KNM Group’s Q1 2025 Report: A Glimmer of Hope Amidst Deep Restructuring
KNM Group Berhad, a familiar name in Malaysia’s industrial landscape, has just released its unaudited financial results for the first quarter ended 31 March 2025. This report offers a crucial snapshot of the company’s ongoing journey through significant restructuring and challenging market conditions. While the path ahead remains complex, the latest figures show some encouraging signs of operational improvement, particularly a notable reduction in losses and a strategic move that could redefine its future.
The highlight of this quarter isn’t just about numbers; it’s about the strategic pivot the company is making. KNM Group has announced a significant proposed disposal that promises to unlock substantial value and address its long-standing debt issues. This could be a game-changer for the group as it strives to exit its PN17 status and refocus its core business.
Core Data Highlights: A Turnaround in Profitability Metrics
Let’s dive into the core financial figures that paint a clearer picture of KNM Group’s performance for Q1 2025 compared to the same period last year (Q1 2024):
Q1 2025 Performance
Revenue: RM254.10 million
Gross Profit: RM56.48 million
Gross Profit Margin: 22.2%
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA): RM22.24 million
Loss Before Tax: RM(21.07) million
Loss for the Period: RM(23.04) million
Loss Attributable to Owners: RM(19.63) million
Basic Loss Per Share: (0.49) Sen
Total Comprehensive Income: RM2.02 million
Q1 2024 Performance
Revenue: RM249.61 million
Gross Profit: RM11.67 million
Gross Profit Margin: 4.8%
Loss Before Interest, Tax, Depreciation and Amortisation (LBITDA): RM(7.70) million
Loss Before Tax: RM(66.75) million
Loss for the Period: RM(80.13) million
Loss Attributable to Owners: RM(75.72) million
Basic Loss Per Share: (1.87) Sen
Total Comprehensive Income: RM(86.57) million
From these figures, it’s evident that KNM Group has made significant strides in improving its profitability metrics. Revenue saw a slight increase, but the real story lies in the remarkable jump in gross profit and the turnaround from a Loss Before Interest, Tax, Depreciation, and Amortisation (LBITDA) to a positive Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA). This indicates better operational efficiency and cost management, particularly in the European segment.
Segmental Performance: Europe Leads the Way
Let’s break down the performance by geographical segment, comparing the first quarter of 2025 to the first quarter of 2024:
| Geographical Segment | Revenue (RM’000) Q1 2025 | Gross Profit/(Loss) (RM’000) Q1 2025 | EBITDA/(LBITDA) (RM’000) Q1 2025 | Revenue (RM’000) Q1 2024 | Gross Profit/(Loss) (RM’000) Q1 2024 | EBITDA/(LBITDA) (RM’000) Q1 2024 |
|---|---|---|---|---|---|---|
| Continuing Operations | ||||||
| Asia & Oceania | 187 | (2,762) | (1,346) | 1,021 | (7,924) | (26,717) |
| Europe | – | – | (2,395) | – | – | (5,637) |
| Americas | – | – | 1,430 | – | – | (1,274) |
| Discontinued Operations | ||||||
| Europe | 253,909 | 59,245 | 24,554 | 248,584 | 19,594 | 25,931 |
| Total Group | 254,096 | 56,483 | 22,243 | 249,605 | 11,670 | (7,697) |
The Asia & Oceania segment, despite being impacted by the company’s PN17 status (which indicates financial distress and requires a regularisation plan) and historical loan defaults, managed to significantly reduce its gross loss and LBITDA. This indicates improved cost control, even though revenue declined. The company is actively working on its Scheme of Arrangement (SOA) to resolve its debt issues and exit the PN17 classification.
The Europe segment, primarily driven by BORSIG, remains the powerhouse, contributing nearly 79% of the Group’s consolidated revenue. This segment delivered higher revenue, gross profit, and EBITDA, underscoring its crucial role in the Group’s performance.
The America segment has ceased operations, with its current profit contribution mainly from unrealised foreign exchange gains.
Financial Health Check: Navigating High Debt with Strategic Disposals
Looking at the balance sheet as of 31 March 2025, KNM Group’s total assets stood at RM2.81 billion, a slight increase from RM2.78 billion at the end of 2024. Total equity also saw a minor uptick to RM275.69 million. While these figures indicate stability, the Group continues to grapple with substantial current liabilities, including defaulted loans and borrowings amounting to over RM1.35 billion, which are currently classified as current liabilities.
On a positive note, the cash and cash equivalents at the end of the period showed a healthy increase to RM234.50 million from RM143.86 million in the same period last year, indicating improved cash generation from operations. No dividend was paid or declared for the current quarter.
Risks and Prospects: A Pivotal Strategic Shift
The Board acknowledges that the outlook for the financial year will continue to remain challenging due to global economic conditions and ongoing corporate restructuring. However, a major strategic move is underway: the proposed disposal of Deutsche KNM GmbH (DKNM), the holding company of BORSIG GmbH, for EUR270 million. This transaction is expected to be a pivotal moment, unlocking significant value and providing crucial cash flow flexibility.
The anticipated benefits from the DKNM disposal are manifold: it will enable the Group to substantially reduce its indebtedness, strengthen its financial position, and potentially enhance its ability to secure future financing. Furthermore, settling the majority of its debts could relieve the Group from prolonged legal disputes and associated costs.
Post-divestment, KNM Group plans to refocus and expand its process equipment manufacturing business in Malaysia, leveraging its existing fabrication plants in Gebeng and Melaka. The strategy involves capitalising on the management’s expertise cultivated through years of experience in the DKNM Group and other process equipment ventures. The Group has already begun tendering for new projects, aiming to grow its order books and establish this as its core business.
Concurrently, KNM Group is continuously exploring opportunities to monetise other non-core assets and foreign investments to further bolster its funds for future business plans and working capital needs. The company aims for positive performance, contingent on the successful implementation of these business strategies.
Summary and
KNM Group’s Q1 2025 results present a mixed but overall more positive picture. While the company continues to navigate significant financial challenges, including its PN17 status and substantial debt, there’s a clear indication of operational improvements, particularly in the European segment. The proposed disposal of DKNM is a critical strategic move that could substantially de-risk the company and provide the necessary capital for its future direction.
The Group’s renewed focus on its Malaysian process equipment manufacturing business, coupled with efforts to monetise non-core assets, outlines a clear path forward. However, the success of these plans, especially the DKNM disposal and the ongoing Scheme of Arrangement with creditors, will be crucial determinants of its long-term viability.
Key points to consider moving forward:
- The successful completion of the DKNM disposal and its impact on debt reduction.
- The progress of the Scheme of Arrangement with creditors and resolution of legal disputes, including the status of the restraining orders.
- The ability of the Malaysian process equipment business to secure new orders and become the new core revenue driver.
