PETALING JAYA: Ancom Nylex Bhd
could see stronger earnings in the financial year ending May 31, 2026 (FY26), following what is expected to be a weaker performance for FY25.
The company is scheduled to release its FY25 results on Thursday.
Kenanga Research noted that FY25 earnings would likely be impacted by high freight costs, particularly in the first half of the year.
This may already be priced into its current price-to-earnings ratio of 10 times.
However, the agricultural chemicals and herbicides maker is projected to rebound in FY26, driven by improved agri-chemical earnings from both existing and new active ingredients (AIs).
The research house noted that the company’s industrial chemicals segment is expected to remain stable but subdued.
Meanwhile, Ancom Nylex appears to be partially shielded from US tariffs, as its timber preservative products have been granted exemptions.
“Healthy exports to United States are likely despite trade tensions, as Ancom’s timber preservative and monosodium methyl arsenate exports enjoy tariff exemptions,” Kenanga Research said, adding that timber preservatives make up 6% of the group’s 11% US revenue exposure.
As an exports-reliant company, Ancom Nylex is exposed to ringgit fluctuations.
However, Kenanga Research expects this to have only a limited net impact, as two-thirds of its agri-chemical revenue is derived from exports, while a majority of inputs are imported.
“A 10% change in the ringgit can affect agri-chemical revenue by 6% to 7%. However, as nearly 70% of agri-chemical input is imported, the net impact on group net profit is less than 2%,” it said.
More significantly, freight rates – which remained elevated through most of FY25 – are expected to continue pressuring earnings into FY26.
Higher freight rates could suppress FY26 group core net profit by about 5%, although rates in the second half of FY25 have already dropped 25% compared to six months ago, Kenanga Research added.
Pending its results, the research house has maintained its FY25 and FY26 profit forecasts, an “outperform” call and a target price of RM1.20.
