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Engtex Group Berhad Q1 2025: Navigating Headwinds Amidst Shifting Sands
The first quarter of 2025 has unfolded with a mix of challenges and strategic maneuvers for Engtex Group Berhad, a diversified Malaysian conglomerate known for its robust presence in wholesale & distribution, manufacturing, property development, and hospitality. As we delve into their latest financial report for the period ending 31 March 2025, the picture painted is one of resilience in certain segments, contrasted with significant headwinds in others, particularly within their core metal-related businesses. While the Group faces a challenging market landscape, their continued focus on operational efficiency and strategic expansion signals a proactive approach to future growth.
A notable highlight from the report is the Group’s strong cash generation from operations, alongside an improved net gearing ratio, indicating a healthier financial position despite the overall decline in profitability. Furthermore, the subsequent payment of a final dividend for the financial year ended 31 December 2024 underscores their commitment to shareholder returns, even in a tougher operating environment.
Core Data Highlights: A Closer Look at Performance
Engtex Group’s first quarter performance was significantly impacted by prevailing market conditions, reflecting a contraction in revenue and a sharp decline in profit before tax compared to the same period last year. Let’s break down the key figures:
Overall Financial Performance
Q1 2025
Revenue: RM310.34 million
Profit Before Tax: RM2.50 million
Profit Attributable to Owners: RM0.41 million
Basic Earnings Per Share: 0.05 sen
Q1 2024
Revenue: RM383.54 million
Profit Before Tax: RM14.13 million
Profit Attributable to Owners: RM9.40 million
Basic Earnings Per Share: 1.22 sen
The Group’s revenue decreased by approximately 19.1% year-on-year, primarily attributed to weak market demand for certain metal-related trading products and manufactured steel products. This decline, coupled with higher procurement and production costs, and intense market competition leading to lower selling prices, resulted in a substantial 82.4% drop in profit before tax and a staggering 95.7% decrease in profit attributable to owners of the company. It’s worth noting that the current quarter’s profit before tax included a gain of RM2.1 million from the disposal of a quoted investment, which somewhat cushioned the decline.
Segmental Performance Review
Wholesale and Distribution
Q1 2025
Net Revenue: RM145.5 million
Profit Before Tax: RM4.2 million
Q1 2024
Net Revenue: RM164.3 million
Profit Before Tax: RM4.1 million
This segment saw an 11.4% decrease in net revenue due to lower selling prices and weak market demand. However, it recorded a marginal 2.1% increase in profit before tax, largely buoyed by the RM2.1 million gain from the disposal of a quoted investment. This segment contributed a significant 46.9% to the Group’s total net revenue and accounted for the majority of the Group’s profit before tax for the quarter.
Manufacturing
Q1 2025
Net Revenue: RM159.2 million
Profit Before Tax: RM(0.8) million (Loss)
Q1 2024
Net Revenue: RM213.9 million
Profit Before Tax: RM11.4 million
The manufacturing segment experienced a substantial 25.6% decline in net revenue and shifted from a profit of RM11.4 million in Q1 2024 to a loss before tax of RM0.8 million in Q1 2025. This sharp deterioration, a 107.4% swing, was primarily due to lower selling prices, increased market competition, and elevated procurement and production costs for certain manufactured steel products amidst volatile international and domestic steel prices, coupled with weak market demand.
Property Development
Q1 2025
Net Revenue: RM1.9 million
Loss Before Tax: RM1.0 million
Q1 2024
Net Revenue: RM2.3 million
Loss Before Tax: RM0.3 million
This segment’s revenue decreased, mainly from sales at the Amanja project. The loss before tax widened to RM1.0 million from RM0.3 million in the previous year, largely due to lower selling prices for units sold in the Amanja project during the quarter.
Hospitality
Q1 2025
Net Revenue: RM3.4 million
Loss Before Tax: RM0.5 million
Q1 2024
Net Revenue: RM3.0 million
Loss Before Tax: RM1.0 million
A positive note, the hospitality segment showed improvement, with net revenue increasing due to a higher number of rooms sold (16,458 in Q1 2025 vs. 12,730 in Q1 2024) and an improved average occupancy rate of 54.4% (Q1 2025 vs. 41.7% in Q1 2024) across its three hotels, alongside increased Meetings, Incentives, Conferences, and Exhibitions (MICE) activities. Consequently, the loss before tax narrowed to RM0.5 million from RM1.0 million, primarily due to lower borrowing costs and depreciation.
Financial Health and Cash Flow
While profitability faced challenges, Engtex Group’s balance sheet showed signs of prudent management. The Group’s total assets decreased slightly to RM1.49 billion as of 31 March 2025 from RM1.57 billion at 31 December 2024. Total equity attributable to owners of the Company saw a marginal decrease to RM818.52 million from RM822.63 million, mainly due to the dividend payable.
Net assets per share remained stable at RM1.06. Crucially, the net gearing ratio improved to 0.48 times as of 31 March 2025, from 0.53 times at 31 December 2024. This improvement was driven by a decrease in bank borrowings, reflecting effective working capital management.
From a cash flow perspective, the Group generated strong net cash from operating activities of RM56.71 million in Q1 2025, an increase from RM48.62 million in Q1 2024. This robust operational cash generation is a positive indicator of the underlying business’s ability to convert sales into cash, despite the profit headwinds. However, net cash used in financing activities increased significantly to RM36.73 million, largely due to net repayment of borrowings and the repurchase of treasury shares.
Risk and Prospect Analysis: Navigating the Future
The Malaysian economy expanded by 4.4% in the first quarter of 2025, supported by steady domestic demand, a positive labor market, and income-related policy measures. While this provides a strong buffer against external headwinds, the broader economic outlook remains uncertain due to escalating trade tensions and heightened policy uncertainties globally. Malaysia’s projected growth for 2025 is expected to be slightly lower than initial forecasts.
For Engtex Group, these uncertainties translate into continued challenges across all segments, given their primary focus on the domestic market. The Group’s performance will heavily depend on the recovery of domestic demand, the volatility of international and domestic metal prices, and the timely implementation of projects in the construction, utilities, infrastructure, and property development sectors.
Despite these challenges, Engtex has outlined clear strategies for each of its segments:
- Wholesale and Distribution: Plans to expand its customer network, diversify its product range, and actively source new products both locally and internationally.
- Manufacturing: Focused on improving, automating, optimizing, and expanding its operating capacity, while continuously seeking new business opportunities.
- Property Development: Prioritizing the sale of its remaining unsold residential and commercial properties in Kepong and Selayang, and exploring new property development opportunities or the sale of existing landbank.
- Hospitality: Aiming to boost revenue from room rentals to both local and foreign tourists, and capitalize on MICE (Meetings, Incentives, Conferences, and Exhibitions) activities to achieve higher gross operating profits.
The Group acknowledges that the performance for the remainder of the year will remain challenging, contingent on domestic demand and overall economic activities.
Summary and
Engtex Group’s Q1 2025 report reveals a mixed bag of results. While the Group experienced a significant decline in overall profitability, driven primarily by the manufacturing segment’s struggles with high costs and competitive pricing, the wholesale and distribution segment showed some resilience, albeit aided by a one-off gain. The hospitality segment, on the other hand, is showing promising signs of recovery. The Group’s financial health remains relatively stable, with an improved gearing ratio and strong cash flow from operations, which are crucial for navigating a tough economic climate.
Key points to consider from this report include:
- The substantial impact of volatile metal prices and weak market demand on the core manufacturing and wholesale businesses.
- The strategic importance of the gain from asset disposal in supporting the wholesale segment’s profitability.
- The positive trajectory of the hospitality segment, indicating potential for future growth as tourism recovers.
- The Group’s proactive strategies across all segments to mitigate risks and capitalize on opportunities.
- The healthy cash generation from operations and improved gearing ratio, providing a stable financial foundation.
Looking ahead, Engtex Group is clearly focused on strengthening its core operations and adapting to the evolving market. Their diversified business model and commitment to operational improvements will be key in overcoming the prevailing economic uncertainties.
From a professional standpoint, Engtex Group’s Q1 2025 performance underscores the challenging environment faced by companies exposed to commodity price volatility and competitive domestic markets. While the sharp decline in profit is concerning, the underlying operational cash flow generation and the disciplined approach to debt management are reassuring. The Group’s clear strategies for each segment demonstrate a pragmatic approach to navigating these headwinds, focusing on what they can control, such as expanding networks, optimizing operations, and divesting non-performing assets.
Do you think Engtex Group can effectively leverage its diversified portfolio and strategic initiatives to turn the tide in the coming quarters? Share your thoughts in the comments below!
For more insights into Malaysian market trends and company performances, consider exploring our other related articles.
