Malakoff Corporation Berhad: Navigating Headwinds with Strategic Shifts in Q1 2025
Greetings, fellow Malaysian investors! Today, we delve into the latest quarterly report from Malakoff Corporation Berhad, a key player in Malaysia’s power generation and increasingly, its environmental services sector. The report for the first quarter ended 31 March 2025 reveals a period of mixed performance, marked by a decline in overall profit but underscored by strategic advancements aimed at future growth and sustainability. Let’s unpack the numbers and understand what this means for the company and its journey forward.
Key Takeaway: While Malakoff experienced a notable dip in its profit before tax for Q1 2025, primarily due to factors impacting its power generation segment, the company is actively strengthening its position in the waste management and environmental services sector, signaling a strategic pivot towards diversified and sustainable revenue streams. Furthermore, the declaration of a final dividend of 2.17 sen per ordinary share for the financial year ended 31 December 2024 offers a positive note for shareholders.
Core Financial Highlights: A Closer Look at Q1 2025
Malakoff’s financial performance for the first quarter of 2025 shows a contraction compared to the same period last year. Let’s examine the key figures:
Revenue Performance
The Group’s revenue for Q1 2025 stood at RM2,027.9 million, representing an 11.1% decrease from RM2,280.1 million recorded in Q1 2024. This reduction was mainly attributed to lower energy payments from its Tanjung Bin Power Sdn. Bhd. (TBP) and Tanjung Bin Energy Sdn. Bhd. (TBE) power plants, influenced by a decline in applicable coal prices. Additionally, Segari Energy Ventures Sdn. Bhd. (SEV) also saw lower energy payments due to a decrease in its despatch factor.
Q1 2025
Revenue: RM2,027,884k
Q1 2024
Revenue: RM2,280,113k
Profitability Overview
The decline in revenue directly impacted profitability. Profit before tax (PBT) for the current quarter significantly decreased by RM61.3 million, falling to RM58.5 million from RM119.8 million in Q1 2024. This was primarily due to a lower positive fuel margin at TBP, aligned with the declining applicable coal price, a higher net realisable value (NRV) provision for coal inventories, and a reduced contribution from Prai Power Plant Sdn. Bhd. (PPSB) following a revised tariff from its extended Power Purchase Agreement (PPA).
Q1 2025
Profit Before Tax: RM58,454k
Profit for the Period: RM42,504k
Profit Attributable to Equity Holders: RM33,991k
Q1 2024
Profit Before Tax: RM119,778k
Profit for the Period: RM78,361k
Profit Attributable to Equity Holders: RM62,200k
Earnings Per Share (EPS)
Reflecting the reduced profitability, Malakoff’s basic and diluted earnings per ordinary share (EPS) for Q1 2025 stood at 0.14 sen, a considerable drop from 0.79 sen in Q1 2024.
Q1 2025
Basic/Diluted EPS: 0.14 sen
Q1 2024
Basic/Diluted EPS: 0.79 sen
Segmental Performance Insights
Breaking down the performance by segment provides a clearer picture:
| Segment | Q1 2025 Revenue (RM’000) | Q1 2024 Revenue (RM’000) | Q1 2025 Profit/(Loss) After Tax (RM’000) | Q1 2024 Profit/(Loss) After Tax (RM’000) |
|---|---|---|---|---|
| Power Generation | 1,800,834 | 2,016,404 | 95,669 | 183,459 |
| Waste Management & Environmental Services | 218,435 | 216,441 | 30,833 | 29,900 |
| Others | 8,615 | 47,268 | (12,983) | 39,177 |
As evident from the table, the Power Generation segment faced significant challenges, with both revenue and profit after tax declining. In contrast, the Waste Management and Environmental Services segment showed a slight increase in both revenue and profit, highlighting its growing contribution to the Group. The “Others” segment, however, saw a substantial drop from a profit to a loss position.
Financial Health and Cash Flow
Looking at the balance sheet as of 31 March 2025 compared to 31 December 2024, total assets increased slightly to RM19,285.0 million from RM19,012.7 million. Total equity also saw a marginal increase to RM5,545.7 million. Net assets per share remained stable at RM0.92.
From a cash flow perspective, Malakoff demonstrated improved operational cash generation. Net cash from operating activities increased to RM411.8 million in Q1 2025, up from RM318.9 million in Q1 2024. This indicates a healthy ability to generate cash from its core business despite the profit dip. However, net cash used in investing activities saw a higher outflow, reflecting strategic investments such as the acquisition of a 49% equity interest in E-Idaman Sdn. Bhd.
Risks, Prospects, and Strategic Moves
Malakoff operates in a dynamic environment, facing both challenges and opportunities. The report sheds light on how the company is addressing these:
Market Headwinds in Power Generation
The global coal market is experiencing a declining trend in the first half of 2025, driven by reduced reliance on coal imports by some developing economies and ample domestic supply in major markets like China and India. This directly impacts Malakoff’s thermal assets, leading to lower energy payments and a higher provision for net realisable value (NRV) for coal inventories. The company’s strategy is to focus on operational efficiencies to enhance reliability and availability of its thermal assets, thereby mitigating the impact of these price fluctuations.
Furthermore, the renegotiated tariff for PPSB’s extended PPA also contributes to the reduced contribution from this plant, highlighting the ongoing adjustments in Malaysia’s power sector landscape.
Strategic Expansion in Environmental Services
A significant positive development is Malakoff’s continued expansion in the waste management and environmental services sector. The acquisition of a 49% equity interest in E-Idaman Sdn. Bhd. in February 2025 is a strategic move that boosts the Group’s waste management capacity by approximately 700 tonnes per day (TPD), increasing its total effective waste volume to 6,315 TPD – a 12% increase. This aligns with Malakoff’s long-term goal of managing 10,000 TPD by 2031, underscoring its commitment to sustainable solutions and diversification beyond conventional power generation.
Additionally, Alam Flora Environmental Solutions Sdn. Bhd. (AFES), a part of the Group, successfully renewed its contract with Keretapi Tanah Melayu Berhad (KTMB) for cleaning and preparation services for three years, reinforcing its non-concession business growth.
Ongoing Litigation
It’s worth noting the ongoing arbitration case concerning the Prai Power Plant. This material litigation involves claims and counterclaims related to an incident in 2015. While the report states no significant change in its status during the quarter, the arbitration hearing has been rescheduled to July-August 2025, meaning it remains a matter to monitor.
Outlook
Despite the challenges, Malakoff’s management expects its overall performance to remain satisfactory for the financial year ending 31 December 2025, supported by its strategic initiatives and operational focus.
Summary and Investment Considerations
Malakoff Corporation Berhad’s Q1 2025 results present a mixed picture. While the power generation segment faced headwinds from declining coal prices and lower despatch factors, leading to a dip in overall profitability, the strategic focus on expanding its waste management and environmental services segment offers a promising avenue for future growth and diversification. The consistent operational cash generation and the declared final dividend are positive indicators of the company’s underlying stability and commitment to shareholder returns.
Key points to consider for the future include:
- The ongoing impact of global coal price fluctuations on its thermal power plants and the effectiveness of mitigation strategies.
- The successful integration and growth of its expanded waste management capacity towards the 2031 target of 10,000 TPD.
- The resolution and potential implications of the material litigation case concerning the Prai Power Plant.
- The Group’s ability to maintain and grow its non-concession businesses, like the renewed AFES contract.
Malakoff is clearly navigating a transitional period, balancing traditional power generation with a strategic pivot towards more sustainable and diversified environmental solutions. This quarter’s report highlights the challenges but also the deliberate steps being taken to build a resilient future.
What are your thoughts on Malakoff’s Q1 2025 performance? Do you believe their strategic shift towards environmental services will be sufficient to offset the headwinds in the power generation sector? Share your insights in the comments below!
