KUALA LUMPUR: Sarawak-based construction company Hock Seng Lee Bhd’s net profit fell by 46.3% to RM7.57mil in the first quarter ended March 31,2020 compared with RM14.11mil a year ago as it was impacted by the onset of the Movement Control Order (MCO).
It said on Thursday its pretax profit fell to RM10.13mil compared with RM18.76mil. Its revenue was down by 23.3% to RM112.39mil from RM146.72mil. Earnings per share were 1.37 sen compared with 2.56 sen.
Of the revenue of RM112.39mil, the construction segment contributed RM101.25mil, or 90%, while property development delivered RM11.15mil.
“The Covid-19 has had an exceptional impact on the construction industry. In Malaysia, although the Movement Control Order (MCO) came into effect on March 18, the ripples effect and impact of China locked down since February was huge on the construction industry when the material supply chain were severely affected.
“It caused more non-productive days on top of the 1Q’s usual festive public holidays and unworkable times due to the monsoon season, ” it said.
HSL said in the property segment, the quick global downturn led to weaker demand in what was already a buyers' market.
“HSL’s order book currently is at RM3.4bil with an outstanding balance of RM2.2bil. With substantial value of project in hand, the challenge now is to manage project execution to achieve favourable deliverable amidst the many challenges under the new normal,” it said.
Commenting on the Covid-19 pandemic, HSL group managing director Datuk Paul Yu Chee Hoe said Covid-19’s negative impact was impossible to foresee.
In early January, when reports emerged the virus had spread outside Wuhan, the impact on China’s economy reverberated across world markets.
“Before the MCO, we anticipated inflationary pressures on profit margins due to factors like supply disruption. But what’s happen since January has been unprecedented. We are preparing for the long-haul now, ” he said.
Yu expected Covid-19’s economic ramifications would be beyond 2008’s Great Recession and 1997’s Asian Financial Crisis.
Yu also said HSL had taken more precautions at worksites with strict compliance to its own Safe Operating Procedure.
“There will be a rise across all operating costs and this will no doubt be reflected in results, ” he added.
He pointed out the labour shortage an industry- and country-wide issue in Malaysia.
“We are only just picking up momentum slowly and it’s already June. The construction industry cannot just go back to status quo at the flick of a switch.
“At the start of the Recovery Movement Control Order (RMCO), we are working at 30- 40% productivity, ” he added.
On property, price adjustments on existing stock will lower revenue and spending on marketing to spur sales will erode profits. HSL’s only major launch will be Samariang Aman 3, a best-seller for over a decade.
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