VS Industry posted positive 4Q earnings, strong recovery for FY21

KUALA LUMPUR: Leading electronics manufacturing services provider V.S. Industry Bhd recorded a net profit of RM54.1 million on the back of RM882.6 million revenue for the fourth quarter (4Q) ended 31 July 2020 following recovery in order flows from key customers.

Meanwhile, 4Q revenue declined 15.0 per cent year-on-year (yoy) due to lower sales orders from a key customer.

Net profit for the quarter, on the other hand, was only marginally lower by 3.8 per cent yoy vis-à-vis RM56.3 million in 4Q 2019.

The slight drop in net profit was largely attributed to losses incurred from the operations in China as the asset-light and lower-cost strategy continued to bear fruit.

In view of this, net profit margin rose to 6.1 per cent in 4Q financial year 2020 (FY20) versus 5.4 per cent a year ago.

“We are pleased to deliver a strong recovery in our 4Q FY20 performance against the backdrop of a difficult operating environment stemming from the Covid-19 pandemic.

“Orders from our existing customers are showing healthy rebound by comparison to the preceding quarter. In fact, in addition to existing models, we will also be producing several new models that our customers are rolling out in 2021.

“Against this encouraging backdrop, we expect the strong order flow to sustain in the near future. With this, the Group’s existing capacity is projected to be fully filled by 2021. In preparation for future expansion, we plan to increase our capacity by acquiring new plants,” managing director Datuk SY Gan said in a statemen today.

For the full year, VS Industry registered a revenue of RM3.24 billion in FY20, a decline of 18.5 per cent YoY.

In-line with the lower turnover, net profit slipped 29.9 per cent yoy to RM115.9 million in FY20.

The top and bottom-line decrease was attributed to the temporary closure of factories following the Movement Control

Order (MCO) that was imposed in addition to lower orders from a key customer.

On a brighter note, loss before tax (LBT) from China narrowed substantially to RM23.9 million in FY20 as compared to RM83.0 million in FY19.

The improvement primarily stemmed from the restructuring and streamlining of operations and by adopting an asset-light model with lower gearing structure.

The VS Industry board has declared an interim dividend of 0.8 sen per share for the quarter under review.

It has also proposed a final dividend of another 0.8 sen, subject to shareholders’ approval at the upcoming annual general meeting.

Total dividend per share for the current financial year amounts to 2.6 sen, representing a 41.5 per cent payout based FY20 earnings per share of 6.27 sen.

The Group has a dividend policy of 40 per cent payout of net profit.

Gan said the US-China trade tension continues to open up opportunities for the company.

“To recap, we managed to clinch another new customer, Victory Innovations, from the US in August 2020 to produce cordless electrostatic sprayers on box-build assembly basis.

“There is a substantial spike in demand for these sprayers for disinfection purpose, which is expected to last in the foreseeable future due to the need to disinfect surfaces in the current pandemic situation.

“This certainly bodes well for us at VS Industry as a key supplier to Victory Innovations. The addition of Victory Innovations is yet another testament to the group’s capability and track record. Meanwhile, the discussions with prospective customers remain ongoing,” he said.

Gan further said given the strong performance in the current quarter and the abovementioned progressive developments, the board opines that the group’s performance in the coming financial year to be better, underpinned by the rebound in global and local economies.

“All in all, the group’s prospects remain bright under the stewardship of the experienced Board and management team that is further backed by a strong balance sheet.” Gan said.

Source: NST