Southern Acids (M) Berhad: Navigating a Mixed Landscape in FY2025

Greetings, fellow investors and market watchers! Today, we’re diving deep into the latest financial report from Southern Acids (M) Berhad (Registration No. 198001010791 (64577-K)) for its fourth financial quarter and full financial year ended 31 March 2025. This report reveals a company that has achieved significant full-year profit growth, demonstrating resilience amidst a dynamic market environment, and has also proposed a final dividend for its shareholders.

While the full-year results paint a picture of strong recovery and expansion, the latest quarter presents a more nuanced view, with some segments facing headwinds. Join me as we unpack the numbers and explore what lies ahead for this diversified Malaysian conglomerate.

Core Data Highlights: A Tale of Two Periods

Southern Acids’ latest report offers a compelling narrative of robust full-year performance, driven by its core business segments, even as the most recent quarter showed some deceleration. Let’s break down the key figures.

Overall Group Performance

For the full financial year ended 31 March 2025, the Group delivered impressive growth across its top and bottom lines, showcasing strong operational recovery and strategic positioning.

The Group’s revenue for the 12-month period surged by 20.1% to RM1.09 billion, while profit before tax (PBT) saw an impressive 67.4% increase to RM72.3 million. This substantial improvement was primarily fueled by strong contributions from the Milling & Cultivation segment and a notable reduction in losses from Oleochemical Manufacturing.

However, the performance in the fourth quarter (31 March 2025) tells a slightly different story when compared to the immediate preceding quarter (31 December 2024). Group revenue declined by 18.1% to RM248.3 million, and PBT saw a significant 79.4% decrease to RM8.5 million. This quarterly dip was attributed to lower contributions across all three core business segments, with Oleochemical Manufacturing reverting to a loss.

Segmental Deep Dive

Oleochemical Manufacturing

The Oleochemical Manufacturing segment faced a challenging quarter, with revenue declining by 23.5% to RM77.9 million compared to the same period last year. While average selling prices (ASP) for fatty acids and glycerine increased by 27.9% and 33.0% respectively, sales volume plummeted by 39.5%. This led to a significant drop in production utilization to 50.4% from 82.8% previously. Consequently, the segment reported an increased loss before tax (LBT) of RM6.7 million for the quarter.

However, looking at the full year, the picture is more positive. Revenue for the segment increased by 13.8% to RM405.4 million, driven by higher ASPs. The segment also managed to significantly reduce its LBT for the full year to RM23.9 million, compared to RM32.6 million in the previous year, indicating some improvements in managing costs or market conditions over the longer term.

Milling & Cultivation

This segment was the standout performer, driving much of the Group’s overall growth. In the fourth quarter, revenue soared by 53.1% to RM136.4 million, primarily due to higher ASPs for Crude Palm Oil (CPO) and Palm Kernel (PK), which rose by 12.1% and a remarkable 75.0% respectively. Sales volumes for both CPO and PK also saw healthy increases of 30.0% and 20.9%. This translated into a robust 71.0% surge in PBT for the quarter, reaching RM10.5 million.

For the full financial year, the Milling & Cultivation segment’s revenue expanded by 30.7% to RM540.2 million, with CPO and PK ASPs increasing by 15.4% and 64.7% respectively. PBT for the year improved by 38.4% to RM67.7 million, showcasing the segment’s strong contribution to the Group’s overall profitability.

Healthcare Services

The Healthcare Services segment experienced a slight dip in the fourth quarter, with revenue decreasing by 8.4% to RM28.1 million. This was accompanied by a decline in both outpatient and inpatient numbers. As a result, PBT for the quarter fell by 21.3% to RM5.8 million.

Despite the quarterly slowdown, the full-year performance for Healthcare Services showed modest growth, with revenue improving by 3.9% to RM122.5 million. Patient volumes remained largely stable, with a slight increase in inpatients. However, full-year PBT for the segment saw a 5.3% decline to RM33.8 million, suggesting increasing operational costs or pricing pressures.

Financial Health Check

Southern Acids maintains a solid financial position. As at 31 March 2025, total assets stood at RM1.008 billion, a slight decrease from RM1.019 billion in the previous year. Total equity saw a marginal increase to RM882.9 million from RM878.7 million. A positive sign of financial prudence is the reduction in total liabilities by 10.9% to RM125.0 million, compared to RM140.2 million in FY2024.

The Group’s cash and cash equivalents remained substantial at RM385.4 million, providing ample liquidity. Furthermore, group borrowings saw a significant reduction, especially in short-term loans, which decreased from RM20.9 million to RM15.0 million.

Risk and Prospect Analysis: Navigating the Headwinds

Southern Acids operates in industries susceptible to external forces, and the management has provided an objective outlook on the challenges and opportunities ahead, along with their strategies to tackle them.

Oleochemical Manufacturing: A Competitive Arena

The global oleochemical market remains intensely competitive and fragmented. The segment continues to face persistent pressure on margins due to the inherent volatility of commodity prices and rising production costs. Macroeconomic factors, including geopolitical risks and global economic conditions, add further layers of uncertainty.

Despite these challenges, Southern Acids is committed to strengthening its competitive position. Their strategy focuses on identifying and penetrating niche, value-added markets. Emphasis on product customization is crucial for retaining existing customers and attracting new business. The company also prioritizes strict cost discipline and operational efficiency to mitigate structural limitations and preserve value.

Milling & Cultivation: Price Volatility and Market Dynamics

The outlook for the Milling & Cultivation segment remains cautious. While average selling prices for crude palm oil (CPO) have improved over the past year, price volatility is a significant concern. The report notes that CPO prices have recently declined from a high of RM4,800 per metric tonne (MT) in early 2025 to a low of RM3,800 per MT in early May 2025, partly due to increased production leading to higher inventory levels.

Near-term market conditions are expected to be influenced by various factors, including weather patterns, global edible oil supply trends, demand from key importing countries, and the implementation of Indonesia’s biodiesel mandate. Heightened market uncertainty from recent tariff measures could also impact trade flows and pricing. The company acknowledges that seasonal production cycles and competition from other edible oils (like soybean, sunflower, and rapeseed) may also pressure prices and volumes. To counter this, management is focused on enhancing operational efficiency and improving yields to manage volatility and safeguard margins.

Healthcare Services: Steady Demand, Evolving Landscape

The Healthcare Services division continues to demonstrate stability. Demand for healthcare services remains robust, supported by increasing health awareness and a growing middle-income population, particularly in urban centers. While patient volumes have remained steady, the company is actively working on enhancing service quality and expanding its range of care offerings.

Southern Acids remains committed to investing in its medical infrastructure and developing a strong team of healthcare professionals. The strategy is to adapt to changing community needs and consistently deliver value through patient-centered care.

Overall Outlook

Looking ahead to FY2026, Southern Acids maintains a cautiously optimistic stance. The company acknowledges that external headwinds, such as commodity price volatility and geopolitical/trade-related uncertainties, will continue to pose challenges. However, their core focus will remain steadfast on operational efficiency, cost discipline, and delivering quality across all business segments. These fundamental principles are expected to underpin their resilience and position them for sustained, long-term growth.

Final Thoughts and Your Perspective

Southern Acids’ latest report offers a comprehensive look at a company adapting to evolving market conditions. The full-year results are undoubtedly strong, reflecting successful navigation of commodity price fluctuations and operational improvements. The recent quarterly performance serves as a reminder of the inherent volatility in some of its key business areas, particularly in the oleochemical and palm oil sectors.

The company’s commitment to operational efficiency, cost discipline, and strategic expansion into value-added markets appears to be a sensible approach for long-term sustainability. However, the external environment, including global economic trends and commodity price movements, will continue to play a crucial role in its future trajectory.

What are your thoughts on Southern Acids (M) Berhad’s performance? Do you believe their current strategies are sufficient to maintain growth momentum in the face of ongoing market challenges? Share your insights and perspectives in the comments section below!