Unpacking LEE SWEE KIAT GROUP BERHAD’s Q1 FY2025: Navigating Headwinds with Resilience
Hello everyone! As a seasoned observer of the Malaysian market, I’m diving into the latest quarterly report from LEE SWEE KIAT GROUP BERHAD for the period ended 31 March 2025. This report offers a crucial glimpse into the performance of a company primarily known for its latex bedding business. While the numbers show a challenging quarter with a dip in overall revenue and profit, there are fascinating underlying dynamics, particularly a strong rebound in export sales, that warrant a closer look. Let’s break down the key figures and strategic insights from this report to understand where the company stands and what lies ahead.
Core Data Highlights: A Mixed Bag for Q1 2025
The first quarter of fiscal year 2025 presented a mixed performance for LEE SWEE KIAT GROUP BERHAD. While overall financial figures saw a decline, a deeper dive reveals the impact of various market conditions and operational factors.
Q1 FY2025 Performance
Revenue: RM32.693 million
Profit Before Taxation (PBT): RM2.484 million
Compared to Q1 FY2024
Revenue: RM36.044 million (down 9.3%)
Profit Before Taxation (PBT): RM4.627 million (down 46.3%)
The report attributes this decline primarily to slower domestic sales and a significant increase in latex costs. The average latex price in Q1 2025 was 19% higher compared to Q1 2024, directly impacting profit margins. Despite these headwinds, the company managed to reduce its finance costs due to active repayment of bank borrowings, which is a positive sign of financial discipline.
Divergent Performance Across Business Segments
One of the most striking takeaways from this report is the contrasting performance between the export and domestic divisions.
The export division experienced a strong rebound in sales, increasing by 23.6% against the previous year corresponding period. This highlights the company’s resilience and potential in international markets.
However, the domestic division, which includes the Cuckoo Napure rent-to-own segment, saw a decrease of approximately 17.5% in sales. This indicates a challenging local market sentiment.
Furthermore, the domestic division’s performance was impacted by specific accounting adjustments. The report notes a discount for Cuckoo Napure trade receivables and a reversal of service income amounting to approximately RM1.588 million, alongside a provision for expected credit loss of approximately RM0.327 million in Q1 FY2025. These factors collectively weighed on the overall domestic sales figures.
Quarter-on-Quarter Snapshot: Q1 FY2025 vs. Q4 FY2024
Looking at the performance against the immediate preceding quarter (Q4 FY2024) also provides valuable context.
| Metric | Current Quarter (31/03/2025) RM’000 | Immediate Preceding Quarter (31/12/2024) RM’000 | Changes % |
|---|---|---|---|
| Revenue | 32,693 | 41,059 | -20.4% |
| Operating profit | 2,196 | 2,169 | +1.2% |
| Other income | 316 | 568 | -44.4% |
| Finance cost | (28) | (224) | +87.5% |
| Profit before taxation | 2,484 | 2,513 | -1.2% |
| Profit after taxation | 2,007 | 2,577 | -22.1% |
| Profit attributable to Ordinary Equity holders of the parent | 2,007 | 2,577 | -22.1% |
The revenue decrease of 20.4% from the preceding quarter was primarily due to slower domestic sales and a revenue reclassification in Q4 2024 related to Cuckoo Napure trade receivables. Despite the revenue dip, operating profit saw a slight increase, indicating some level of cost control, although other income declined.
Financial Health: Stronger Borrowings, Lower Cash
The company’s balance sheet shows a positive trend in managing its debt, while cash position has seen a slight reduction.
As at Q1 FY2025
Total Borrowings: RM2.063 million
Net Cash Position: RM15.246 million
Compared to Q1 FY2024
Total Borrowings: RM4.459 million
Net Cash Position: RM19.845 million
Total borrowings significantly decreased by over 50% compared to the previous year’s corresponding quarter, attributed to higher positive cash flow from operations. This is a commendable effort in strengthening the balance sheet. However, the net cash position decreased, mainly due to higher working capital requirements for receivables and inventories. The Group maintains a net cash position, reflecting a healthy financial standing.
Navigating Risks and Charting Prospects
Looking ahead, LEE SWEE KIAT GROUP BERHAD identifies several key factors that will directly influence its performance in 2025. It’s crucial for investors to consider these elements when assessing the company’s future trajectory.
Raw Material Volatility: The fluctuation of centrifuged latex price, a primary raw material, remains a significant concern. Its upward trend in Q1 2025 already impacted margins, and continued volatility could pose challenges.
Domestic Market Sentiment: The slower domestic sales reflect broader consumer sentiment and confidence levels. A recovery in local demand will be crucial for the company’s overall growth.
Cuckoo Napure Collaboration: This segment contributes about 20% of total group revenue. Its performance is highly dependent on the demand generated through the Cuckoo distribution network, making it a key growth driver to watch.
Foreign Exchange Exposure: As a significant exporter, changes in the US Dollar exchange rate will impact the Group’s operations and margins. The company currently practices natural hedging for USD imports with export proceeds.
Property Sector Health: The residential property sector directly influences demand for furnishing, including bedding products. Any recovery here would positively impact the Group.
Labour Costs: Potential revisions to minimum wages or labour laws could lead to increased labour costs, affecting operational expenses.
The strong rebound in export sales is a silver lining and suggests opportunities in overseas markets. The company’s ability to capitalize on this international demand while managing domestic challenges and raw material costs will be paramount.
Summary and Outlook
LEE SWEE KIAT GROUP BERHAD’s Q1 FY2025 report paints a picture of a company facing a challenging domestic market and rising raw material costs, leading to a decline in overall revenue and profit. However, the robust performance of its export division and a significant reduction in borrowings demonstrate underlying strengths and strategic management. The company’s financial health remains sound with a net cash position, and the recent interim dividend payment for FY2024 further reflects its commitment to shareholder returns.
Key areas to monitor for future performance include:
- The sustained recovery of overseas market demand.
- The stability or fluctuation of latex prices.
- The effectiveness of the Cuckoo Napure collaboration in stimulating domestic sales.
- The broader economic environment, particularly consumer spending and the property sector in Malaysia.
While the immediate quarter presented hurdles, the company’s agility in navigating these challenges, especially its export success, suggests a capacity for resilience. The focus on managing costs and debt is also a positive indicator for long-term stability.
What Are Your Thoughts?
This report highlights the dynamic nature of the business environment. Do you think LEE SWEE KIAT GROUP BERHAD can maintain its export momentum and successfully navigate the domestic market challenges in the coming quarters? Share your insights in the comments below!
For more detailed analysis of other companies in the Malaysian market, feel free to explore our other articles.
