KKB ENGINEERING BERHAD Q1 2025 Latest Quarterly Report Analysis

Greetings, fellow investors and market watchers! Today, we’re taking a closer look at the latest financial performance of KKB Engineering Berhad (KKB), a prominent Malaysian player in the engineering and manufacturing sectors. Their interim financial statements for the first quarter ended 31 March 2025 have just been released, and they paint a picture of significant shifts in their operational landscape.

While the headline figures show a notable dip in revenue and a turn to pre-tax loss compared to the same period last year, the report also highlights strategic realignments and a commitment to shareholder returns through a recommended dividend. Let’s dive into the details and understand what’s truly shaping KKB’s journey this quarter and what lies ahead.

Q1 2025: A Quarter of Significant Adjustments

KKB Engineering Berhad’s first quarter of 2025 saw a substantial reduction in its top and bottom lines. The Group reported a revenue of RM45.1 million, a sharp decrease of 70.0% compared to the RM150.3 million recorded in the preceding year corresponding quarter. This decline directly impacted profitability, with the Group turning to a pre-tax loss of RM4.2 million, a stark contrast to the RM13.3 million pre-tax profit in the first quarter of 2024.

Here’s a snapshot of the key financial figures for the cumulative three months ended 31 March 2025, compared to the same period last year:

The primary driver behind this significant revenue decrease was lower progress billing from the Steel Fabrication division. This also led to a pre-tax loss, highlighting the impact of project completion cycles on the Group’s performance.

Performance by Business Sector

KKB operates primarily through two key sectors: Engineering and Manufacturing. Their performance in Q1 2025 reflects varying dynamics within each segment.

Engineering Sector

The Engineering sector, contributing 84% of the Group’s current quarter revenue, registered RM37.8 million, a 73.4% decrease from RM141.9 million in the preceding year corresponding quarter. This decline is mainly attributed to the completion of major projects and a slowdown in activities for both the Construction and Steel Fabrication divisions.

• Steel Fabrication: This division saw an 86.2% decrease in revenue, dropping to RM14.5 million from RM105.0 million. Consequently, it reported a gross loss of RM4.5 million, compared to a gross profit of RM20.2 million last year. This was largely due to major projects for Sarawak Shell Berhad and Samsung E & A Engineering Sdn Bhd reaching their “tail end.”
• Civil Construction: Revenue for this division decreased to RM23.3 million (from RM36.5 million), aligning with the completion of the Pan Borneo Highway project (Phase 1). Current revenue is primarily from water-related construction projects, such as the Proposed Serian Regional Water Supply Phase II (Stage 1).
• Hot-Dip Galvanising (HDG): Revenue remained low at RM71K (from RM354K). The HDG plant is currently undergoing major repair and maintenance work and is expected to resume operation in June 2025.

Manufacturing Sector

The Manufacturing sector’s revenue was RM7.4 million, a 12.9% decrease from RM8.5 million in the preceding year corresponding quarter. This sector contributed 16% to the Group’s total revenue.

• LP Gas (LPG) Cylinders: This division experienced a revenue decline due to lower demand for new LPG cylinders from Petroleum Companies. However, a new supply order for 25,000 LPG cylinders received in January 2025 commenced production in March 2025, which should contribute in future quarters.
• Steel Pipes: In a positive turn, revenue for the Steel Pipes manufacturing division improved by 27.8% to RM6.9 million (from RM5.4 million). This was primarily from the supply of Mild Steel Concrete Lined (MSCL) Pipes for the Salim Water Treatment Plant and the Proposed Serian Regional Water Supply Phase II (Stage 2). A recent order from Gamuda Berhad in December 2024 is still in its early stages of contribution.

Financial Position and Cash Flow

As at 31 March 2025, KKB’s total assets stood at RM792.99 million, a slight decrease from RM823.31 million at the end of 2024. Total equity remained healthy at RM464.21 million. On the cash flow front, the Group reported net cash flows used in operating activities of RM14.85 million, a significant shift from the RM62.74 million generated in the same period last year. This reflects the impact of lower operational profitability and changes in working capital.

Outlook and Strategic Direction

KKB maintains a cautious outlook for its Engineering sector, especially the Steel Fabrication division, anticipating a potential slowdown in contract rollouts from major Oil and Gas companies. With several major projects delivered in 2024 and early 2025, the Group expects a “reset” in its activities for the current year. This suggests that 2025 might see lower revenue and profit compared to previous years as they navigate this transition phase.

However, the Group is not standing still. They are actively tendering for and aiming to secure new projects in the second half of 2025. This proactive approach is crucial for positioning the Group more favourably for 2026. KKB also emphasizes its diverse business portfolio and healthy financial position, which are expected to provide the resilience needed to mitigate adverse effects in the current competitive and challenging business environment.

Dividend Announcement

In a positive note for shareholders, the Board of Directors has recommended a first and final single-tier dividend of 7.5 sen per ordinary share for the financial year ended 31 December 2024. This dividend, if approved at the upcoming 49th Annual General Meeting on 22 May 2025, is scheduled to be paid on 24 June 2025. This demonstrates KKB’s commitment to returning value to its shareholders despite the challenging operational quarter.

What are your thoughts on KKB Engineering Berhad’s Q1 2025 performance? Do you believe their strategy to secure new projects in the second half of the year will effectively position them for a stronger 2026? Share your insights and perspectives in the comments section below!