SALUTICA BERHAD Q4 2025 Latest Quarterly Report Analysis

Salutica Berhad Navigates a Challenging Quarter with Strategic Shifts and Decreased Losses

Greetings, fellow investors! Today, we’re diving into the latest financial performance of Salutica Berhad for its fourth quarter and full financial year ended 30 June 2025. This report offers a candid look at a company in transition, showcasing a significant decrease in losses while simultaneously highlighting the persistent market challenges it faces. Despite a tough operating environment, there are clear strategic moves underway, particularly in diversifying its customer base and product offerings.

While the full-year revenue saw a slight dip, the fourth quarter brought a commendable surge in sales. More importantly, the company managed to substantially narrow its losses compared to the previous year, which is a key takeaway. Let’s unpack the numbers and strategies that shaped Salutica’s journey over the past year.

Financial Performance Overview: A Path Towards Recovery

Salutica Berhad’s latest report reveals a mixed, yet cautiously optimistic, financial picture. While the full financial year saw a slight decline in revenue, the fourth quarter demonstrated strong growth, hinting at potential shifts. The most encouraging news comes from the significant reduction in both quarterly and full-year losses, a testament to the company’s cost-control efforts and the absence of large impairment charges seen in the prior year.

Revenue Performance

The latest quarter, ending 30 June 2025, showed a robust increase in revenue, largely driven by the fulfillment of wireless headset orders and the nascent shipment of servers for data processing centers.

This represents a remarkable increase of approximately RM5.45 million, or 140.9%, compared to the same period last year. This surge is a welcome sign after a challenging cumulative year.

However, looking at the full financial year, the overall revenue saw a slight contraction:

This cumulative decrease of approximately RM1.08 million, or 5.1%, was primarily attributed to lower sales order volumes from existing products and prolonged development activities for new ventures like coffee machines and automotive tools due to evolving customer design requirements.

Profitability: Significantly Narrowing Losses

The most notable improvement comes from the Group’s efforts in managing its losses. Both the quarterly and full-year Loss Before Taxation (LBT) saw substantial reductions.

The current quarter’s LBT decreased by a significant RM14.68 million, or 67.5%, compared to the same quarter last year. This drastic improvement is largely due to the absence of large impairment losses on property, plant & equipment (RM9.3 million) and trade receivables (RM7.9 million) that were recognized in the prior corresponding quarter.

For the full financial year, the LBT reduced by RM13.36 million, or 31.0%. While this is a positive trend, it’s important to understand the factors still contributing to the current year’s losses:

• Low order volume from existing products.
• Holding excess resources in anticipation of mass production for new development projects.
• Inefficient absorption of fixed overheads due to lower overall revenue.
• Significant legal fees expenditure of RM3.5 million for ongoing court cases.
• A provision of RM1.2 million for court award costs in the Apple Malaysia suit (which the Group is appealing).
• Spending on factory relayout and new line setup for data processing center servers, amounting to RM0.8 million, in addition to RM1.2 million in capital expenditure.
• Impact from the minimum wage increase, totaling RM0.2 million.
• Spending on product development for the in-house FOBO brand, amounting to RM0.2 million.

The Group emphasizes its ongoing cost-control efforts to mitigate these challenges.

Loss Per Share

Reflecting the reduced losses, the basic loss per share also showed improvement:

And for the full year:

Financial Position Highlights

A quick look at the balance sheet reveals some key changes:

This decline in equity largely reflects the full-year losses. However, there’s a significant increase in property, plant and equipment, largely due to a revaluation surplus of RM12.56 million net of tax, reflecting an updated market value of its properties.

Current assets notably decreased, primarily driven by a reduction in short-term investments and inventories. Conversely, current liabilities saw a decrease, mainly due to lower contract liabilities and borrowings.

The substantial drop in net current assets highlights the ongoing need to manage working capital efficiently.

Cash Flow Overview

The cash flow statement reflects the operational challenges, with net cash used in operating activities increasing compared to the prior year. This led to an overall decrease in cash and cash equivalents.

The company also utilized cash for investing activities, including property, plant, and equipment acquisitions, and for financing activities, including loan repayments, partially offset by funds raised from a private placement.

Business Unit Performance: A Single Segment with Diversified Geographical Reach

Salutica operates primarily in one segment: Consumer Electronics, which encompasses product design, development, and manufacturing of mobile communication products, wireless electronics, servers for data processing centers, and lifestyle devices.

Geographically, revenue distribution for the cumulative year ended 30 June 2025 shows a strong focus on two key regions:

The Americas region, particularly the United States, contributed almost half of the total revenue (49.2%), while Europe, with Switzerland as a major contributor, accounted for 38.7%.

Risks and Prospects: Charting a Course Through Volatile Waters

The Board of Directors acknowledges the challenging financial conditions, primarily due to fluctuations in customer sales orders. However, the company is not standing still; it’s actively pivoting and strengthening its foundation for future growth.

Strategic Diversification and Certifications

Salutica is vigorously pursuing new opportunities in the automotive and medical industries. This strategic shift is backed by leveraging key certifications:

• IATF 16949: A global technical specification and quality management standard crucial for the automotive industry.
• ISO 13485: A recognized standard for quality management systems in the medical devices sector.

These certifications are critical enablers for entering and competing in these high-value, regulated industries, which could provide more stable and sizeable sales orders compared to the more cyclical consumer electronics market.

Operational Optimisation

The Group is focused on securing more customers to achieve significant sales order volumes, which is essential for optimizing the absorption of factory overheads and ensuring efficient utilization of its skilled manpower resources. This addresses one of the key reasons for current losses: inefficient absorption of fixed overheads due to low revenue.

Funding Growth: Private Placement

To support its strategic expansion, Salutica announced a private placement of up to 42.65 million new ordinary shares. This move aims to bolster the company’s cash position, funding capital expenditures for new customers and product ranges, as well as meeting working capital requirements. As of the report date, 11.5 million shares have been subscribed, and an extension of time has been secured for the remaining tranches.

Ongoing Legal Challenges

The company faces several material legal suits, which have contributed to significant legal expenses and provisions. These include patent infringement suits against Apple Malaysia Sdn. Bhd. and Apple South Asia Pte. Ltd., an arbitration case against Paradigm Metal Industries Sdn. Bhd., and a suit against Nuheara Ltd. (where a judgment in default was obtained, debt assigned, and Nuheara has since entered liquidation).

These litigations, particularly the adverse judgment and appeal against Apple Malaysia and the ongoing suits, represent potential financial liabilities and require continuous management attention and resources.

Outlook

What are your thoughts on Salutica’s strategic shift and its path towards recovery? Do you believe the move into automotive and medical sectors will provide the necessary stability and growth? Share your insights in the comments below!

For more detailed analysis and company updates, stay tuned to our blog.