CMS records significant improvement in earnings for 1H18

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CMS believes that its growth strategy for its strategic investments to drive the next wave of growth for CMS Group is beginning to come to fruition. The aim of this growth strategy is for its traditional core businesses and its strategic investments to equally contribute to double the group’s earnings in the next three to five years. — Photo by Chimon Upon

KUCHING: Bhd (CMS) recorded significant improvements for its performance for first half of 2018 (1H18), driven by its associates’ healthy numbers.

Beyond this, CMS believes that its growth strategy for its strategic investments are expected to drive the next wave of growth for CMS Group.



Last week, CMS reported a total revenue of RM750.27 million and a pre-tax profit (PBT) of RM175.94 million for 1H18, an increase by 15 and 32 per cent, in comparison to the preceding year’s corresponding period’s (1H17) result of RM650.23 million and RM132.91 million respectively.

The group’s profit after tax and non-controlling interests (PATNCI) of RM130.60 million for 1H18 was 57 per cent higher than 1H17’s PATNCI of RM83.30 million. Earnings per share (EPS) also stood notably at 12.16 sen versus 7.75 sen reported for the corresponding six-month period of last year.

It explained that the significant improvement in the Group’s financial performance was mainly due to increase in the share of results of associates namely: OM Materials (Sarawak) Sdn Bhd, SACOFA Sdn Bhd, KKB Engineering Berhad and Kenanga Investment Bank Bhd. Collectively, their PBT catapulted by 1,101 per cent to RM74.88 million during 1H18 from a loss of RM7.48 million in 1H17.

The main contributor to this performance was the strong turnaround at OM Materials (Sarawak) where a PATNCI of RM48.48 million was registered (for CMSB’s 25 per cent share) compared with a loss of RM26.21 million for the corresponding period in 2017.

It noted that this strong performance by OM Materials (Sarawak) is expected to be sustained if ferrosilicon and manganese alloy prices and production outputs are maintained at their current levels.

The group also recorded a robust profit contribution from SACOFA where a PBT of RM21.11 million was recorded compared to RM18.88 million for the corresponding period in 2017.

Commenting on the results, CMSB’s Group chief executive officer – Corporate, Dato Isaac Lugun, said: “The improvement in our financial performance for first six months of this year has mainly been due to the strong turnaround of our associate, OM Materials and improved contributions from our other associate companies including SACOFA.

“We believe that our growth strategy for our strategic investments to drive the next wave of growth for CMS Group is beginning to come to fruition.



“The aim of this growth strategy is for our traditional core businesses and our strategic investments to equally contribute to double the group’s earnings in the next three to five years.”

Meanwhile, he said, CMS also expect improved performance from its traditional core businesses of Cement and Construction Materials despite the operational challenges being faced by the two Divisions including the recent overall downgrade of the construction sector by various research houses in .

“ This growth is expected to come from the Pan Borneo Highway, which is gradually gathering momentum, and is expected to drive the construction sector in the State for the next two to three years,” he highlighted.

The group’s Cement Division, reported a lower PBT of RM39.19 million in 1H18 compared to 1H17’s PBT of RM47.04 million despite an eight per cent increase in its revenue. The lower PBT was mainly due to repair costs from the planned plant maintenance shutdown carried at its clinker plant during the months of and February this year. This was the first extensive maintenance shutdown exercise carried out by the Group since it took over the plant in 2007.

The division’s performance was further impacted by an increase in the price of imported clinker due to tight supply in the international market which management seeks to mitigate through alternative supply sources.

CMS also noted that the Construction Materials & Trading Division reported a PBT of RM23.41 million for 1H18 which is 21 per cent lower than 1H17’s PBT of RM29.50 million despite a 10 per cent increase in revenue.

“The lower PBT was mainly attributable to a sudden and acute shortage of raw materials supply: quarry aggregates and quarry sand, resulting from a steep spike in the demand for the materials from the Pan Borneo Highway project. Margin was also compressed by the recent increase in prices of bitumen and diesel. Thedivision is actively exploring for alternative supply sources to ensure its continuous production of premix,” it explained.

As for the Construction & Road Maintenance Division, it said, it registered a strong PBT of RM44.76 million, an increase by 24 per cent in comparison to 1H17’s profit of RM36.11 million.



“This was on the back of higher revenue from the construction of Pan Borneo Highway project, the Miri-Marudi road rehabilitation project and the Sarawak Museum project,” it added.

As for its Property Development Division, the group reported a lower PBT of RM11.30 million compared with RM23.57 million for the corresponding period in 2017. This was mainly attributable to lower sales in an increasingly challenging property market.

Overall, Lugun said: “We are confident that CMS will continue to maintain its strong and will remain resilient in spite of expected continuing headwinds.”

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Source: Borneo Post Online





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