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Hello fellow investors and curious minds!
Today, we’re diving deep into the latest financial performance of HEXZA CORPORATION BERHAD, as presented in their Interim Financial Report for the Third Quarter ended 31 March 2025. This report offers a crucial snapshot of the company’s journey through a dynamic market landscape, revealing both areas of growth and significant challenges. While the company recorded an impressive overall revenue increase for the nine-month cumulative period, the latest quarter saw a dip into a loss, primarily impacted by strategic operational changes in its Ethanol segment and a significant unrealised loss from investments. Let’s unpack the numbers and understand what this means for HEXZA’s path forward.
HEXZA Q3 FY2025: A Mixed Bag of Performance
HEXZA’s third-quarter results present a nuanced picture. While the year-to-date figures show positive momentum in revenue, the performance for the quarter itself faced headwinds. Let’s look at the key figures:
Quarterly Performance (Q3 FY2025 vs. Q3 FY2024)
For the three months ended 31 March 2025, HEXZA reported a decline in both revenue and profitability compared to the same period last year.
Q3 FY2025
Revenue: RM13.05 million
Loss Before Tax: RM(1.17) million
Loss for the Period: RM(1.05) million
Earnings per Share: (0.6) sen
Q3 FY2024
Revenue: RM14.39 million
Profit Before Tax: RM2.11 million
Profit for the Period: RM1.65 million
Earnings per Share: 0.8 sen
The Group’s revenue for the quarter decreased by 9.3%, falling to RM13.05 million from RM14.39 million in the corresponding quarter last year. More significantly, the company swung from a profit before tax of RM2.11 million in Q3 FY2024 to a loss before tax of RM1.17 million in the current quarter. This substantial shift was largely influenced by the Ethanol segment’s temporary shutdown and lower margins from its trading activities, as well as reduced investment gains.
Year-to-Date Performance (9M FY2025 vs. 9M FY2024)
Looking at the cumulative nine-month period, the picture is somewhat different, showing overall revenue growth but a notable drop in profitability.
9M FY2025
Revenue: RM45.84 million
Profit Before Tax: RM1.69 million
Profit for the Period: RM1.22 million
Earnings per Share: 0.6 sen
9M FY2024
Revenue: RM40.56 million
Profit Before Tax: RM5.46 million
Profit for the Period: RM4.41 million
Earnings per Share: 2.2 sen
For the nine months ended 31 March 2025, HEXZA’s revenue increased by 13.0% to RM45.84 million, up from RM40.56 million in the same period last year. However, profit before tax saw a significant decrease of 69.1%, settling at RM1.69 million compared to RM5.46 million previously. This indicates that while sales volume may have improved in certain areas, overall profitability was severely impacted by operational challenges and lower margins in key segments.
Segmental Performance Breakdown (9M FY2025 vs. 9M FY2024)
A deeper dive into HEXZA’s business segments reveals the drivers behind these overall figures:
Resins Segment: A Turnaround Story
The Resins segment showed robust growth, with revenue increasing by 18.7% to RM23.80 million. This was attributed to higher sales volume and an improvement in average selling price. Crucially, the segment turned a loss before tax of RM0.52 million in the prior period into a profit before tax of RM0.46 million, demonstrating improved operational efficiency and market positioning.
Ethanol Segment: Facing Production Headwinds
Revenue for the Ethanol segment saw a marginal increase of 4.1% to RM19.27 million, primarily due to higher sales volume from trading. However, profit before tax plummeted by 94.5% to RM0.25 million from RM4.43 million. This significant drop in profitability was largely due to the temporary shutdown of the ethanol plant since November 2024 for the installation of the new Corn Ethanol Plant, leading to lower margins from increased trading activities as opposed to higher-margin own production.
Investment Segment: Lower Gains Impact Performance
The Investment segment’s profit before tax decreased by 57.0% to RM0.59 million. This was mainly attributed to lower gains from financial assets designated as fair value through profit and loss, indicating a more challenging investment environment or less favourable market movements compared to the previous year.
Trading Segment: Explosive Growth from a Low Base
The Trading segment experienced substantial growth, with revenue exceeding 100% increase to RM0.57 million and profit before tax soaring to RM0.22 million. While impressive in percentage terms, it’s important to note this segment operates from a relatively smaller base.
Financial Health and Cash Flow
As at 31 March 2025, HEXZA’s financial position shows a reduction in assets and equity compared to the audited figures as at 30 June 2024. Total assets stood at RM405.22 million (down from RM481.37 million), and total equity was RM397.63 million (down from RM474.17 million). This decline is largely influenced by net fair value changes in equity instruments designated as at FVTOCI, which recorded a significant unrealised loss of RM62.73 million for the nine-month period.
Net assets per share attributable to owners of the company also decreased to RM1.95 from RM2.33.
Looking at cash flows for the nine months:
| Cash Flow Category | 9M FY2025 (RM’000) | 9M FY2024 (RM’000) | Change (RM’000) |
|---|---|---|---|
| Net Cash from Operating Activities | 5,229 | (177) | +5,406 |
| Net Cash Used in Investing Activities | (5,215) | (23,541) | +18,326 |
| Net Cash Used in Financing Activities | (13,293) | (10,156) | -3,137 |
| Net Increase/(Decrease) in Cash & Equivalents | (13,279) | (33,874) | +20,595 |
While cash generated from operations improved significantly, the overall cash and cash equivalents at the end of the period saw a decrease to RM13.09 million from RM26.41 million at the beginning of the financial period. This was primarily due to cash used in financing activities, including the payment of dividends.
Risks and Future Prospects
HEXZA acknowledges both the challenges and opportunities ahead.
Outlook for the Ethanol Segment
The demand for ethanol remains strong. However, the performance of this segment will be impacted until the completion of the Corn Ethanol Project, which is anticipated by June 2025. The Board is optimistic that sales and profitability for the ethanol business will improve significantly once this project is completed and the plant is fully operational, allowing for higher-margin production.
Outlook for the Resins Segment
The Resins segment continues to face a challenging business environment, with overall demand for plywood and other wood panel products in Sarawak remaining weak. Despite this, HEXZA is actively implementing strategies to increase its market share and enhance margins. The company expects this segment to remain stable and profitable for the current financial year.
Key Risks Identified:
- Operational Disruption: The temporary shutdown of the Ethanol plant for the Corn Ethanol Project significantly impacted its profitability in the current quarter, leading to a reliance on lower-margin trading activities.
- Investment Volatility: The Investment segment experienced lower gains, and the company recorded substantial unrealised losses from its equity investments designated as at FVTOCI, highlighting market volatility and its impact on the balance sheet.
- Market Demand Fluctuations: The Resins segment continues to grapple with weak demand in the wood panel products market, necessitating proactive strategies to maintain profitability.
Shareholder Returns: Dividends Paid
While no dividend was proposed for the quarter under review, HEXZA did announce and pay a final single-tier dividend of 5.0 sen per share and a special dividend of 2.5 sen per share for the financial year ended 30 June 2024. These dividends, approved by shareholders on 16 November 2024, were paid out on 19 December 2024, reflecting the company’s commitment to shareholder returns from prior year’s performance.
Summary and Outlook
HEXZA Corporation Berhad’s third-quarter report for FY2025 paints a picture of a company navigating significant transitions. While the overall nine-month revenue growth is encouraging, the quarterly loss underscores the impact of strategic operational changes, particularly the temporary shutdown of the Ethanol plant for its Corn Ethanol Project. The Resins segment’s turnaround is a positive highlight, demonstrating resilience in a challenging market.
The company’s future hinges significantly on the successful completion and ramp-up of the Corn Ethanol Project by June 2025. This project is expected to be a major catalyst for the Ethanol segment’s profitability. Despite market headwinds in the Resins sector, management’s focus on market share and margins suggests a stable outlook for this division. The volatility in investment gains, however, remains a factor to monitor.
In essence, HEXZA is in a transitional phase, investing for future growth while managing current operational challenges. The coming quarters will be critical in demonstrating the benefits of these strategic initiatives.
- Temporary shutdown of Ethanol plant impacting current profitability.
- Significant unrealised losses on fair value through other comprehensive income (FVTOCI) investments.
- Weak demand environment for the Resins segment.
What are your thoughts on HEXZA’s latest performance? Do you believe the Corn Ethanol Project will be the game-changer the company anticipates? Share your insights and perspectives in the comments below!
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