Greetings, fellow investors and market watchers!
The first quarter of 2025 has just concluded, and with it comes the latest financial report from Evergreen Fibreboard Berhad (EFB). As a prominent player in the fibreboard industry, EFB’s performance offers valuable insights into both the company’s health and the broader market trends. This report presents a mixed picture: while the company saw an increase in revenue, its profitability took a significant hit compared to the same period last year. Let’s dive deeper into the numbers to understand what’s really happening.
Key Takeaways from EFB’s Q1 2025 Report:
- Revenue surged by 13.5%, indicating strong sales.
- However, Net Profit plummeted by approximately 89.4%, a stark reminder of operational challenges.
- Earnings per Share (EPS) saw a corresponding drop from 0.72 sen to just 0.08 sen.
- Despite the profit decline, the company’s cash flow from operations showed an improvement in reducing outflows compared to the previous year.
Core Financial Performance: A Closer Look at the Numbers
Let’s dissect the key figures from EFB’s Condensed Consolidated Statement of Comprehensive Income for the first quarter ended 31 March 2025.
Revenue Growth: A Positive Sign
Evergreen Fibreboard reported a healthy increase in revenue, which is a testament to its market presence and demand for its products. This growth, however, did not translate into better profits.
Q1 2025 Revenue
RM 252,803,000
Q1 2024 Revenue
RM 222,739,000
This represents a robust 13.5% increase in sales compared to the first quarter of the previous year.
Profitability: The Challenging Side
While revenue climbed, profitability experienced a sharp decline. Both Profit Before Tax (PBT) and Net Profit for the period saw significant reductions.
Q1 2025 Profit Before Tax
RM 2,193,000
Q1 2024 Profit Before Tax
RM 8,785,000
This marks a substantial 75% decrease in PBT. The drop is even more pronounced when we look at the Net Profit:
Q1 2025 Net Profit
RM 643,000
Q1 2024 Net Profit
RM 6,091,000
The net profit for the period fell by a staggering 89.4%. This significant decline can be attributed to several factors highlighted in the report: a notable increase in the cost of sales (from RM183.38 million to RM207.53 million), a shift from “Other operating income” of RM6.84 million in Q1 2024 to an “Other operating expense” of RM0.68 million in Q1 2025, and an increase in selling and administrative expenses.
Earnings Per Share (EPS): A Direct Impact on Shareholders
The reduced profitability directly impacted the company’s earnings per share, a key metric for investors.
Q1 2025 Basic EPS
0.08 sen
Q1 2024 Basic EPS
0.72 sen
This substantial reduction reflects the compressed profit margins during the quarter.
Financial Position: Balance Sheet Snapshot
As of 31 March 2025, EFB’s financial position shows some shifts compared to the end of 2024.
| Balance Sheet Item | 31 March 2025 (RM’000) | 31 December 2024 (RM’000) |
|---|---|---|
| Total Assets | 1,417,947 | 1,432,617 |
| Inventories | 205,207 | 214,333 |
| Cash and Cash Equivalents | 112,334 | 139,992 |
| Total Equity | 985,445 | 987,074 |
| Non-current Loans and Borrowings | 107,485 | 96,321 |
| Current Loans and Borrowings | 162,717 | 170,812 |
While total assets saw a slight decrease, it’s notable that non-current loans and borrowings increased, suggesting potential long-term investments or refinancing activities. The decrease in cash and cash equivalents is also a point to observe.
Cash Flow: Managing Liquidity
Cash flow is the lifeblood of any business. Here’s how EFB fared in Q1 2025:
Q1 2025 Net Cash Used in Operating Activities
RM (4,226,000)
Q1 2024 Net Cash Used in Operating Activities
RM (21,702,000)
Interestingly, despite the lower profit, the net cash outflow from operating activities significantly improved. This indicates better management of working capital, with a positive net change in inventory helping to offset other outflows. However, the company continued to invest heavily in property, plant and equipment (RM27.40 million outflow), reflecting ongoing capital expenditure.
Q1 2025 Net Decrease in Cash & Cash Equivalents
RM (27,658,000)
Q1 2024 Net Decrease in Cash & Cash Equivalents
RM (62,273,000)
The overall decrease in cash and cash equivalents for the quarter was less severe than in the same period last year, partly due to a positive net cash flow from financing activities, driven by a higher drawdown of borrowings.
Risk and Prospect Analysis: Navigating the Future
Evergreen Fibreboard operates in a dynamic environment, and its Q1 2025 results highlight both opportunities and challenges.
Challenges and Risks
The primary concern arising from this report is the significant compression of profit margins. Despite increased revenue, higher costs of sales, increased administrative expenses, and the absence of “other operating income” (which was substantial last year) have severely impacted profitability. This suggests potential pressures from raw material costs, operational inefficiencies, or a highly competitive pricing environment. Furthermore, the increase in non-current borrowings indicates a higher debt load, which could impact future interest expenses and financial flexibility.
Opportunities and Strategic Focus
On the flip side, the growth in revenue suggests that demand for EFB’s products remains robust. The continued investment in property, plant, and equipment, as seen in the investing activities, signals the company’s commitment to expanding capacity, upgrading technology, or maintaining its asset base for long-term growth. This forward-looking capital expenditure, combined with an improved cash outflow from operations, could position the company for better performance once cost pressures ease or operational efficiencies are realized. The Malaysian fibreboard industry, like many others, faces global economic shifts and commodity price fluctuations, which EFB must navigate through strategic sourcing and efficient production.
Summary and
Evergreen Fibreboard Berhad’s Q1 2025 results present a mixed bag. While revenue growth is a positive indicator of market demand, the significant decline in net profit and EPS is a clear signal of margin pressure and increased operational costs. The company’s ability to manage its working capital and improve cash flow from operations is a positive sign, but the reliance on increased borrowings for financing activities warrants attention.
Key points to consider for future performance include:
- Profitability Recovery: Can EFB effectively manage its cost of sales and administrative expenses to restore profit margins?
- Operational Efficiency: Will the ongoing investments in property, plant, and equipment translate into improved efficiency and lower production costs in the long run?
- Market Dynamics: How will global commodity prices and demand for fibreboard products evolve, and how will EFB adapt its pricing strategies?
- Debt Management: The increase in non-current borrowings should be monitored in relation to the company’s ability to generate future earnings.
This analysis is for informational purposes only and should not be construed as a recommendation to buy, sell, or hold any securities. Investors should conduct their own thorough due diligence and consult with a qualified financial advisor before making any investment decisions.
What Are Your Thoughts?
Evergreen Fibreboard Berhad’s Q1 2025 report clearly shows the challenges of balancing revenue growth with profitability in a dynamic market. Do you think the company can effectively address its cost pressures and turn its impressive revenue growth into sustainable profit in the coming quarters? Share your insights and perspectives in the comments below!
