KUALA LUMPUR: MBM Resources Bhd’s alloy wheel division is expected to operate at a loss in the year ending Dec 31, but it will narrow in the next financial year, according to its managing director Looi Kok Loon.
He said volume was set to pick up by December as the group secured orders for a major car model.
“The alloy business has been very tough and we expect improvement from next month onward. Unfortunately, it is only for a month the current fourth quarter,” he said after the company EGM yesterday.
He said the average volume for the group’s alloy wheels was about 3,000 to 4,000 units, adding that the new order it secured would see the alloy wheel production being ramped up to 12,000-15,000 units in the first half of next year.
“This year has been challenging with very low volume. Orders will kick in next month,” Looi said.
Going forward, Looi said its alloy wheel operations, new Perodua plant as well as and Hino manufacturing plant would be strong anchors and earnings prospects as capital expenditure tapered off.
“All three plants are in full swing. This year the plants have been a negative drag for the group and it will be positive contributions going forward,” he said.
He added that the operating environment remained challenging as competition continued to be intense while credit conditions tight.
Looi disclosed that the group had focused a lot on after-sales service and it was beginning to bear fruits.
“After-sales business is very defensive and the margins are better,” he said.
For the third quarter ended Sept 30, MBM Resources’s net profit fell 27.4% to RM25.4mil on revenue of RM484mil. In the first nine months, its earnings stood at RM80.1mil, down 23.6% from RM105mil in the same period a year ago.
Revenue for the period fell to RM1.55bil against RM1.73bil last year.
“This third quarter is historical. It is not a structural decline, which means that it is not permanently declining, but it is a transition,” he said.
Looi said the group was affected by the shorter working quarter due to the festive season and the transition in production to Perodua Axia from Perodua Viva.
Despite a challenging environment this year, Affin Hwang Capital Research said it expected to see a recovery moving into 2015 as MBM gained traction on the back of new model launches (Perodua Axia), secured orders for a major car model for the alloy wheel plant and as investment losses from manufacturing facilities to subsided.
Hong Leong Investment Bank Research said MBM’s reported third-quarter core earnings of RM25.3mil and nine months to Sept 30 of RM80.3mil were in line with its forecast (73.3%) and consensus (68.3%).