Financial Statement Announcement for the Third Quarter Ended 30 September 2018
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Profit & Loss
Consolidated Statement of Comprehensive Income
Review of Performance
CONSOLIDATED INCOME STATEMENT
July – September 2018 ("3Q18")
The Group's revenue increased 1.9% year-on-year ("yoy") from $188.1 million for 3Q17 to $191.8 million for 3Q18.
The Group reported an increase in revenue from all business segments except for Mould Fabrication segment. The decrease in revenue from the Mould Fabrication segment was due to lesser orders recognised to profit and loss during the period.
The Group's gross profit decreased 12.8% yoy from $26.9 million for 3Q17 to $23.5 million for 3Q18. Correspondingly, the Group's gross profit margin declined from 14.3% for 3Q17 to 12.3% for 3Q18. This was mainly due to increase in labour, utilities, and materials costs as well as pricing pressure from customers.
The increase in other income was due to foreign exchange gain of $2.3 million for 3Q18.
The increase in administrative expenses from $9.8 million for 3Q17 to $10.7 million for 3Q18 was due to higher staff costs, professional fees and travelling expenses.
The decrease in other expenses was mainly due to foreign exchange losses amounting to $3.1 million for 3Q17 whereas the Group reported foreign exchange gain under other income for 3Q18.
The increase in finance costs was due to the drawdown of loans to finance the Group's new factory in Penang and for capital expenditure.
The Group achieved a net profit of $7.5 million for 3Q18 compared to a net profit of $7.7 million for 3Q17. Excluding foreign exchange gains and losses and retrenchment costs, net profit would have been $5.3 million for 3Q18 and $10.9 million for 3Q17, representing a 51.6% yoy decline.
CONSOLIDATED BALANCE SHEET
The Group's PPE amounted to $189.7 million as at 30 September 2018 as compared to $193.9 million as at 31 December 2017. PPE was stated net of depreciation charges of $21.8 million (9M17: $21.3 million), partially offset by currency re-alignment and the addition of $28.4 million (9M17: $26.4 million) in PPE.
The Group maintained a cash balance of $87.7 million as at 30 September 2018 (31 December 2017: $105.3 million). This resulted in a net debt position of $22.8 million (31 December 2017: net cash $1.6 million) after accounting for loans and borrowings amounting to $110.5 million (31 December 2017: $103.7 million). The decrease in net cash was due to a foreign currency translation loss of $1.05 million on the opening balance of cash and cash at bank, the payment of capital expenditure amounting to $27.6 million, the payment of dividends amounting to $14.2 million and the payment of debt amounting to $1.1 million following the acquisition of Adval Tech (Thailand) Co Ltd on 4 September 2018(1).
CONSOLIDATED CASHFLOW STATEMENT
July – September 2018 ("3Q18")
Net cash flows from operating activities amounted to $7.0 million for 3Q18 as compared to $14.5 million for 3Q17. Net cash flows used in investing activities amounted to $3.9 million for 3Q18 as compared to $7.5 million for 3Q17 due to lower amount paid for the purchase of PPE.
Net cash flows used in financing activities amounted to $0.9 million for 3Q18 as compared to $9.0 million for 3Q17 due to additional loans draw down for the payment of capital expenditure.
 For more information, please refer to the Group's announcement on SGXNet dated 5 September 2018
Commentary On Current Year Prospects
In addition to rising labour costs, rising utility costs and foreign exchange rate volatility, negative market sentiment surrounding the trade war continues to present challenges to the Group's operations which span across 20 manufacturing sites in nine different countries. Furthermore, pricing pressure from customers and rising materials cost have presented the Group with additional headwinds.
Despite rising trade tensions, the Group's technological capabilities and global manufacturing footprint has led to an increasing amount of business queries from both new and existing customers who are confident in the Group's ability to handle challenging projects on a global scale. As a result, the Group's order backlog across the Automotive, Healthcare, Consumer/IT and Mould Fabrication segments remains stable. Within the Consumer/IT segment, the Group has made the strategic decision to exit some low-margin projects.
The Group continues to remain focused on building the long-term stability of its operations. In this light, the Group continues to sharpen its competitive edge by investing into technology and new machinery to stay ahead of the curve in an ever-changing business environment.
As announced via SGXNet on 25 April 2018, the Group has appointed Knight Frank (Shanghai) Property Consultants Limited as its exclusive brokerage team to execute the sale process for its factory in Zhongshan, China. At present, this sale process is still ongoing. Shareholders will be updated on any material developments regarding the potential disposal of the factory in accordance with SGX listing rules.
Looking ahead, the Group is vigilant of headwinds such as rising costs and an increasingly competitive business landscape. While the Group has substantial operations outside of China, the Group continues to monitor the ongoing trade war situation closely. The Group remains confident in its resilient business model as the long-term sustainability and profitability of operations remain on track.