KUALA LUMPUR (Dec 14): Hiap Teck Venture Bhd slipped back into the red with a net loss of RM9.43 million or 0.54 sen per share for its first quarter ended Oct 31, 2023 (1QFY2024), after three consecutive profitable quarters, as its bottomline was dragged by its share of losses from a joint venture entity.

Revenue also shrank to RM407.5 million on lower sales volumes due to sluggish market demand for steel products, from the RM453.79 million it recorded in the immediate preceding quarter of 4QFY2023 — when the group made a net profit of RM42.6 million.

The group recorded a loss of RM16.61 million from its equity-accounted investees in 1QFY2024, as opposed to a profit of RM17.13 million in 4QFY2023, its bourse filing showed.

The group said its profitability from operations decreased by 48.22% to RM13.28 million in the current quarter, from RM25.65 million in the immediate preceding quarter, due to lower revenue and lower margin.

Nevertheless, compared to the corresponding 1QFY2023, the group has narrowed its net loss from RM49.14 million, with revenue improving from RM397.83 million, and cost of sales dropping to RM387.11 million from RM434.93 million.

On prospects, the group said it is exercising caution regarding the current business landscape, which included fluctuations in steel prices, uncertainties in financial markets, and geopolitical tensions.

"Management will persist in implementing prudent procurement strategies and effective inventory management to enhance financial performance and maintain a robust balance sheet, ensuring vigilance and adept navigation during challenging periods," it said.

It added that steel production capacity expansion, coupled with the ongoing development of auxiliary facilities, is poised to generate a substantial increase in revenue from its JV entity, Eastern Steel Sdn Bhd (ESSB). It is also expecting notable cost savings from greater economies of scale.

"The recent capital injection, announced on Dec 6, 2023, aimed at strengthening the JV entity's capital base, will be deployed for capital expenditure, including the construction of a 1450mm Hot Rolling Mill, and meeting working capital requirements," it added.

Hiap Teck had announced that it planned to fork out RM53.24 million to take up its share of ESSB's RM195 million rights issue, to fund its capital expenditure.

Hiap Teck owns 27.3% in ESSB. The other JV partners are: Shanxi Jianlong Industry Co Ltd with a 68.8% stake in the JV and Chinaco Investment Pte Ltd (3.9%).

Barring unforeseen circumstances, the group anticipates significant future contributions and positive outcomes from ESSB.

Shares in Hiap Teck settled one sen or 2.35% lower at 42 sen on Thursday, giving it a market capitalisation of RM725.3 million.