.34% due to higher gross loss and foreign exchange losses.
- Strategic Outlook: Management remains cautiously optimistic, focusing on expanding customer base, exploring new geographical markets (Indonesia), and venturing into environmental and energy efficiency business.
- Legal Resolution: A favorable summary judgment of RM2.38 million against a debtor provides a positive financial boost.
- Cash Flow Challenges: Negative cash flow from operations for the quarter, highlighting liquidity needs.
