Leon Fuat Berhad (“Leon Fuat”), a key player in the steel industry, specializing in rolled long and flat steel products, has announced its financial performance for the second quarter ended 30 June 2024 (“Q2FY2024”).
Despite the tough economic conditions, the Group managed to achieve solid revenue and profit before tax (“PBT”), demonstrating its resilience.
Leon Fuat Financial Highlights for Q2FY2024
In Q2FY2024, Leon Fuat reported a revenue of RM227.00 million, marking a 4.4% increase compared to RM217.42 million in the same quarter last year (“Q2FY2023”).
This growth was driven by higher sales in both the trading and processing segments of steel products, which saw increases of 3.7% and 4.7%, respectively. The rise in revenue was mainly due to higher sales volumes, although average selling prices saw a slight decline.
However, the Group’s gross profit for Q2FY2024 fell by 29.0% to RM21.07 million, down from RM29.66 million in Q2FY2023. This decline was largely due to a reduction in the overall gross profit margin, which decreased by approximately 4.3 percentage points, from 13.6% in Q2FY2023 to 9.3% in the current quarter.
Leon Fuat’s PBT also saw a significant decrease, dropping 70.5% to RM4.74 million, compared to RM16.09 million in the same period last year. This decline was attributed to several factors, including the lower gross profit, higher operating costs, and increased finance costs.
Specifically, the Group experienced a 14.9% rise in finance costs, primarily due to higher interest expenses stemming from increased use of credit facilities and rising interest rates following Bank Negara Malaysia’s hike in the Overnight Policy Rate in May 2023.
Comparison with Previous Quarter
When compared to the previous quarter (“Q1FY2024”), Leon Fuat’s revenue in Q2FY2024 saw a slight increase of 0.8%, from RM225.26 million to RM227.00 million.
However, the Group’s gross profit dropped by 23.4%, from RM27.52 million to RM21.07 million, while PBT fell by 56.3%, from RM10.85 million to RM4.74 million. The decline in profitability was mainly due to continued pressure on gross profit margins in a highly competitive market.
Calvin Ooi Shang How, Executive Director of Leon Fuat, acknowledged the challenges faced in the second quarter of FY2024.
“The market conditions in this quarter have been tough, impacting our profit margins despite an increase in revenue. The decline in our gross profit and PBT is primarily due to the ongoing volatility in steel prices, rising costs, and intense market competition. We remain committed to improving our operational efficiencies and managing costs carefully to navigate these challenges. Our focus is on strategic initiatives that will support our business in the long term.
We will continue to closely monitor the fluctuations in steel prices and foreign currency exchange rates, taking necessary steps to mitigate potential risks. This includes prudent inventory management and strategic contract negotiations to protect the Group’s profitability.”
As of 28 August 2024, Leon Fuat’s share price stands at RM0.52, giving the company a market capitalization of RM177.30 million.
About Leon Fuat
Leon Fuat Berhad (‘Leon Fuat’ or the Group’) primarily in the business of trading, processing and/or manufacturing (collectively referred to as “processing”) of steel products, specialising in rolled long and flat steel products.
The Group’s trading activities consist of a wide portfolio of steel products, which includes flat products such as coils, plates, sheets, welded tubes, and pipes, welded rectangular and square sections, and long products such as bars, rods, shafts, sections, angles, channels and seamless tubes and pipes.
The Group’s processing business is synergistic to the trading operations. As part of the Group’s value-added activities, Leon Fuat undertakes processing activities in the form of cutting, levelling, shearing, profiling, bending, finishing and production of welded steel pipe and expanded metal.
As an established name, Leon Fuat has a strong portfolio of customers of more than 3,000 and have a long-standing relationship with customers.
For more information, please visit www.leonfuat.com.my
