Another quarter has passed, and it’s time to delve into the latest financial performance of DRB-HICOM BERHAD (DRB-HICOM) for the first quarter ended 31 March 2025. As one of Malaysia’s prominent diversified conglomerates, DRB-HICOM’s results often serve as a barometer for various key sectors of the Malaysian economy, from automotive to banking and postal services.
This report presents a mixed bag of results. While the Group continues to navigate a challenging economic landscape, the latest figures indicate a notable dip in overall profitability compared to the same period last year, even as some sectors show resilience. Let’s break down the key takeaways from their Q1 2025 interim financial report.
Q1 2025 Performance: A Closer Look at the Numbers
DRB-HICOM reported a decrease in revenue and a significant reduction in pre-tax profit for the quarter. This performance reflects the ongoing market dynamics and operational challenges across its diverse business segments.
Group Financial Highlights
The Group’s overall revenue saw a reduction, primarily driven by softer sales in key segments. Profitability was also impacted by higher operating costs and impairment losses.
Revenue (Q1 2025)
RM4,113,977,000
Revenue (Q1 2024)
RM4,332,917,000
This represents a 5.1% decrease in revenue compared to the same period last year, amounting to a reduction of RM218.94 million.
Profit Before Taxation (Q1 2025)
RM92,621,000
Profit Before Taxation (Q1 2024)
RM210,762,000
The Group’s pre-tax profit saw a substantial decline of 56.1%, reflecting weaker contributions from several key sectors and increased operational costs.
Net Profit for the Period (Q1 2025)
RM63,754,000
Net Profit for the Period (Q1 2024)
RM148,849,000
Correspondingly, net profit for the period decreased by 57.2%.
Basic and Diluted Earnings Per Share (Q1 2025)
0.92 sen
Basic and Diluted Earnings Per Share (Q1 2024)
4.73 sen
Earnings per share also saw a significant drop, mirroring the decline in net profit attributable to owners of the Company.
Segmental Performance Analysis
The performance across DRB-HICOM’s various business sectors was varied, with some facing headwinds while others demonstrated growth.
| Group Business Sectors | Q1 2025 (RM’000) | Q1 2024 (RM’000) | Variance (RM’000) | % Change |
|---|---|---|---|---|
| Automotive | 2,860,638 | 3,047,751 | (187,113) | -6.1% |
| Aerospace and Defence | 165,170 | 187,786 | (22,616) | -12.0% |
| Postal | 457,071 | 460,317 | (3,246) | -0.7% |
| Banking | 533,087 | 510,413 | 22,674 | 4.4% |
| Services | 51,370 | 47,560 | 3,810 | 8.0% |
| Properties | 46,641 | 79,090 | (32,449) | -41.0% |
- Automotive Sector: The largest revenue contributor, this sector experienced a 6.1% decline in revenue. This was primarily due to lower sales volume of Proton vehicles and reduced revenue from manufacturing and engineering companies.
- Aerospace and Defence Sector: Revenue here dropped by 12.0%, mainly from decreased product deliveries of single-aisle aircraft and parts due to lower airline demand.
- Postal Sector: A slight decrease of 0.7% was noted, attributed to lower volumes in automotive and freight management businesses, an extended vessel docking period, and a decline in bulk and international mail volumes. However, this was partially mitigated by higher revenue from in-flight catering.
- Banking Sector: A bright spot, the Banking sector recorded a 4.4% increase in revenue. This was driven by higher financing income from growth in financing volume and an expanding customer base. However, its profit contribution was reduced due to impairment losses on investments and increased credit loss allowances.
- Services Sector: This sector saw an 8.0% rise in revenue, primarily due to a higher turnout of commercial vehicles for inspections.
- Properties Sector: The largest percentage decline, with revenue falling by 41.0%, mainly from reduced contributions from property development projects, though construction projects provided some mitigation.
The overall lower pre-tax profit was largely attributed to weaker contributions from the Automotive, Postal, and Properties sectors due to softer sales and higher operating costs. The Banking sector’s profit was also impacted by impairment losses and increased credit loss allowances, despite its revenue growth.
Financial Position and Cash Flow
From a balance sheet perspective, total assets slightly decreased from RM62.26 billion as at 31 December 2024 to RM62.13 billion as at 31 March 2025. Net assets per share attributable to owners of the Company also saw a marginal dip from RM3.83 to RM3.81.
Cash flow from operating activities showed a significant outflow of RM338.32 million for the three months ended 31 March 2025, compared to an outflow of RM83.52 million in the same period last year. This larger outflow was mainly due to changes in working capital, particularly net increases in banking-related assets and net decreases in banking-related liabilities and other assets/liabilities. However, net cash inflow from investing activities turned positive at RM156.28 million (compared to an outflow of RM288.79 million last year), largely due to proceeds from disposal/acquisition of investment securities by a banking subsidiary and dividends received from an associated company. Financing activities also generated a net cash inflow of RM31.36 million.
Navigating Risks and Future Prospects
DRB-HICOM acknowledges that the Malaysian economy is expected to remain resilient in 2025, despite global uncertainties such as US-imposed tariffs and geopolitical tensions. Bank Negara Malaysia’s consistent Overnight Policy Rate (OPR) at 3% aims to balance growth and price stability.
However, the automotive sector faces a challenging outlook. The Malaysian Automotive Association (MAA) forecasts a lower Total Industry Volume (TIV) for 2025 compared to 2024. This is due to anticipated softer demand, easing of order backlogs, and the potential impact of fuel subsidy rationalisation. This directly affects DRB-HICOM’s automotive sales, which are highly dependent on market sentiments and economic conditions.
In response, DRB-HICOM is focused on strategic initiatives. They are advancing digital transformation across key sectors like Banking and Postal services to enhance operational efficiency. For Aerospace and Defence, Services, and Properties, the Group is committed to strengthening business fundamentals to build resilience and ensure long-term sustainability. The Group anticipates a “moderate outlook” for the financial year ending 31 December 2025.
Summary and
DRB-HICOM’s Q1 2025 results highlight the challenges faced by diversified conglomerates operating in a dynamic economic environment. While the Banking and Services sectors showed revenue growth, the Automotive, Aerospace, Postal, and Properties sectors experienced declines, impacting overall profitability. The significant drop in pre-tax and net profit underscores the pressures from softer sales and higher operating costs, alongside increased impairment losses in the banking segment.
The Group’s proactive strategies, including digital transformation and strengthening business fundamentals, are crucial for navigating these headwinds. However, the anticipated lower TIV for the automotive sector and broader global uncertainties will remain key factors influencing their performance in the coming quarters.
Key points to consider going forward:
- The projected lower Total Industry Volume (TIV) for the automotive sector in 2025, influenced by subdued demand and fuel subsidy rationalisation.
- The ongoing global economic uncertainties, including evolving US trade policies and geopolitical tensions, which could affect various segments.
- The impact of higher operating costs and increased credit loss allowances on the Group’s overall profitability.
- The effectiveness of digital transformation and fundamental strengthening strategies in mitigating sector-specific challenges.
DRB-HICOM’s journey through 2025 appears to be one of cautious optimism, balancing strategic development with market realities. The focus on enhancing efficiency and strengthening core businesses is a sensible approach in light of the anticipated moderate outlook.
What are your thoughts on DRB-HICOM’s performance this quarter? Do you believe their strategic initiatives will be enough to counter the challenging market conditions, especially in the automotive sector? Share your insights in the comments below!
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