KUALA LUMPUR: Amid global cost swings, Sarawak construction company Hartanah Kenyalang Bhd
says early material lock-ins and strategic subcontracting have helped cushion the group’s margins.
Hartanah managing director Seah Boon Tiat said: “While the conflict will inevitably impact our margins, we mitigate the effects by subcontracting specialised work to lock in costs with our partners.”
“Additionally, we secured most of the project materials early, before the conflict escalated.
“We also expect the government to implement the variation-of-price mechanism, as it has done in the past, which would help cushion the impact on contractors,” Seah told reporters at the group’s first quarter of financial year 2026 (1Q26) briefing yesterday.
Hartanah chief financial officer Desmond Foo Jin Sen added that the group has adopted a cautious approach, recognising variation orders in its accounts only upon government approval.
“In fact, even after projects are completed and handed over, there may still be revenue coming in from these variation orders.
“This additional revenue goes straight to the top line, as the costs were already accounted for during construction,” he said.
He noted that the group had secured pricing for raw materials before the variation orders were applied, with regard to its recent projects.
“However, this approach applied only to the stadium and park projects, and partially to the three key immigration projects,” Foo said.
On that note, Seah further said the group expects minimal cost impact in the early phase of its Sibu Prison project, with site clearing and cut‑and‑fill work requiring minimal materials thanks to a balanced design.
“Approvals from state planning authorities should be completed within one to two months, by which time the company hopes material prices will have stabilised,” he added.
Moreover, Hartanah was awarded the RM275.33mil Sibu Prison project in Sarawak, its largest contract to date, during its 1Q26.
The contract is in line with Budget 2026 provisions for a new prison in Sibu, which will accommodate up to 1,000 inmates and replace the existing facility built in 1918 with a capacity of about 450.
Following the prison project, the group secured the Sarawak Stadium project worth RM184.32mil.
Hartanah had reported a net profit of RM2.14mil year-on-year in financial year 2025 (FY25), down from RM9.21mil in FY24, primarily due to listing expenses.
The group said earnings are thereby expected to stabilise from the 2Q26, with its government projects remaining on track.
Furthermore, management explained that activities for the Sibu Prison and Sarawak Stadium are expected to pick up by the 2Q26 and towards the end of FY27, with the stadium progressing on schedule for the SEA Games.
