KUALA LUMPUR: TAN CHONG MOTOR HOLDINGS BHD [] recorded a 43.3% increase in net profit of RM49.34 million for the third quarter ended Sept 30, 2010 from RM34.43 million a year ago but it was more cautious in the remaining part of the year.

It said on Friday, Nov 19 revenue rose 16.8% to RM871.59 million from RM745.76 million. Earnings per share were 7.56 sen compared with 5.27 sen a year ago. Net asset per share was RM2.50.

Tan Chong said the overall nine-month results pointed to a more cautious second half of 2010. This was despite net profit of RM177.67 million, up 60.6% from RM110.6 million. Revenue was RM2.67 billion, an increase of 24.9% from RM2.13 billion.

"There has been a slowdown in 3Q compared to the first six months. To counter this, we started to invest in more advertising and promotion as well as marketing  support activities to build up for the launch of the all-new Nissan Teana before Christmas," it said.

Reviewing its third quarter results, Tan Chong said the period saw a pause in momentum, adding that the July-August sales hit a soft patch and September was a short month with Hari Raya holidays.

It said earnings before interest and tax margins fell from 10.5% in Q2 2010 to 8.3% in Q3 due to negative operating leverage as a result of slower revenue and a higher cost base.

"Gross margins remained intact due to a favourable foreign exchange rate on imports. However, operating expenses were higher than budget on the back of increased advertising and promotion costs taken up for the Raya promotion and Teana pre-launch events.

"The timing difference in expenditure incurred upfront before the start of actual sales is necessary to build a flagship model in the high end D-segment. We  should be reaping the rewards of this investment soon," it said.

On its prospects for the remainder of the year, Tan Chong said whilst the data pointed toward a much more cautious conclusion about the growth of the Malaysian economy, the preconditions for a pick up in 4Q appeared in place.

"We have a strong product pipeline to help support sales and guard against a loss of market share. The ringgit has strengthened from RM3.425 against the US dollar at the start of the year to around the RM3.12 level currently. These structural trends are accommodative for continued growth for the rest of the year," it said.