Greetings, fellow investors and market watchers! Today, we’re diving into the latest financial pulse of KOMARKCORP BERHAD, a name you might recognize in the Malaysian packaging and labels industry. Their interim financial report for the third quarter ended 31 March 2025 has just been released, and it paints a picture of a company navigating a challenging economic landscape while strategically recalibrating its focus.
This report offers a crucial glimpse into KOMARKCORP’s performance, revealing a notable increase in revenue compared to the immediate preceding quarter. However, it also highlights continued losses, primarily driven by fair value adjustments on investments and persistent headwinds in their mask manufacturing division. Let’s break down the numbers and strategic shifts that are shaping the company’s journey.
Core Financial Performance: A Mixed Bag of Growth and Challenges
One important note before we dive into the numbers: KOMARKCORP’s financial year-end was changed from 31 March 2024 to 30 June 2024. Consequently, the comparative figures for previous financial periods in the consolidated statement of comprehensive income and cash flow are for a 15-month period (1 April 2023 to 30 June 2024) and are therefore not directly comparable on a year-on-year basis. Our analysis will primarily focus on the quarter-on-quarter performance and the year-to-date figures where appropriate.
Quarter-on-Quarter Snapshot (Q3 FY2025 vs Q2 FY2025)
The latest quarter shows some intriguing dynamics:
Current Quarter Ended 31/03/2025
Revenue: RM7,022,000
Loss Before Tax: RM(4,485,000)
Loss After Tax: RM(4,489,000)
Basic Loss per Share: (1.91) sen
Immediate Preceding Quarter Ended 31/12/2024
Revenue: RM4,310,000
Loss Before Tax: RM(3,954,000)
Loss After Tax: RM(3,954,000)
Basic Loss per Share: Not directly provided for this quarter in the report.
As you can see, KOMARKCORP’s revenue for the quarter ended 31 March 2025 saw a significant increase of RM2.712 million, reaching RM7.022 million, up from RM4.310 million in the preceding quarter. This revenue uplift is a positive sign, suggesting improved sales activity.
However, despite the revenue growth, the Group reported a higher loss before tax of RM4.485 million, compared to RM3.954 million in the immediate preceding quarter. The primary culprit for this deeper loss was a substantial RM4.518 million fair value adjustment on quoted shares (year-to-date figure), which significantly impacted profitability.
Segmental Performance: A Tale of Two Divisions
KOMARKCORP operates primarily in two segments: Label and Packaging, and Mask manufacturing. Let’s look at their contributions for the financial year-to-date ended 31 March 2025:
| Segment | Revenue (RM’000) | Loss (RM’000) |
|---|---|---|
| Label and Packaging | 15,747 | (9,855) (Includes unallocated expenses, finance costs, fair value adjustments etc. for overall loss) |
| Mask | 236 | (9,855) (Includes unallocated expenses, finance costs, fair value adjustments etc. for overall loss) |
| Consolidated Total (Revenue) | 15,961 |
The Label and Packaging segment remains the dominant revenue contributor. The report specifically notes that the mask business saw a “small spike due to the recent influenza outbreak,” but this short-term demand was “insufficient to provide any material impact into what appears to be an overall overstocked position.” This indicates persistent challenges in the mask division, which is a highly commoditized business.
Financial Position: A Shift in the Balance Sheet
As at 31 March 2025, the Group’s financial position shows some key changes compared to 30 June 2024:
- Total Assets: Decreased slightly to RM122.456 million from RM124.971 million.
- Total Equity: Declined to RM87.227 million from RM98.841 million, reflecting the accumulated losses.
- Net Assets per Share: Consequently, Net Assets per Share also decreased to RM0.38 from RM0.43.
- Total Liabilities: Increased to RM35.229 million from RM26.130 million, largely driven by an increase in current liabilities, particularly loans and borrowings and lease liabilities.
- Total Borrowings: Increased to RM11.805 million (RM3.435 million long-term, RM8.370 million short-term) from RM9.315 million as at 30 June 2024.
Cash Flow: Navigating Negative Territory
The cash flow statement for the period ended 31 March 2025 indicates a net decrease in cash and cash equivalents. The Group experienced negative cash flows from all three core activities:
- Net Cash Used in Operating Activities: RM(1.191) million
- Net Cash Used in Investing Activities: RM(0.825) million
- Net Cash Used in Financing Activities: RM(1.790) million
This resulted in a total net decrease in cash and cash equivalents of RM3.806 million, bringing the cash and cash equivalents at the end of the period to RM7.534 million.
Risks and Prospects: A Strategic Re-Focus
KOMARKCORP acknowledges the challenging economic landscape, particularly for consumer packaging and printing services. However, they are seeing “signs with the recent uptick in economic numbers that the local manufacturing industry is recovery and this can be seen in a gradual increase in our printing and labelling numbers.” This is a crucial positive indicator for their core business.
The mask business, as noted, continues to be a tough nut to crack. The management states they have made “little headway in market penetration” in what is a “highly commoditised business.” External factors like increases in minimum wages, a weakening Ringgit, and global economic turbulence (including the impact of boycott movements on some customers due to the war in Gaza) are making international marketing difficult, while locally, there’s a preference for lower-grade masks.
In response to these realities, the management is undertaking a strategic shift: they are “making adjustments in its forecasts and budgets to redirect all free resources into boosting its labels and printing business.” This re-focus is further supported by a “revival” in their Johor operation, driven by increasing Singaporean orders. The company plans to continue a “two-pronged strategy,” aligning its focus with general economic trends.
On the legal front, KOMARKCORP is involved in a material litigation case against The Edge Communications Sdn Bhd. While the High Court dismissed their claims, the company has filed an appeal, with the Court of Appeal scheduled to deliver its decision on 31 July 2025. The Board “is of the view that Komarkcorp has a fair chance to overturn the High Court judgement.”
Summary and
KOMARKCORP’s Q3 FY2025 report presents a nuanced picture. While the company achieved a commendable quarter-on-quarter revenue increase, the bottom line was negatively impacted by a significant fair value adjustment on investments and ongoing challenges in its mask manufacturing division. The decline in total equity and net assets per share, alongside increasing liabilities and negative cash flows from all activities, signals a period of financial strain.
However, the strategic pivot towards strengthening its core labels and printing business, supported by signs of recovery in the local manufacturing sector and increasing orders from Singapore, offers a potential pathway to improved performance. The company’s efforts to reallocate resources to its more promising segment are a sensible move in the current economic climate.
Key points to consider moving forward:
- The success of the strategic re-focus on the labels and printing business.
- The ability to manage and mitigate the impact of the challenging mask business.
- The outcome of the ongoing material litigation with The Edge.
- The company’s ability to generate positive cash flows from operations in future periods.
This report underscores that KOMARKCORP is a company in transition, actively addressing its challenges by doubling down on its strengths. While the path ahead may be challenging, the strategic adjustments are aimed at positioning the company for a more sustainable future.
What are your thoughts on KOMARKCORP’s strategic re-focus? Do you believe their emphasis on the labels and printing business will be enough to turn the tide given the broader economic headwinds? Share your insights and perspectives in the comments below!
