Hiap Teck Venture Berhad Q3 FY2025: Navigating Headwinds with a Strong Joint Venture
Greetings, fellow investors! Today, we’re diving into the latest financial report from Hiap Teck Venture Berhad (HTVB) for its third quarter ended 30 April 2025. This report offers a compelling look into the company’s performance, revealing a mixed landscape where traditional steel operations face significant challenges, yet a robust joint venture provides a vital anchor, driving a notable improvement in cumulative profitability.
While the individual quarter saw a decline in revenue and profit before tax, the year-to-date figures paint a more encouraging picture, thanks largely to the impressive contributions from HTVB’s equity-accounted joint venture. Let’s break down the numbers and understand what’s shaping HTVB’s journey in a dynamic market.
Core Data Highlights: A Tale of Two Performances
Quarterly Performance: Facing the Steel Sector’s Downturn
The third quarter proved challenging for HTVB’s core operations. Revenue for the quarter stood at RM344.836 million, a 14% decrease compared to RM399.676 million in the corresponding quarter last year. This decline was primarily attributed to lower average selling prices and reduced sales volume in both the Trading and Manufacturing divisions.
Current Quarter (30/04/2025)
Revenue: RM344,836k
Profit Before Tax: RM36,273k
Profit for the Period: RM34,727k
Profit Attributable to Owners: RM34,275k
Basic EPS: 1.97 sen
Corresponding Quarter Last Year (30/04/2024)
Revenue: RM399,676k
Profit Before Tax: RM50,739k
Profit for the Period: RM47,247k
Profit Attributable to Owners: RM46,818k
Basic EPS: 2.69 sen
The impact of this softer revenue, coupled with margin compression from the continued downtrend in steel prices, led to a significant drop in operational profit, from RM19.690 million last year to a mere RM0.036 million in the current quarter. Consequently, profit before tax (PBT) for the quarter declined by 29% to RM36.273 million from RM50.739 million.
The Joint Venture: A Strategic Pillar
Despite the challenges in its direct operations, HTVB’s investment in its joint venture (JV) has proven to be a strategic strength. The Group’s share of profit from its equity-accounted JV surged by a remarkable 8% in the quarter, reaching RM40.852 million, up from RM37.706 million in the same period last year. This strong performance was supported by steady margins, higher capacity utilisation, and a favourable foreign exchange translation impact.
Cumulative Performance: A Brighter Outlook
When we look at the cumulative nine-month period ended 30 April 2025, the picture significantly brightens, largely due to the JV’s consistent contribution. While cumulative revenue still saw a 14% decline to RM1,094.813 million, the cumulative profit before tax actually increased by 30% to RM89.021 million, compared to RM68.581 million last year.
This impressive turnaround in cumulative profitability is a direct result of the JV’s outstanding performance, with its contribution to profit before tax skyrocketing by 266% to RM108.169 million for the nine-month period, compared to RM29.534 million last year. This highlights the critical role of the JV in buffering the impact of a challenging steel market on HTVB’s overall financials.
Financial Health: Strengthening the Balance Sheet
Beyond the profit and loss statement, HTVB has also made strides in strengthening its financial position. As at 30 April 2025, the net assets per share attributable to ordinary equity holders improved to RM0.8417, up from RM0.7948 at the end of the last financial year (31 July 2024).
Furthermore, the Group has significantly reduced its total liabilities, from RM710.999 million to RM534.424 million, reflecting a healthier balance sheet. Total loans and borrowings also saw a substantial reduction to RM468.803 million from RM565.501 million.
Perhaps most encouragingly, the net cash generated from operating activities for the nine-month period turned positive at RM155.000 million, a significant improvement from the RM(112.975) million cash used in operating activities during the corresponding period last year. This indicates improved operational efficiency and cash management.
Risk and Prospect Analysis: Navigating a Complex Landscape
The steel industry continues to face a complex global environment. According to the OECD Steel Outlook 2025, global steel demand peaked in 2021 and has been weakening, primarily due to a sharp decline in demand from the People’s Republic of China, despite strong growth in other emerging markets driven by infrastructure projects.
While steel prices have stabilized recently after a downtrend since 2021, new market uncertainties have emerged, such as the announcement of a potential doubling of steel import tariffs to 50% in the U.S. This, combined with the unlikelihood of China’s stimulus policies reversing the decline in its steel demand, suggests that challenges for the steel industry are likely to persist into 2025.
Domestically, Malaysia’s economy expanded by 4.4% in Q1 2025, supported by resilient consumer spending and steady investment. However, the government has indicated a potential downward revision to its full-year GDP growth projection due to the impact of U.S. tariffs on trade.
In a protective move for local producers, the Ministry of Investment, Trade and Industry (MITI) extended its moratorium on new steel manufacturing licenses and Malaysia imposed definitive anti-dumping duties on selected flat-rolled steel imports. These measures aim to shield domestic players from unfair trade practices.
Operationally, HTVB’s joint venture’s 1450mm Hot Rolled Coil (HRC) line has steadily ramped up, delivering improved economies of scale and contributing positively to Group performance. However, the Trading division remains subdued due to weak pricing, while the scaffolding business continues to show strong performance. The Group’s strategy remains focused on enhancing operational efficiency and cost optimisation to navigate the evolving market landscape.
Summary and Outlook
Hiap Teck Venture Berhad’s latest quarterly report presents a nuanced financial narrative. While the core steel trading and manufacturing segments continue to grapple with lower selling prices and reduced volumes, leading to a dip in individual quarterly performance, the strategic investment in its joint venture has been a game-changer. The JV’s robust contribution has not only cushioned the impact but also propelled the Group’s cumulative profit before tax and net profit into significant positive growth for the nine-month period.
The company has also demonstrated prudent financial management by reducing its overall liabilities and improving its cash flow from operations, which are positive indicators of financial health. Looking ahead, the global steel market remains challenging, but domestic protective measures and HTVB’s focus on operational efficiency, coupled with the strong performance of its JV and scaffolding business, provide some resilience.
Key points to monitor moving forward include:
- The trajectory of global steel prices and demand, particularly from China.
- The effectiveness of domestic anti-dumping measures in protecting local market share and margins.
- The continued strong performance and capacity utilization of the joint venture.
- HTVB’s success in implementing its operational efficiency and cost optimisation strategies.
From a professional standpoint, HTVB’s diversification through its joint venture appears to be a well-timed and critical strategic move, providing stability and growth in an otherwise volatile industry. The management’s continued emphasis on internal efficiencies will be crucial in navigating the persistent external challenges.
Given the persistent challenges in the steel sector, do you believe HTVB’s strategic focus on operational efficiency and its strong joint venture can sustain its positive cumulative performance? Share your thoughts in the comments below!
