Greetings, fellow investors! Today, we’re diving into the latest financial performance of MINHO (M) BERHAD, a familiar name in Malaysia’s timber industry. The company recently released its unaudited interim financial statements for the first quarter ended 31 March 2025. This report offers a glimpse into MINHO’s operational landscape and financial health as we navigate a dynamic economic environment.
While the first quarter of 2025 saw a slight dip in overall revenue compared to the same period last year, MINHO managed to significantly improve its pre-tax profit when compared to the immediate preceding quarter. This indicates a potential turnaround in operational efficiency or market conditions for certain segments. Let’s break down the numbers and understand what’s driving MINHO’s performance.
Q1 2025 Financial Snapshot: A Mixed Bag
MINHO (M) Berhad’s first quarter of 2025 shows a nuanced financial picture. While revenue experienced a year-on-year decline, the company successfully swung from a pre-tax loss in the previous quarter to a profit. Let’s look at the key figures:
Quarter-on-Quarter Performance (Q1 2025 vs. Q4 2024)
Q1 2025
Revenue: RM 45.25 million
Pre-tax Profit: RM 4.056 million
Q4 2024
Revenue: RM 44.19 million
Pre-tax Loss: RM 2.39 million
The Group’s turnover for Q1 2025 increased by RM 1.06 million or 2.4% from the preceding quarter, primarily due to a notable increase in the Timber Trading segment. More impressively, the Group posted a pre-tax profit of RM 4.056 million, a significant recovery from the pre-tax loss of RM 2.39 million in the preceding quarter, with Manufacturing and Services & Treatment segments being major contributors.
Year-on-Year Performance (Q1 2025 vs. Q1 2024)
Q1 2025
Revenue: RM 45.25 million
Pre-tax Profit: RM 4.056 million
Net Profit: RM 2.809 million
Basic Earnings Per Share (EPS): 0.58 sen
Q1 2024
Revenue: RM 48.50 million
Pre-tax Profit: RM 5.066 million
Net Profit: RM 3.738 million
Basic Earnings Per Share (EPS): 0.77 sen
Comparing Q1 2025 to the same period last year, MINHO’s total revenue saw a decrease of RM 3.25 million (or 6.7%). This was mainly attributed to a RM 4.234 million decrease in the Timber Trading, Services & Treatment, and Others market segments, partially offset by an increase in the Manufacturing segment.
Consequently, the group’s pre-tax profit decreased by RM 1.01 million, primarily due to the lower pre-tax profit from the Timber Trading and Other market segments.
Let’s delve deeper into the performance of each business unit:
Business Unit Performance: A Closer Look
- Timber Trading: This segment experienced a decrease in turnover by RM 1.27 million. Its pre-tax profit also fell by RM 887 thousand, from RM 1.29 million in Q1 2024 to RM 403 thousand in Q1 2025, primarily due to lower sales volumes.
- Manufacturing: A brighter spot, this segment saw its total turnover increase by RM 982 thousand, driven by higher sales orders. This translated into a pre-tax profit increase of RM 260 thousand, rising from RM 2.03 million in Q1 2024 to RM 2.29 million in Q1 2025.
- Services & Treatment: Despite a 16% decrease in kiln drying volume, an increase of 10% in service charges resulted in a RM 1.45 million decrease in gross turnover for this segment. However, pre-tax profit remarkably increased by RM 1.021 million, from RM 335 thousand to RM 1.35 million, largely attributed to an increase in other income.
- Property Development: This segment registered no revenue for both Q1 2025 and Q1 2024. It reported a pre-tax profit of RM 26 thousand, a slight decrease from RM 42 thousand previously, mainly due to higher administration expenses.
Financial Health and Stability
As at 31 March 2025, MINHO’s financial position indicates a cautious approach. The company had contingent liabilities in the form of corporate guarantees amounting to RM 90.313 million, with RM 20.161 million utilized. Total Group borrowings stood at RM 50.976 million, comprising RM 44.976 million in short-term borrowings and RM 6.000 million in long-term borrowings. These figures suggest a manageable debt profile, though the contingent liabilities warrant ongoing monitoring.
Risks and Prospects: Navigating the Headwinds
The global economic landscape remains unpredictable. The International Monetary Fund (IMF) projects global growth to decline from an estimated 3.3% in 2024 to 2.8% in 2025, before recovering slightly to 3% in 2026. This forecast reflects a challenging environment marked by high tariff rates and geopolitical uncertainties. Global headline inflation is also expected to decline, which could ease some cost pressures but also signal softening demand.
For MINHO, its business operations are inherently susceptible to seasonal factors, such as the monsoon seasons and major festive holidays like Hari Raya Aidilfitri and Chinese New Year. These periods can curtail operational activities and dampen customer demand. In response to this mixed economic outlook, MINHO intends to maintain a prudent view, focusing on strengthening efficiency and minimizing costs across its operations.
One factor impacting MINHO’s profitability is its effective tax rate, which is currently higher than the statutory rate. This is primarily due to losses in certain subsidiaries that cannot be offset against taxable profits from other subsidiaries, as well as certain expenses that are not tax-deductible.
Summary and Outlook
MINHO (M) BERHAD’s Q1 2025 results present a picture of resilience amidst external challenges. While overall revenue saw a year-on-year contraction, the significant improvement in pre-tax profit from the preceding quarter is a positive sign, indicating effective management of operational costs and strategic adjustments in certain segments, particularly Manufacturing and Services & Treatment.
The company’s focus on strengthening efficiency and cost minimization is a sensible strategy in the current uncertain global economic climate. However, investors should remain aware of the inherent cyclical and seasonal nature of the timber industry, as well as broader macroeconomic headwinds.
Key points to consider moving forward:
- Revenue Fluctuations: The report highlights the sensitivity of revenue to market segments, particularly the decrease in Timber Trading and Services & Treatment, offset by Manufacturing. Diversification and market demand remain crucial.
- Cost Management: The company’s emphasis on efficiency and cost minimization will be key to maintaining profitability, especially given the higher effective tax rate due to non-deductible expenses and unutilised losses from certain subsidiaries.
- Seasonal Impact: The negative impact of monsoon and festive seasons on operations and demand is a recurring factor that could influence future quarterly performances.
- Global Economic Outlook: The IMF’s cautious outlook on global growth and trade policies will likely continue to influence demand for timber and related products, posing a potential headwind for MINHO.
MINHO (M) BERHAD did not recommend any dividend for the period ended 31 March 2025, consistent with the previous year. This suggests a focus on reinvestment or preserving cash, which could be a prudent move in the current economic climate.
What are your thoughts on MINHO’s Q1 2025 performance? Do you think their strategy of focusing on efficiency and cost reduction will be sufficient to navigate the challenging global economic environment? Share your insights in the comments below!
