Leon Fuat Reports Resilience Q2FY2024 Results With RM4.74 Million in PBT Amidst Market Uncertainties

Group’s Focus on Navigating Challenging Market Conditions while Maintaining Operational Efficiencies

SHAH ALAM, 28 AUGUST 2024 – LEON FUAT BERHAD (“Leon Fuat” or the “Group”), a manufacturer and trader of steel products specialising in rolled long and flat steel, today announced the Group’s financial performance for the second quarter ended 30 June 2024 (“Q2FY2024”) with a satisfactory revenue and profit before tax (“PBT”) of RM4.74 million, reflecting its efforts to maintain resilience in a challenging economic environment.

For Q2FY2024, Leon Fuat recorded a revenue of RM227.00 million, representing an increase of 4.4% from RM217.42 million in the corresponding quarter of the previous financial year (“Q2FY2023”). This growth in revenue was primarily driven by an increase in both the trading and processing segments of steel products, which saw rises of 3.7% and 4.7% respectively. The growth in revenue was mainly attributed to higher tonnage sales in certain steel products, despite a reduction in average selling prices.

However, despite the increase in revenue, the Group’s gross profit for Q2FY2024 decreased by 29.0% to RM21.07 million, down from RM29.66 million in Q2FY2023. The significant decline in gross profit was due to the fluctuation in the overall gross profit margin, which fell by approximately 4.3 percentage points, from 13.6% in Q2FY2023 to 9.3% in the current quarter.

The Group's PBT saw a decrease of 70.5% to RM4.74 million, compared to RM16.09 million in the same period of the last financial year. The decline in PBT was exacerbated by several factors, including the lower gross profit, increased operating costs, and higher finance costs. Specifically, the Group experienced a 14.9% increase in finance costs due to higher interest expenses related to the higher utilisation of credit facilities and the increase in interest rates and profit charges for Islamic financing, following the rise in the Overnight Policy Rate by Bank Negara Malaysia in May 2023.

In comparison with the immediate preceding quarter (“Q1FY2024”), Leon Fuat's revenue in Q2FY2024 increased marginally by 0.8% from RM225.26 million to RM227.00 million. However, gross profit decreased by 23.4% from RM27.52 million to RM21.07 million, and PBT dropped by 56.3% from RM10.85 million to RM4.74 million. The reduction in profitability was primarily due to a decline in gross profit margins, reflecting the continued pressure on pricing amidst a competitive market.

Calvin Ooi Shang How, Executive Director of Leon Fuat commented, “The second quarter of FY2024 has been challenging, with market conditions exerting pressure on our profit margins despite an increase in revenue. The decline in our gross profit and PBT is largely attributable to the continued volatility in steel prices, increased cost pressures, and competitive market dynamics. We remain committed to enhancing our operational efficiencies and carefully managing costs to navigate these challenges. Our focus continues to be on strategic initiatives that will sustain our business in the long term.”

He added, “We will continue to monitor the fluctuations in steel prices and foreign currency exchange rates closely, taking necessary measures to mitigate potential risks. Our approach includes prudent inventory management and strategic contract negotiations to safeguard the Group’s profitability.”

As at 28 August 2024, the share price of Leon Fuat is RM0.52, representing a market capitalisation of RM177.30 million.