Notion VTEC Berhad: Navigating Growth and Global Headwinds in Q2 FY2025
Greetings, fellow investors and market watchers! Today, we’re diving deep into the latest financial report from Notion VTEC Berhad, a key player in high-precision metal manufacturing. Their unaudited quarterly results for the period ended 31 March 2025 offer a fascinating glimpse into a company balancing robust revenue growth with the complexities of a dynamic global economy. While the first half of the financial year saw an impressive surge in overall revenue, the latest quarter reveals a more nuanced picture, particularly concerning profitability and the looming impact of US tariffs. Let’s break down the numbers and understand what this means for Notion VTEC’s journey ahead.
Q2 FY2025 Performance: A Mixed Bag
Notion VTEC’s second quarter of Financial Year 2025 (Q2 FY2025) presented a mixed financial picture. While the company managed to grow its revenue, profitability saw a notable decline compared to the same period last year. Here’s a quick look at the key figures:
Q2 FY2025
Revenue: RM116.4 million
Gross Profit: RM19.3 million
Profit Before Tax (PBT): RM7.4 million
Profit After Tax (PAT): RM5.3 million
Basic Earnings Per Share: 0.97 sen
Q2 FY2024
Revenue: RM111.6 million
Gross Profit: RM23.8 million
Profit Before Tax (PBT): RM17.8 million
Profit After Tax (PAT): RM14.0 million
Basic Earnings Per Share: 2.72 sen
Revenue for Q2 FY2025 increased by 4.3% to RM116.4 million from RM111.6 million in Q2 FY2024. However, Gross Profit saw an 18.9% decrease, while Profit Before Tax (PBT) plummeted by 58.5% and Profit After Tax (PAT) by 62.0%. This significant drop in profitability is a key area of concern, primarily attributed to a net foreign exchange loss of RM1.1 million in Q2 FY2025, compared to a net foreign exchange gain of RM6.7 million in the preceding quarter (Q1 FY2025), alongside higher operating expenses.
First Half (H1 FY2025) Performance: A Broader View
Looking at the cumulative performance for the first six months of FY2025 (H1 FY2025), Notion VTEC demonstrated stronger top-line growth, although profitability still lagged compared to the previous year.
H1 FY2025
Revenue: RM242.3 million
Gross Profit: RM42.4 million
Profit Before Tax (PBT): RM26.5 million
Profit After Tax (PAT): RM18.1 million
Basic Earnings Per Share: 3.39 sen
H1 FY2024
Revenue: RM205.4 million
Gross Profit: RM45.5 million
Profit Before Tax (PBT): RM30.9 million
Profit After Tax (PAT): RM22.1 million
Basic Earnings Per Share: 4.27 sen
Cumulative revenue for H1 FY2025 surged by 18.0% to RM242.3 million from RM205.4 million in H1 FY2024. Despite this revenue growth, Gross Profit decreased by 6.9%, PBT by 14.3%, and PAT by 18.1%. The overall profitability trend for the first half mirrors the challenges seen in the second quarter.
Segmental Performance: Shifting Dynamics
A closer look at Notion VTEC’s business segments reveals varying performances in Q2 FY2025 compared to the preceding quarter (Q1 FY2025):
| Segment | Q2 FY2025 (RM’000) | Q1 FY2025 (RM’000) | Change (%) |
|---|---|---|---|
| HDD (Hard Disk Drive) | 36,028 | 33,846 | +6.4% |
| Automotive | 28,122 | 22,756 | +23.6% |
| EMS (Electronic Manufacturing Services) | 42,752 | 57,848 | -26.1% |
| Camera/Industrial | 9,489 | 11,506 | -17.5% |
| TOTAL | 116,391 | 125,956 | -7.6% |
The HDD and Automotive segments showed resilience, growing by 6.4% and 23.6% respectively. This growth in Automotive was mainly due to seasonal demand and front-loading activities ahead of the US tariff announcement. Conversely, the EMS and Camera/Industrial businesses experienced declines of 26.1% and 17.5% respectively, likely due to uncertainties surrounding the US reciprocal tariffs. Overall, Q2 sales were down by 7.6% compared to Q1, partly affected by the shorter month of February impacting production and delivery.
Financial Health and Cash Flow
As of 31 March 2025, Notion VTEC’s financial position remains solid. Total equity attributable to owners of the company increased to RM436.5 million from RM421.0 million as at 30 September 2024, indicating healthy retained profits. Total liabilities saw a reduction to RM137.8 million from RM157.5 million, which is a positive sign of deleveraging.
In terms of cash flow for the first six months, net cash generated from operating activities improved to RM11.7 million from RM10.0 million in the previous corresponding period. However, net cash used in investing activities significantly increased to RM19.9 million, primarily due to higher purchases of property, plant, and equipment (RM18.8 million compared to RM6.3 million last year). This suggests the company is investing in its long-term assets and operational capabilities.
Risks and Prospects: Navigating the Tariff Landscape
The most significant cloud on Notion VTEC’s horizon, as highlighted in the report, is the ongoing uncertainty surrounding the US unilateral reciprocal tariff announcement. While the US Commerce Department is negotiating with individual countries, the final outcome for Malaysia’s tariff rate remains unclear, with expectations ranging between 10% and 24%. This could significantly impact the company’s export-oriented segments.
- HDD: Expected to be unaffected as data storage components are under special exempted tariff goods.
- Automotive: US automotive parts imported from Malaysia are likely to receive a 0% exemption tariff for the next two years, mitigating impact.
- EMS: This segment is most vulnerable, as customers may choose countries with lower tariffs for shipping goods to the US, potentially leading to shared tariff costs with suppliers.
- Camera/Industrial: Orders to the US from Thailand and Japan, where Notion VTEC’s main camera customer is based, could be affected as they seek new markets.
The company also acknowledges the selling pressure on the USD due to tariff negotiations and the Federal Reserve’s interest rate reduction program, and is actively undertaking short-term USD hedging when rates are favorable. Given these uncertainties, the Board cautions that FY2025 revenue will likely be similar to FY2024 or show only single-digit growth. Nevertheless, they anticipate a profitable financial year.
Summary and
Notion VTEC Berhad’s Q2 FY2025 report presents a mixed yet intriguing picture. The company demonstrates resilience in its overall revenue growth for the first half of the year, driven by strong performance in its HDD and Automotive segments. This indicates a robust underlying demand for its precision manufacturing capabilities. The reduction in total liabilities and an increase in net assets per share also point to a strengthening balance sheet, while increased capital expenditure signals long-term growth initiatives.
However, the significant decline in quarterly profitability, largely influenced by foreign exchange fluctuations and higher operating costs, warrants close attention. Furthermore, the looming threat of US tariffs introduces a notable element of uncertainty, particularly for the EMS and Camera/Industrial segments. The company’s proactive hedging strategy and cautious outlook for the full financial year reflect a pragmatic approach to these challenges.
Key points to monitor going forward:
- The outcome of US tariff negotiations and their specific impact on Notion VTEC’s EMS and Camera/Industrial segments.
- The company’s ability to manage foreign exchange risks and maintain profitability amidst currency volatility.
- The effectiveness of its strategies to diversify markets or mitigate tariff impacts for affected segments.
- The continued demand and performance of its resilient HDD and Automotive businesses.
From a professional standpoint, Notion VTEC appears to be navigating a complex environment with a focus on operational resilience and strategic investments. While the short-term profitability has faced headwinds, the company’s long-term growth drivers and balance sheet health provide a foundation for future stability. The key will be how effectively they adapt to the evolving global trade landscape and manage external economic pressures.
What are your thoughts on Notion VTEC’s performance this quarter? Do you believe the company can maintain its revenue momentum and improve profitability in the face of global trade uncertainties? Share your insights in the comments section below!
