Cahya Mata Sarawak Berhad: Navigating a Challenging Quarter Amidst Shifting Tides
Greetings, fellow investors! Today, we’re diving into the latest financial report from Cahya Mata Sarawak Berhad (CMSB), a prominent diversified group with significant operations in Sarawak. Their unaudited condensed consolidated interim financial statements for the first quarter ended 31 March 2025 (Q1 2025) have just been released, and they offer a mixed bag of insights into the company’s performance.
While CMSB showcased resilience in certain segments, the overall financial picture for this quarter reflects a softer performance compared to the same period last year. Let’s break down the key figures and understand what’s driving these changes.
Q1 2025 Performance: A Closer Look at the Numbers
The first quarter saw a notable decline in several key financial metrics for CMSB. Here’s a snapshot of their performance compared to the same period last year:
Q1 2025
Revenue: RM246.13 million
Gross Profit: RM67.81 million
Profit Before Tax (PBT): RM26.87 million
Profit for the Period: RM18.83 million
Profit Attributable to Owners: RM25.34 million
Basic Earnings Per Share: 2.36 sen
Q1 2024
Revenue: RM277.37 million (11% decrease)
Gross Profit: RM76.16 million (11% decrease)
Profit Before Tax (PBT): RM57.26 million (53% decrease)
Profit for the Period: RM39.53 million (52% decrease)
Profit Attributable to Owners: RM38.25 million (34% decrease)
Basic Earnings Per Share: 3.56 sen
As you can see, the Group’s revenue decreased by 11% to RM246.13 million. More significantly, the Profit Before Tax (PBT) from operations saw a substantial 53% drop to RM26.87 million. This was primarily due to weaker contributions from the Phosphates, Oiltools, Strategic Investments, and Property Development Strategic Business Units (SBUs). Furthermore, contributions from associates decreased by 26%, and joint ventures even turned into a loss of RM0.14 million.
Deep Dive into Business Unit Performance
Let’s unpack the performance of CMSB’s various business segments:
- Cement SBU: While revenue saw a slight 4% dip to RM143.18 million, largely due to prolonged rainfall and slower progress on key infrastructure projects, profitability actually improved by 37% to RM36.76 million. This was a positive sign, attributed to lower costs compared to last year.
- Road Maintenance SBU: This segment was a strong performer, reporting a 57% increase in revenue to RM42.65 million and a 32% rise in PBT to RM7.00 million. Higher ongoing orders and work completions were the main drivers here.
- Property Development SBU: This unit faced headwinds, with revenue dropping by 39% to RM8.45 million and turning into a loss before tax of RM1.26 million, a significant 120% decrease from a profit in the same period last year. The prior year’s performance was boosted by a deemed land sale transaction.
- Phosphates SBU: Continued to record a loss before tax of RM31.0 million, which was higher than the loss in the same period last year (RM19.23 million). This was mainly due to unrealised foreign exchange losses in the current quarter, contrasting with unrealised foreign exchange gains in the previous year.
- Oiltools SBU: Experienced a significant decline, with revenue falling by 45% to RM43.34 million and PBT plummeting by 72% to RM4.22 million. Reduced rig activities across most markets were the primary cause.
- Strategic Investments SBU: Reported a substantially lower PBT of RM0.16 million, down from RM7.17 million in the same period last year. This was impacted by unrealised foreign exchange losses and fair value losses in investment securities this quarter, as opposed to gains in the prior year.
- Construction Materials and Trading SBU: Showed modest growth, with revenue increasing by 6% to RM11.83 million.
Quarter-on-Quarter Comparison: Q1 2025 vs. Q4 2024
Comparing the current quarter’s performance to the immediate preceding quarter (Q4 2024) reveals a broader softening across the Group:
| Metric | Q1 2025 (RM’000) | Q4 2024 (RM’000) | Change (%) |
|---|---|---|---|
| Revenue | 246,129 | 340,988 | (28%) |
| Gross Profit | 67,814 | 104,127 | (35%) |
| Share of results of associates | 12,585 | 22,072 | (43%) |
| Share of results of joint ventures | (136) | 11,604 | (101%) |
| Profit before tax | 26,871 | 105,930 | (75%) |
| Profit Attributable to Owners of the Company (PATNCI) | 25,336 | 65,799 | (61%) |
The Group’s revenue decreased by 28% and PBT by a significant 75% compared to Q4 2024. The preceding quarter’s high PBT was significantly influenced by a reversal of unrealised foreign exchange losses in the Phosphates SBU. Beyond that, the decline in Q1 2025 was also due to lower revenue and gross profit, coupled with weaker performance from associates and joint ventures.
Financial Health and Cash Flow
On the balance sheet, CMSB’s cash and bank balances increased to RM691.14 million as at 31 March 2025, up from RM647.46 million at the end of 2024. Total loans and borrowings saw a reduction, standing at RM192.27 million compared to RM212.79 million at 31 December 2024. This indicates a healthy cash position and a slight deleveraging, which is a positive sign of financial management.
Net cash flows from operating activities improved significantly to RM39.06 million in Q1 2025, a strong turnaround from a negative cash flow of RM65.62 million in the same period last year. This demonstrates better operational efficiency in generating cash.
Risks and Prospects for 2025
Looking ahead, CMSB acknowledges the challenges but also sees opportunities:
Positive Outlook:
- Improved Weather Conditions: The Group anticipates better weather for the rest of the year, which should lead to a resumption of construction activities, benefiting segments like Cement and Construction Materials.
- Strong Construction Prospects in Sarawak: Sarawak continues to be a hub of development, promising robust construction activities that will support CMSB’s core businesses.
- Favorable Exchange Rates: The recent weakening of the US Dollar against the Malaysian Ringgit is expected to positively impact supply chain costs, which could improve margins.
Key Challenges:
- Foreign Exchange Volatility: As seen in the Phosphates and Strategic Investments SBUs, unrealised foreign exchange movements can significantly impact profitability.
- Project Progress Dependency: The performance of certain segments, like Cement, is heavily reliant on the pace of key infrastructure projects.
- Market Specific Downturns: Reduced rig activities globally impacted the Oiltools SBU, highlighting exposure to specific industry cycles.
- Subsidiary Losses: The report noted that losses in certain subsidiaries prevent offsetting against taxable profits, leading to a higher effective tax rate for the Group.
- Litigation Risks: The ongoing arbitration proceedings involving a subsidiary could present unforeseen financial and operational impacts.
Summary and Outlook
Cahya Mata Sarawak Berhad’s Q1 2025 report reveals a quarter of mixed fortunes. While the overall financial performance softened compared to the previous year and immediate preceding quarter, driven by specific segment challenges and foreign exchange impacts, there are underlying strengths.
The positive turnaround in operating cash flow and the healthy cash balance, coupled with a reduction in borrowings, demonstrate sound financial management. The Cement and Road Maintenance segments showed resilience and growth, which is encouraging. The Group’s forward-looking statements highlight a belief in improving weather conditions and sustained construction activities in Sarawak, along with potential benefits from a weaker US Dollar.
However, the significant impact of foreign exchange fluctuations on certain SBUs and the ongoing litigation remind us that external factors and operational risks remain key areas to monitor. For investors, it’s crucial to look beyond the headline numbers and understand the nuanced performance of each business unit and the strategic measures CMSB is taking to navigate the current environment.
Key risk points to keep an eye on include:
- The continued volatility of foreign exchange rates, particularly for segments with US Dollar exposure.
- The pace and commencement of new infrastructure projects in Sarawak, which will directly impact the construction-related segments.
- The global rig activity levels, which are critical for the Oiltools SBU.
- The resolution and financial implications of the ongoing arbitration case.
- The ability of the Group to mitigate losses in unprofitable subsidiaries to optimize its effective tax rate.
Your Thoughts?
Cahya Mata Sarawak Berhad is clearly navigating a dynamic landscape. Do you think the company can maintain its operational improvements and capitalize on the strong construction outlook in Sarawak despite the current headwinds?
Share your insights and perspectives in the comments section below!
