CEO Morning Brief

Dufu Technology Warns of Lower FY2023 Earnings Amid Slow Demand; Declares 1.5 Sen Dividend

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Publish date: Wed, 02 Aug 2023, 08:41 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Aug 1): Dufu Technology Corp Bhd, which saw second-quarter net profit fall 88.7% year-on-year (y-o-y), has warned that the group's financial performance for the full year ending Dec 31, 2023 (FY2023) is expected to be "considerably lower" compared with FY2022, given reduced demand from customers, challenging operating conditions and uncertain market circumstances.

In a bourse filing on Tuesday (Aug 1), the precision machining parts and components manufacturer said a decline in consumer spending, coupled with rising interest rates and persistent inflationary pressures, has led to reduced capital expenditures by enterprises and cloud providers.

"Consequently, the demand for large-capacity hard disk drives (HDD) and other semiconductor-related fabrication equipment have been negatively impacted. Additionally, in Malaysia, the group's profitability will be further affected by the increased energy costs resulting from electricity tariff adjustments through the imbalance cost pass-through mechanism," it added.

"Looking ahead in the long term, we anticipate digital storage devices to grow in sync with the strong demand from the cloud data centre market, driven by the relentless growth of data. HDD storage devices are expected to remain the most cost-effective solution for storing large volumes of data."

Considering the ongoing customer inventory correction in the HDD business, Dufu anticipates that the potential of a demand recovery will only commence at the beginning of 2024.

On its part, it remains committed to streamlining its business structure, enhancing its processes and optimising operations.

In the second quarter ended June 30, 2023 (2QFY2023), Dufu posted a net profit of RM3.32 million compared with RM29.26 million in 2QFY2022, on lower revenue given the decrease in revenue in HDD components as well as higher operating costs incurred.

As a result, its earnings per share declined to 0.6 sen in 2QFY2023, from 5.5 sen in 2QFY2022.

Quarterly revenue fell 48.1% y-o-y to RM47.65 million — its weakest in nearly six years since 3QFY2017 when it posted a revenue of RM43.53 million.

Despite the weak quarterly performance, Dufu declared an interim dividend of 1.5 sen per share for FY2023, payable on Sept 22.

For 1HFY2023, the group's net profit shrank 70.2% to RM14.2 million from RM47.58 million a year earlier, on the back of a 31.6% decline in revenue to RM121.84 million from RM178.11 million in 1HFY2022.

Shares in Dufu closed unchanged at RM1.90 on Tuesday, giving the group a market capitalisation of RM1.03 billion.

Source: TheEdge - 2 Aug 2023

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