The Malaysian furniture industry, a key player in the global market, continues to face a complex landscape of evolving trade policies, fluctuating demand, and rising operational costs. In this environment, Lii Hen Industries Bhd, a prominent local player, has just released its unaudited results for the first quarter ended 31 March 2025. This report offers a crucial glimpse into how the company is contending with these challenges.

While the latest figures reveal a significant decline in profitability compared to the same period last year, Lii Hen Industries also demonstrated a sequential improvement from the immediate preceding quarter. This indicates a challenging but potentially stabilizing operational environment. Let’s unpack the key figures and strategic insights from their latest financial disclosure.

Core Financial Highlights: A Mixed Picture

The first quarter of 2025 presented Lii Hen Industries with notable headwinds, reflected in a substantial dip in year-on-year performance. However, a closer look reveals some resilience when compared to the immediate preceding quarter.

Year-on-Year Performance (Q1 2025 vs Q1 2024)

The comparison against the corresponding quarter in the previous year highlights the impact of a subdued market and rising costs:

Revenue for the current quarter stood at RM164.59 million, marking a 13.75% decrease compared to RM190.81 million in the same period last year. This decline was primarily driven by lower sales of bedroom sets, office panel products, and sofa sets, reflecting the ongoing subdued demand in the Group’s main markets.

Profit before tax saw a significant reduction of 66.05% to RM6.22 million from RM18.32 million. This sharp decrease is attributed to several factors: lower business volume, an unfavourable product mix, higher operating costs due to the minimum wage rate increase effective February 1, 2025, and the significant depreciation of the US Dollar against the Ringgit Malaysia by 5.12% compared to the same period last year.

Consequently, Profit for the Period (after tax) also decreased by 64.42% to RM5.03 million. Basic Earnings Per Share (EPS) followed suit, dropping to 0.90 sen from 2.52 sen in the corresponding quarter of the previous year.

Sequential Performance (Q1 2025 vs Q4 2024)

While the year-on-year figures are stark, the company showed signs of improvement when compared to the immediate preceding quarter, Q4 2024:

Revenue improved by 9.83% from RM149.85 million in Q4 2024 to RM164.59 million in Q1 2025. This was mainly driven by increased sales of bedroom and dining sets, despite negative growth in sofa sets and office panel products.

Profit before tax saw a significant 42.11% increase to RM6.22 million from RM4.38 million in the immediate preceding quarter. This improvement was largely due to the absence of substantial impairment provisions for trade receivables (RM1.42 million) and biological assets (RM4.5 million) that were recorded in Q4 2024. However, the current quarter’s profit was still impacted by a weaker US Dollar against the Ringgit Malaysia and an exhibition expenditure of RM973,000.

Segmental Performance: A Look at Market Dynamics

Lii Hen Industries’ primary revenue driver remains its Furniture Manufacturing segment. Geographically, the North American market continues to be the largest contributor, though it experienced a significant drop in revenue from RM181.19 million in Q1 2024 to RM154.40 million in Q1 2025. Other key markets like Africa, Asia, and Australia also saw declines, with Europe registering no sales for the current quarter. Encouragingly, sales in Malaysia bucked the trend, increasing from RM3.35 million to RM5.70 million.

Financial Health and Cash Flow

As of 31 March 2025, Lii Hen Industries maintains a healthy financial position. Total assets stood at RM666.17 million, a slight decrease from RM673.45 million at the end of 2024. Total equity marginally increased to RM542.98 million, while total liabilities decreased to RM123.19 million, indicating a well-managed balance sheet.

In terms of cash flow, the Group generated RM4.92 million in net cash from operating activities for the quarter, compared to RM39.79 million for the full year ended 31 December 2024. The cash and cash equivalents carried forward at the end of the quarter were RM197.73 million, a slight dip from RM200.16 million at the end of the previous financial year. The company also paid out a third interim single-tier dividend of 0.7 sen per share, amounting to RM3.78 million, for the financial year ended 31 December 2024.

Risks and Prospects: Navigating a Shifting Landscape

Lii Hen Industries acknowledges the significant challenges ahead. The recently announced reciprocal tariffs by the USA Government, despite a 90-day reprieve, introduce considerable uncertainty. Given the Group’s heavy reliance on the North American market, these trade policy shifts could increase costs for customers and further dampen demand for furniture products.

Beyond tariffs, the company anticipates continued pressure from sluggish customer demand, the full impact of the minimum wage implementation (effective February 1, 2025) on operating costs, and the persistent volatility of foreign currency exchange rates, particularly the US Dollar against the Ringgit Malaysia.

Despite these headwinds, the Board of Directors and Management are committed to exercising diligence and vigilance in their decision-making. They highlight the Group’s largely controllable cost structure, its wide market and customer base, and diligent use of operational and financial resources, including its existing workforce. The Board expresses a positive outlook, believing the Group is well-positioned to weather the prevailing business challenges throughout 2025.