D&O Green Technologies Q2 2025 Report: Navigating Market Headwinds with an Eye on a Stronger Second Half
D&O Green Technologies Berhad, a prominent player in the semiconductor industry, has released its financial results for the second quarter ended June 30, 2025. The report reveals a challenging period marked by a significant year-on-year decline in profitability due to broader market moderation in the automotive sector. However, a closer look reveals disciplined cost management, a resilient balance sheet, and early signs of a potential recovery, with management expressing confidence in a stronger performance in the second half of the year.
Despite a tough year-on-year comparison, the company’s performance showed a slight improvement from the preceding quarter, hinting at a potential bottoming out of the recent slowdown.
Core Financial Highlights: A Tale of Two Comparisons
A Challenging Quarter: Year-on-Year Performance
When compared to the same quarter last year, D&O faced significant headwinds. The company’s revenue saw a downturn, which directly impacted its profitability due to lower production utilisation and reduced absorption of fixed costs.
Q2 2025
Revenue: RM 244.3 million
Gross Profit: RM 38.3 million
Profit Before Tax (PBT): RM 0.8 million
Net Profit: RM 0.6 million
Q2 2024
Revenue: RM 265.6 million
Gross Profit: RM 52.1 million
Profit Before Tax (PBT): RM 8.6 million
Net Profit: RM 8.0 million
The 8.0% year-on-year decline in revenue was primarily attributed to adjustments in orders from key automotive clients. This reflects a broader market moderation and policy shifts in key export markets. Consequently, the Gross Profit Margin contracted from 19.6% to 15.7%, leading to a steep 92.5% drop in net profit.
Segment Spotlight: Automotive Sector Remains Key
The Group’s performance is heavily tied to the automotive industry, which constitutes the vast majority of its revenue. While the non-automotive segment showed impressive growth, the decline in the core automotive business drove the overall results.
| Segment | Q2 2025 Revenue (RM mil) | Q2 2024 Revenue (RM mil) | % Change |
|---|---|---|---|
| Automotive | 237.81 | 261.08 | -8.9% |
| Non-Automotive | 6.44 | 4.55 | +41.5% |
Signs of a Turnaround? Quarter-on-Quarter Improvement
While the year-on-year figures are stark, the quarter-on-quarter (QoQ) results offer a glimmer of hope. Revenue saw a slight uptick of 1.4% from RM240.8 million in Q1 2025, driven by the resumption of production by a key customer. This stabilisation in revenue, combined with effective cost control, led to a significant improvement in profitability from the previous quarter, with pre-tax profit rising to RM0.79 million from RM0.19 million in Q1 2025.
Financial Health and Management Discipline
Throughout this challenging period, D&O has maintained strong financial discipline. The Group’s balance sheet remains healthy, with cash and cash equivalents standing at RM225.6 million and a net gearing ratio of 30% as of June 30, 2025.
A key highlight is the stringent management of capital expenditure (capex). In the first half of 2025, capex was reduced by a massive 75% year-on-year to just RM17.7 million. This prudent approach preserves cash and strengthens the company’s financial resilience, positioning it to fund future growth opportunities effectively.
Risks and Prospects: Navigating the Road Ahead
Management remains cautiously optimistic about the future, citing several positive industry trends and internal strategies.
According to GlobalData, global vehicle sales are forecasted to grow by 1.3% in 2025, with a stronger performance of over 10% growth anticipated in the second half of the year. D&O expects to benefit from this trend, anticipating improved sales from Q3 2025 onwards. This is supported by a stable order pipeline as inventory levels across the automotive sector gradually normalise.
The company’s strategy remains focused on cost optimisation and operational efficiency to enhance profit margins as revenue recovers. Furthermore, recent global agreements have eased trade and tariff risks, reducing a key source of market volatility. The Group also notes its limited exposure to the United States market (less than 3% of total revenue), insulating it from specific trade tensions.
However, the primary risk remains the ongoing volatility in global car production schedules and broader macroeconomic uncertainties that could impact consumer demand. The company’s diversified global footprint and customer base are key strengths that provide resilience to navigate these dynamic conditions.
Summary and Investment Recommendations
D&O Green Technologies’ Q2 2025 results reflect a company navigating a cyclical downturn with strategic prudence. While the sharp year-on-year profit decline is a key concern, it is balanced by commendable financial discipline, demonstrated by significant capex reduction and effective cost management. The sequential improvement in performance and a positive industry outlook for the second half of the year suggest that the company is positioning itself for a progressive recovery. The focus now shifts to whether the anticipated rebound in customer orders will materialise and drive a meaningful recovery in profitability in the coming quarters.
Key positive takeaways from this report include:
- Stabilisation and slight improvement in quarter-on-quarter revenue and profit.
- Strong discipline in capital expenditure, preserving cash and strengthening the balance sheet.
- A healthy liquidity position and a manageable net gearing ratio of 30%.
- An optimistic outlook for the second half of 2025, supported by industry forecasts and a stable order pipeline.
Investors should remain mindful of the following risks:
- Persistent volatility in global automotive production schedules could impact order flow.
- Broader macroeconomic uncertainties affecting global consumer demand for vehicles.
- The risk of inventory build-up if the anticipated sales recovery is slower than expected.
