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Hup Seng Q2 2025: Revenue Rises on Strong Domestic Demand, But Profits Feel the Pinch
Hup Seng Industries Berhad, a name synonymous with biscuits in many Malaysian households, has just released its financial results for the second quarter ended June 30, 2025. The report paints a picture of resilience and challenge: while the company successfully grew its revenue, profitability faced headwinds from rising costs. However, a pleasant surprise for shareholders comes in the form of a newly declared dividend, signaling confidence from the management.
Let’s dive into the numbers and see what they tell us about the beloved biscuit maker’s performance and prospects.
Core Data Highlights: A Tale of Two Trends
At a glance, Hup Seng’s performance this quarter is a classic example of top-line growth not fully translating to the bottom line. While more products were sold, the cost to make them increased, squeezing profit margins.
Revenue Growth Driven by Home Market
The Group’s revenue saw a healthy increase, primarily fueled by strong performance in the domestic market.
Q2 2025 Revenue
RM 84.8 million
Q2 2024 Revenue
RM 80.2 million
This represents a 6% increase compared to the same quarter last year. The growth was mainly attributed to a 9% rise in domestic sales, particularly in East Malaysia and through wholesale, super, and hypermarket channels. However, this was partially offset by a 5% decline in export sales.
Profitability Under Pressure
Despite higher sales, the company’s profit before tax took a slight dip, a clear indicator of rising operational costs.
Q2 2025 Profit Before Tax
RM 11.5 million
Q2 2024 Profit Before Tax
RM 12.2 million
The 5% decrease in pre-tax profit was primarily due to an increase in the cost of certain raw materials. This trend is even more pronounced over the first six months of the year, where pre-tax profit fell by 17% compared to the same period in 2024.
Earnings Per Share (EPS)
Reflecting the lower profitability, earnings per share for the quarter also saw a slight reduction.
Q2 2025 EPS
1.06 sen
Q2 2024 EPS
1.13 sen
A Look at the Balance Sheet
On a positive note, Hup Seng’s financial health remains robust. The Group’s gearing ratio (total liabilities to total equity) improved significantly, decreasing from 53% at the end of 2024 to 38% as of June 30, 2025. This was mainly due to a reduction in trade and other payables, indicating a stronger and less leveraged financial position.
Risk and Prospect Analysis: A Cautious Outlook Ahead
Looking towards the second half of 2025, Hup Seng’s management is adopting a cautious stance. The business landscape is fraught with challenges that could impact future performance.
- Rising Costs: The company anticipates continued upward pressure on the prices of key raw materials. This remains the most significant headwind to its profitability.
- Geopolitical Uncertainties: The global political and economic environment remains unpredictable, which can affect both supply chains and consumer demand.
- Export Market Challenges: The decline in export sales, particularly due to issues like import permit restrictions in markets like Myanmar, highlights the vulnerability of international revenue streams.
To navigate these challenges, Hup Seng plans to double down on its strategy of enhancing operational efficiency. By streamlining processes and managing costs more effectively, the Group aims to mitigate the impact of rising expenses and maintain its competitive edge in the market.
Good News for Shareholders: Dividend Declared!
Despite the challenging environment, the Board of Directors has recommended a first interim single-tier dividend of 2 sen per ordinary share for the financial year ending December 31, 2025. This move reflects the company’s stable financial position and its ongoing commitment to rewarding its shareholders.
Summary and Investment Recommendations
Hup Seng’s Q2 2025 results present a mixed but clear picture. The company demonstrates strong brand power and distribution networks within Malaysia, driving solid revenue growth. However, it is not immune to the macroeconomic pressures of inflation and supply chain issues, which have compressed its profit margins. The management’s focus on operational efficiency and a healthy balance sheet, coupled with a consistent dividend policy, are key positives.
Investors should take note of the following key risk factors moving forward:
- Persistent Cost Inflation: The continued rise in raw material costs could further erode profit margins if not managed effectively.
- Export Market Volatility: Dependence on international markets comes with risks, including regulatory changes and economic instability in those regions.
- Competitive Pressure: The food and beverage industry is highly competitive, requiring continuous innovation and marketing efforts to maintain market share.
Disclaimer: This article is for informational purposes only and should not be considered as investment advice. Please conduct your own due diligence before making any investment decisions.
Final Thoughts
Hup Seng is navigating a complex environment by leveraging its domestic strength while battling external cost pressures. Its ability to innovate and optimize operations will be critical in determining its trajectory for the rest of the year. The consistent dividend payout remains a testament to its underlying financial stability.
What are your thoughts on Hup Seng’s performance? Do you think its focus on operational efficiency will be enough to protect its margins in the coming quarters?
Share your views in the comments below!
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