Lii Hen Industries Q2 2025: Navigating a Storm of Tariffs and Currency Headwinds
Prominent Malaysian furniture manufacturer, Lii Hen Industries Bhd, has released its financial results for the second quarter ended June 30, 2025. The report reveals a challenging period for the company, as it grappled with significant external pressures, including US tariffs and unfavourable currency movements. This has led to a notable downturn in performance, swinging the company from a healthy profit last year to a loss in the current quarter. Let’s dive deep into the numbers to understand the key factors driving these results and what the future may hold.
Core Financial Highlights: A Tale of Two Quarters
The second quarter of 2025 proved to be a tough one for Lii Hen. The top and bottom lines were significantly impacted by a confluence of market challenges, reversing the profitable trend seen in the same period last year.
The Group registered a net loss attributable to owners of RM 9.25 million for the quarter, a stark contrast to the RM 7.01 million profit recorded in the corresponding quarter of the previous year.
Here’s a side-by-side comparison of the key performance indicators for the second quarter:
Q2 2025 (Current Quarter)
- Revenue: RM 120.42 million
- Loss Before Tax: (RM 9.99 million)
- Net Loss Attributable to Owners: (RM 9.25 million)
- Earnings Per Share (EPS): (1.71 sen)
Q2 2024 (Corresponding Quarter)
- Revenue: RM 149.10 million
- Profit Before Tax: RM 10.57 million
- Net Profit Attributable to Owners: RM 7.01 million
- Earnings Per Share (EPS): 1.30 sen
So, what caused this dramatic reversal? According to the report, the decline was primarily driven by two major factors. Firstly, the imposition of a temporary 10% baseline tariff by the U.S. effective April 2025 squeezed margins, as the company had to absorb some of the cost. This led to lower average selling prices and additional discounts. Secondly, a significant depreciation of the US Dollar against the Malaysian Ringgit by approximately 9% resulted in a substantial foreign exchange loss of RM3.6 million.
Segment Performance: North American Market Feels the Squeeze
The furniture manufacturing segment, which is the Group’s core business, saw its revenue decline in line with the overall results. A closer look at the geographical breakdown reveals that the North American market, Lii Hen’s largest revenue contributor, experienced the most significant drop.
| Region | Q2 2025 Revenue (RM’000) | Q2 2024 Revenue (RM’000) |
|---|---|---|
| North America | 110,829 | 138,673 |
| Malaysia | 5,331 | 5,419 |
| Asia | 2,354 | 2,563 |
| Australia | 1,403 | 1,757 |
This decline in the North American market is a direct reflection of the impact of the newly imposed tariffs, which has made products more expensive for US customers and put pressure on sales volumes.
Financial Health Check: A Resilient Balance Sheet
Despite the operational loss, Lii Hen’s financial position remains robust. As of June 30, 2025, the company holds total equity of RM 533.7 million and maintains a healthy cash position with cash, bank balances, and fixed deposits totalling RM 197.9 million. This strong foundation provides the company with the stability needed to navigate the current challenging economic environment.
Risks and Prospects: Charting a Course Through Uncertainty
Looking ahead, the path for Lii Hen and the broader furniture industry is fraught with challenges. The company has identified several key risks and outlined its strategy to mitigate them.
Key Challenges on the Horizon:
- The Tariff Tightrope: The U.S. tariff on Malaysian furniture has been revised to 19% from August 1, 2025. While this is lower than the initially feared 25%, it is a significant increase from the 10% baseline tariff in Q2 and will continue to exert pressure on profitability and sales volume.
- Rising Domestic Costs: The company faces a series of escalating operational costs in Malaysia, including the new minimum wage, increased EPF contributions for foreign workers, an expanded SST scope, and the upcoming RON 95 petrol rationalization.
- Currency Volatility: The fluctuation of the US Dollar against the Ringgit remains a critical risk factor, as demonstrated by the significant forex losses in the current quarter.
- Sluggish Global Demand: The overall global economic slowdown continues to dampen consumer demand for furniture, limiting the ability of exporters to raise prices.
In response to these headwinds, the management is focusing on diligent cost rationalization and leveraging its wide market and customer base. The Board remains cautiously optimistic, stating it is “positive that the Group is well-positioned to weather prevailing business challenges for the year of 2025.”
Summary and Investment Recommendations
In summary, Lii Hen Industries faced a perfect storm in Q2 2025, with US tariffs and adverse currency movements pushing the company into a net loss. The upcoming 19% tariff and rising domestic costs signal that the challenging environment is set to continue. However, the company’s strong balance sheet and solid financial footing provide a crucial buffer. Management’s ability to navigate these external pressures through stringent cost control and strategic pricing will be paramount in the coming quarters. As a policy, this blog does not provide any buy or sell recommendations. The analysis presented here is for informational and educational purposes only, aimed at helping retail investors understand the company’s performance and position.
Key risks to monitor going forward include:
- Sustained pressure on margins and sales volume due to the 19% U.S. tariff.
- The cumulative impact of escalating domestic operating costs on profitability.
- Continued volatility in foreign exchange rates, particularly the USD/MYR pair.
- A prolonged slowdown in global consumer demand for furniture products.
From a professional standpoint, this report paints a picture of a fundamentally sound company caught in a web of macroeconomic challenges. The swing to a loss is alarming but appears to be primarily driven by external shocks rather than a breakdown in core operations. The key metric to watch in the coming quarters will be how effectively management can renegotiate prices with clients and optimize costs to absorb the impact of the new 19% tariff.
Do you think Lii Hen can successfully navigate these challenges and return to profitability in the second half of the year?
Share your views in the comments section below! We’d love to hear your perspective.
For more in-depth analysis of companies in the manufacturing sector, be sure to check out our other articles.
