Hextar Industries Reports Strong Q2 Growth, But What’s Brewing Beneath the Surface?
Hextar Industries Berhad (HIB) has just released its financial results for the second quarter ending June 30, 2025, and the headline numbers are impressive. The company posted significant growth in both revenue and profit for the quarter, showcasing the strength of its core business. Adding to the positive news, HIB also rewarded its shareholders with a dividend payout.
However, a deeper dive into the report reveals a more nuanced picture, with challenges in certain segments and a year-to-date performance that tells a different story. Let’s break down the key figures and what they mean for the company moving forward.
Core Data Highlights
A Strong Quarter: Performance at a Glance
Hextar Industries delivered a robust performance in the second quarter of 2025, demonstrating significant year-on-year growth across key metrics. This was primarily driven by higher delivery volumes from its core Fertilisers division.
Q2 2025 (Current Quarter)
- Revenue: RM 280.8 million
- Profit Before Tax (PBT): RM 9.6 million
- Profit After Tax (PAT): RM 6.8 million
- Earnings Per Share (EPS): 0.24 sen
Q2 2024 (Comparative Quarter)
- Revenue: RM 245.3 million
- Profit Before Tax (PBT): RM 7.6 million
- Profit After Tax (PAT): RM 5.7 million
- Earnings Per Share (EPS): 0.21 sen
The company’s revenue surged by 14.5%, leading to an impressive 25.5% jump in pre-tax profit compared to the same quarter last year. This strong quarterly result underscores the solid demand for its primary products.
Cumulative Performance: A Mixed Picture
While the second quarter was strong, the performance for the first half of 2025 paints a more cautious picture. Although revenue saw a slight increase of 3.4% year-on-year, profits declined. The company attributes this dip to initial setup costs for its retail business expansion and a softening in the equipment rental market, which impacted its Industrial and Consumer segment.
For the six months ended June 30, 2025, Profit After Tax stood at RM8.9 million, a 15.1% decrease from the RM10.4 million recorded in the same period last year.
Segment Deep Dive: Fertilisers Remain the Bedrock
The group’s performance continues to be anchored by its Fertilisers division, which remains the backbone of the business, contributing to 87% of the total revenue. In contrast, the Industrial and Consumer segment faced headwinds.
| Segment (Q2 2025) | External Revenue (RM’000) | Profit/(Loss) Before Tax (RM’000) |
|---|---|---|
| Fertilisers | 244,481 | 13,162 |
| Industrial and Consumer | 36,337 | (2,930) |
The loss in the Industrial and Consumer segment reflects the investment costs associated with its new ventures and challenging market conditions for equipment rentals.
A Look at Financial Health
A review of the balance sheet shows an increase in total assets to RM847.8 million. However, this was accompanied by a rise in total bank borrowings, which grew to RM278.0 million from RM225.4 million at the end of 2024. Consequently, cash and bank balances saw a significant decrease from RM131.6 million to RM76.5 million. The net cash used in operating activities for the first half of the year was notably higher, primarily due to an increase in trade receivables, an area investors will be monitoring closely.
Risk and Prospect Analysis
Navigating the Future: Opportunities and Challenges
Hextar Industries is pursuing a dual strategy: strengthening its core business while investing in new growth avenues.
Opportunities on the Horizon
- Sustainable Agriculture: In its Fertilisers division, the group is focusing on innovative products that reduce nutrient loss after rainfall. This aligns with the growing global demand for sustainable agricultural practices and could provide a key competitive advantage.
- Retail Expansion: The strategic partnership to operate “Luckin Coffee” outlets nationwide is progressing well. With 36 outlets already established and receiving positive market response, this venture could become a significant long-term revenue stream, despite the current setup costs.
- Industrial Growth: The heavy equipment and engineering solutions arm is expected to see moderate growth, supported by its existing order book.
Potential Headwinds
- Market Softness: The company has acknowledged a “softening in the equipment rental market,” which could continue to pressure the Industrial and Consumer segment’s profitability.
- Expansion Costs: The ambitious rollout of Luckin Coffee outlets involves significant initial investment. While promising, these costs are currently weighing on the group’s overall profitability.
- Seasonal Risks: As a major player in the agriculture sector, the company’s fertiliser business is susceptible to adverse weather conditions, which can impact demand.
Summary and Investment Recommendations
Hextar Industries’ Q2 2025 results present a tale of a robust core business funding ambitious future growth. The fertiliser segment continues to perform exceptionally well, driving strong quarterly profits and enabling shareholder returns through dividends. However, the costs associated with the strategic expansion into the consumer retail space with Luckin Coffee, coupled with a softer industrial market, have impacted the year-to-date bottom line and strained the company’s cash flow.
Looking ahead, the key will be to see if the new ventures can begin contributing positively to offset their initial costs. The company’s focus on innovation in its core fertiliser business is a positive sign for long-term sustainability. Investors will be watching closely to see how Hextar balances the demands of its expansion with prudent financial management.
Key points for consideration:
- The timeline for the Industrial and Consumer segment, particularly the Luckin Coffee venture, to achieve profitability.
- The company’s ability to manage its working capital, especially the collection of trade receivables, to improve operating cash flow.
- The continued performance and market leadership of the core Fertilisers division amidst potential seasonal and market fluctuations.
- The impact of increased borrowings on the company’s finance costs in the coming quarters.
My Take
Hextar Industries’ Q2 report presents a classic case of a company investing for future growth while its core business remains robust. The strong performance of the fertiliser segment provides a solid foundation, but the success of the ambitious Luckin Coffee expansion will be a key storyline to follow. Investors should pay close attention to how the company manages the associated costs and its overall working capital in the upcoming quarters.
What are your thoughts on Hextar’s expansion into the competitive coffee retail market? Can it become a significant growth engine for the company?
Share your insights in the comments below!
