Auto sector to weigh on DRB-Hicom's group operating profit

At 5pm yesterday, DRB-Hicom shares jumped 43 sen to RM23.50, its highest since May 2014.

KUALA LUMPUR: Malaysian Rating Corporation (MARC) views DRB-Hicom Bhd group’s operating profit would remain weighed down by the challenging outlook for the automotive sector due to a weaker economic growth forecast.

The rating agency said on Friday the group’s automotive segment, which contributed 53% to revenue for the first quarter ending June 30, 2018 (1QFY2019), has continued to register operating losses. 

DRB-Hicom's 50.1%-owned Proton Holdings Bhd (Proton) remains a drag on group performance, registering losses of RM134.6mil in FY2018 on a continued decline in sales volume and competitive pricing pressure. 

However, DRB-Hicom’s associate automotive companies, mainly Honda (M) Sdn Bhd, have partly offset the losses in the automotive segment, MARC said.

Proton car sales registered an 11.0% on-year decline to 64,459 units in FY2018 but sales are expected to be boosted by the launch of an SUV model for which it has received bookings of about 10,000 units to date.

The production of the vehicle, along with two other planned models will require additional investments in Proton’s production facilities over the near to medium term for which DRB-Hicom and its partner in Proton, Zhejiang Geely Holding Group, will make proportionate contributions. 

The performance of the group’s non-Proton marques such as Honda remained commendable, allowing DRB-Hicom to maintain its overall domestic market share of 36.3% of the total industry volume of 570,935 units for FY2018.