Ranhill Utilities Navigates Q1 2025: Revenue Holds Steady, But Profitability Faces Headwinds
Hello fellow investors and market enthusiasts! Today, we’re diving into the latest financial performance of Ranhill Utilities Berhad, a key player in Malaysia’s utilities sector. Their unaudited quarterly report for the period ended 31 March 2025 has just been released, and it offers a mixed bag of results that warrant a closer look.
While the company demonstrates resilience in its core operations, evidenced by a robust performance over the past 15 months, the most recent quarter presents a sharper picture of challenges, particularly in profitability. On a brighter note, Ranhill Utilities continues to demonstrate its commitment to shareholders with a recent share dividend announcement. Let’s unpack the numbers and see what’s driving Ranhill’s journey.
Unpacking the Numbers: A Deep Dive into Performance
Quarterly Performance: A Closer Look at Q1 2025
The first quarter of 2025 (3 months ended 31 March 2025) saw Ranhill Utilities maintain a strong top line, but profitability experienced a notable decline compared to the immediate preceding quarter.
Current Quarter (Q1 2025)
Revenue: RM513.1 million
Profit Attributable to Ordinary Equity Holder of the Parent: RM6.9 million
Earnings Per Share (Basic/Diluted): 0.54 sen
Immediate Preceding Quarter (Q4 2024)
Revenue: RM522.4 million
Profit Attributable to Ordinary Equity Holder of the Parent: RM17.8 million
Earnings Per Share (Basic/Diluted): N/A
Revenue for the current quarter saw a slight dip of 1.8% from RM522.4 million in Q4 2024 to RM513.1 million. This was primarily attributed to lower revenue from the Consultancy and Services division, despite higher contributions from the Power and Water segments.
The more significant shift was in profitability. Profit attributable to ordinary equity holders of the parent decreased by a substantial 61.0%, from RM17.8 million in Q4 2024 to RM6.9 million in Q1 2025. This sharp decline was largely due to cost overruns in the Consultancy and Services division, specifically on the P82 project.
15-Month Period Performance: A Broader View
It’s important to note that due to a change in the Group’s financial year-end from 31 December to 30 June, direct year-on-year comparisons for the quarter and the 15-month period are not available. However, we can examine the cumulative performance for the 15 months ended 31 March 2025, which provides a longer-term perspective.
For the 15-month period ended 31 March 2025:
- Revenue: RM2,787.6 million
- Profit Attributable to Ordinary Equity Holder of the Parent: RM57.9 million
- Basic Earnings Per Share: 4.47 sen
Segmental Contributions: Who’s Driving Growth, Who’s Lagging?
Ranhill Utilities operates across three main segments: Water, Power, and Others (which includes Consultancy and Services, and Investment Holding). Here’s how they performed for the 15 months ended 31 March 2025:
- Water Segment: This segment continues to be a strong pillar, generating RM1,671.8 million in revenue and RM81.2 million in profit after taxation. This robust performance was largely driven by Ranhill SAJ Sdn Bhd, benefiting from water revenue and an additional matching grant of RM35.0 million, though partially offset by higher amortisation on service concession assets.
- Power Segment: Contributing RM343.8 million in revenue and RM3.4 million in profit after tax, the Power segment’s performance was bolstered by capacity and energy payments from Ranhill Sabah Energy I Sdn Bhd and Ranhill Sabah Energy II Sdn Bhd. Finance income from operating assets also played a role, despite maintenance and interest costs.
- Others (Consultancy and Services): This segment recorded RM772.1 million in revenue but a loss after tax of RM7.3 million. The loss was primarily due to cost overruns at Ranhill Worley Sdn Bhd (RWSB) related to its P82 and Kasawari projects. This highlights a key area of concern impacting overall group profitability.
Financial Health: Balance Sheet and Cash Flow
As of 31 March 2025, Ranhill Utilities’ financial position shows growth in assets and a notable reduction in borrowings, indicating prudent financial management:
Total Assets: RM3,706.8 million (up from RM2,961.2 million at 31 Dec 2023)
Net Assets: RM1,059.6 million (up from RM1,004.6 million at 31 Dec 2023)
Net Assets per Share: RM0.63 (up from RM0.60 at 31 Dec 2023)
Total Borrowings: RM880.1 million (down from RM999.5 million at 31 Dec 2023)
From a cash flow perspective, the Group generated a healthy RM306.5 million from operating activities over the 15-month period. This strong operational cash generation provides a solid foundation for future investments and debt management.
Looking Ahead: Prospects and Potential Pitfalls
Bright Prospects on the Horizon
Ranhill Utilities is actively positioning itself to capitalise on various growth opportunities across its segments:
- Water Segment: The demand for water is expected to continue its upward trajectory, fuelled by expansion in key economic sectors such as manufacturing, services, tourism, construction, and infrastructure. Mega-projects like the Johor-Singapore Special Economic Zone and Special Financial Zone are anticipated to create significant multiplier effects, attracting both domestic and foreign investment.
- Power Segment: The Group is committed to sustainability, exploring various initiatives to reduce its carbon footprint and transition towards greener energy. Participation in the Corporate Renewable Energy Supply Scheme (CRESS) is a key strategic move, allowing direct access to renewable energy sources for green consumers.
- Consultancy and Services Segment: Despite current challenges, this segment anticipates new opportunities stemming from the 12th Malaysia Plan and increasing global energy demand. Ranhill aims to leverage its extensive expertise in water, transport, and civil infrastructure to secure suitable projects in these burgeoning areas.
Navigating the Risks
While the future holds promise, Ranhill Utilities also faces certain challenges and risks that warrant close monitoring:
- Taxation Issues: The company’s effective tax rate for the quarter and year-to-date was higher than the statutory rate, mainly due to non-allowable tax expenses related to Sukuk interest. Furthermore, there’s an ongoing appeal to the Ministry of Finance regarding the 7-Year Limitation on carry forward of unabsorbed business losses and unutilised investment allowances, particularly for Ranhill Sabah Energy II Sdn Bhd (RSEII). A potential reversal of deferred tax assets amounting to RM38.8 million hinges on the outcome of this appeal.
- Project Cost Overruns: As seen in the Consultancy and Services division, cost overruns on projects like P82 and Kasawari have directly impacted the Group’s profitability. Effective project management and risk mitigation strategies will be crucial to prevent recurrence.
- Material Litigation: Ranhill Utilities is involved in a legal battle to recover RM7.0 million related to a terminated share sale and purchase agreement for SM Hydro Energy Sdn Bhd. While a summary judgment was awarded in the company’s favour, an appeal is pending, creating uncertainty regarding the recovery of these funds.
Summary and
Ranhill Utilities Berhad’s Q1 2025 report showcases a company with a strong foundation in its core utility businesses, particularly water and power, which continue to provide stable revenue streams and contribute positively to overall performance. The strategic shift in financial year-end and the cumulative 15-month performance highlight a period of significant operational activity and asset growth.
However, the immediate quarter’s profitability has been noticeably impacted by specific challenges, most prominently the cost overruns within the Consultancy and Services segment. This underscores the importance of diligent project execution and risk management in this particular business unit. The company’s efforts to reduce borrowings and generate robust operational cash flow are positive indicators of its financial discipline.
Looking ahead, Ranhill Utilities appears to be well-positioned to capitalize on Malaysia’s economic growth and infrastructure development, especially in the water and power sectors. Their focus on energy transition and leveraging expertise for new projects are commendable strategic directions.
Key risk points to observe include:
- The ongoing appeal regarding the 7-Year Limitation on tax allowances and its potential impact on deferred tax assets.
- The management of cost overruns and profitability in the Consultancy and Services division.
- The outcome of the material litigation to recover RM7.0 million.
While I cannot offer , these are the critical factors that will shape Ranhill Utilities’ trajectory in the coming periods. Investors should carefully consider these points in their own assessment.
From a professional standpoint, Ranhill Utilities is navigating a dynamic landscape. Its core utility operations remain robust, providing essential services and demonstrating consistent demand. The challenges in the consultancy segment, while impacting short-term profitability, seem to be project-specific and highlight the inherent risks of that business line. The strategic initiatives for growth and the proactive management of debt are certainly positive signs for the company’s long-term health.
What are your thoughts on Ranhill Utilities’ latest performance? Do you believe their strategic initiatives in water and power will outweigh the challenges in their consultancy division? Share your insights in the comments below!
