Hextar Industries Berhad: Navigating a Shifting Landscape in Q1 2025
Greetings, fellow investors! Today, we’re diving deep into the latest financial report from Hextar Industries Berhad (HIB) for the first quarter ended 31 March 2025. This report offers a comprehensive look at the company’s performance, revealing a mixed bag of results with notable revenue shifts and profit adjustments, alongside exciting strategic moves. Let’s unpack the numbers and see what HIB has been up to and what lies ahead.
Financial Overview: A Mixed Bag
HIB’s first quarter saw a decline in overall revenue and profit compared to the same period last year. The company reported a consolidated revenue of RM219 million, a decrease from RM238 million in Q1 2024. This 8% dip in revenue translated into a more significant drop in profitability, with profit before tax (PBT) falling by 55.4% and profit after tax (PAT) by 56.4%.
Q1 2025
Revenue: RM218,586,000
Profit Before Tax: RM2,836,000
Profit After Tax: RM2,055,000
Basic Earnings Per Share: 0.07 sen
Q1 2024
Revenue: RM237,712,000
Profit Before Tax: RM6,364,000
Profit After Tax: RM4,712,000
Basic Earnings Per Share: 0.16 sen
The primary reason cited for the revenue decline was the completion of several major projects within the engineering solutions division. Additionally, the initial setup costs for the expansion into the retail business impacted the Industrial and Consumer segment’s financial results. While the Fertiliser segment achieved better profit margins, it wasn’t enough to fully offset the overall group’s profit reduction.
Quarter-on-Quarter Performance: A Glimmer of Recovery?
Comparing Q1 2025 with the immediate preceding quarter (Q4 2024), HIB actually saw a 10.1% increase in revenue, from RM199 million to RM219 million. This improvement was driven by higher sales of bulk straight fertilisers. However, due to the lower profit margins associated with these bulk sales, the profit after tax for Q1 2025 was lower than Q4 2024.
Q1 2025
Revenue: RM218,586,000
Profit Before Tax: RM2,836,000
Profit After Tax: RM2,055,000
Q4 2024
Revenue: RM198,577,000
Profit Before Tax: RM8,597,000
Profit After Tax: RM6,425,000
Segmental Performance: Fertiliser Remains the Anchor
The Fertiliser division continues to be HIB’s bedrock, contributing a substantial 87% of the total revenues in Q1 2025. This highlights its consistent stability and importance to the Group’s overall business portfolio. The segment’s profit before tax stood at RM5,325,000, a significant improvement from RM2,699,000 in Q1 2024, demonstrating better profit margins despite a slight revenue dip.
In contrast, the Industrial and Consumer segment faced headwinds, recording a loss before tax of RM1,829,000, a stark difference from the RM3,820,000 profit in Q1 2024. This was primarily due to the aforementioned project completions and initial retail expansion costs.
Financial Health: Balance Sheet and Cash Flow
As of 31 March 2025, HIB’s total assets amounted to RM794,769,000, a slight decrease from RM811,275,000 at the end of 2024. Key movements include:
- Inventories: Decreased from RM192,881,000 (31 Dec 2024) to RM154,242,000 (31 Mar 2025).
- Other Receivables, Prepayments and Deposits: Significantly increased from RM33,541,000 (31 Dec 2024) to RM115,829,000 (31 Mar 2025).
- Cash and Bank Balances: Saw a notable reduction from RM131,595,000 (31 Dec 2024) to RM66,814,000 (31 Mar 2025).
- Trade Payables: Decreased substantially from RM103,822,000 (31 Dec 2024) to RM44,636,000 (31 Mar 2025).
- Bank Borrowings: Increased slightly from RM225,387,000 (31 Dec 2024) to RM230,375,000 (31 Mar 2025).
From a cash flow perspective, HIB recorded a net cash outflow from operating activities of RM79,742,000 for the quarter, compared to an outflow of RM21,535,000 in Q1 2024. This was largely due to changes in working capital, particularly a significant increase in trade and other receivables and a decrease in trade and other payables. However, investing activities generated net cash of RM15,084,000, mainly from the proceeds of property disposal, partially offsetting the operational outflow.
Strategic Outlook and Future Prospects
HIB is not resting on its laurels and has outlined clear strategies for growth:
- Fertilisers: The Group aims to expand its export markets into neighbouring countries like Indonesia, Vietnam, and Myanmar through partnerships with local distributors. A major highlight is the upcoming launch of an innovative product designed to address issues like nutrient leaching and run-off, aligning with sustainability (ESG) principles and reducing carbon footprint.
- Industrial and Consumer: A significant strategic move is the exclusive partnership with Luckin Coffee Holding Singapore Pte Ltd. HIB’s wholly-owned subsidiary, Global Aroma Sdn. Bhd., now holds the rights to develop, open, and operate “Luckin Coffee” shops nationwide, signaling a new growth phase in the retail sector.
Additionally, HIB has been actively managing its asset portfolio. The disposal of properties to KIP REIT for RM45.90 million is progressing, with the Cheras Property disposal completed on 26 February 2025. These proceeds are primarily earmarked for working capital, enhancing the company’s financial flexibility.
Dividend Announcement: A Return to Shareholders
In a positive development for shareholders, the Board of Directors declared a first interim single-tier dividend of 1 sen per share for the financial year ending 31 December 2025. This dividend, totaling approximately RM27 million, is scheduled to be paid on 18 June 2025, reflecting the company’s commitment to shareholder returns.
Summary and
Hextar Industries Berhad’s Q1 2025 report presents a nuanced picture. While the headline figures show a decline in revenue and profit compared to the previous year’s corresponding quarter, this was largely attributed to specific project completions and initial investment costs in new ventures. The core Fertiliser segment continues to demonstrate resilience and improved margins, remaining the primary revenue driver.
The company’s strategic initiatives, particularly the expansion into new export markets for fertilisers with innovative, sustainable products, and the significant entry into the retail coffee business via the Luckin Coffee partnership, signal a proactive approach to future growth. These moves could diversify revenue streams and position HIB for long-term success.
However, it’s crucial for investors to consider the following key points:
- The plantation business, which influences fertiliser demand, remains susceptible to adverse weather conditions.
- The decline in profitability despite a quarter-on-quarter revenue increase points to pressure on profit margins from bulk sales in the Fertiliser segment.
- The Industrial and Consumer segment is undergoing a transitional phase, with initial setup costs impacting its immediate financial performance.
- The effective tax rate was higher than the statutory rate due to certain non-allowable tax deductions.
- Some corporate proposals, such as the disposal of Pasir Gudang Property and the Bintulu Tenancy, are still pending the fulfillment of conditions precedent.
This analysis is for informational purposes only and should not be construed as financial advice or a recommendation to buy or sell any securities. Investors should conduct their own thorough due diligence and consult with a qualified financial advisor before making any investment decisions.
Overall, HIB appears to be in a phase of strategic transformation, balancing the performance of its established segments with investments in new growth areas. The immediate financial impact of these transitions is evident, but the long-term potential of these strategic shifts warrants close observation.
What are your thoughts on Hextar Industries Berhad’s Q1 2025 performance and its strategic direction? Do you think the new ventures, especially the Luckin Coffee partnership, will significantly boost its future earnings? Share your insights in the comments below!
