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Logistics sector hit by margin erosion


Improved results: Tiong Nam’s core logistics and warehousing business made a pre-tax profit of RM4.9mil in the latest quarter as higher deliveries and new clientele pushed the segment’s revenue up by 9.1%.

Improved results: Tiong Nam’s core logistics and warehousing business made a pre-tax profit of RM4.9mil in the latest quarter as higher deliveries and new clientele pushed the segment’s revenue up by 9.1%.

COMPETITION in the domestic logistics scene is heating up, against the backdrop of rising demand for parcel and larger goods deliveries in Malaysia. While greater competition is good for the end-consumers, many logistics players have been hit by margin erosion as a result.

This year’s third quarter earnings season ended up unfavourable for the logistics sector. In the period of July to Sept 2018, the bottom line of logistics providers Tasco Bhd and GD Express Carrier Bhd declined by 70% and 18% year-on-year (y-o-y), respectively.

CJ Century Logistics Holdings Bhd saw its earnings dipping by 3.6% y-o-y, while Xin Hwa Holdings Bhd ’s net profit fell by nearly 33% y-o-y. Pos Malaysia Bhd took a greater hit compared to its sector peers as the group fell into red in the three-month period, with a net loss of RM16.58mil.

Unlike the others, Tiong Nam Logistics Holdings Bhd ’s earnings story turned out slightly different in the latest quarter. Its core logistics and warehousing business segment returned to the black with a pre-tax profit of RM4.9mil, as higher deliveries and new clientele pushed the segment’s revenue up by 9.1% y-o-y to RM137.8mil.

However, Tiong Nam’s overall earnings at the group level took a plunge by 82% y-o-y to RM2.22mil in its second quarter ended Sept 30, as topline was slashed by about 12%.

The major reason? Disappointing property sales. Declining progress billing due to the group’s property development projects reaching completion dragged down the segment’s revenue by nearly 71% y-o-y in the second quarter.

Tiong Nam recorded a sharply-lower unbilled sales of RM2mil in the second quarter as compared to RM80.2mil a year earlier, post-completion of its Pinetree Marina Resort development.

Moving forward, the group only has one project in the pipeline – the Kota Masai township – which will likely be launched by March 2019 with an estimated gross development value (GDV) of RM150mil.

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Corporate News , Tiong Nam