PETALING JAYA (Feb 21): Kobay Technology Bhd, which manufactures precision parts, said on Wednesday its net profit plunged 66% in the second quarter from a year earlier due to a shift towards lower margin sales, subdued demand, and elevated setup costs.

Net profit for the three months ended Dec 31 was RM3.07 million, or 0.96 sen per share, compared with RM9.03 million over the same period last year, Kobay said in an exchange filing. Revenue for the quarter slipped 6% year-on-year to RM77.25 million from RM82.15 million.

“While remaining vigilant, management acknowledges the challenges posed by increasing costs and the looming possibility of a recession in 2024,” Kobay said.

The company didn’t declare any dividend for the quarter.

At its mainstay manufacturing segment, Kobay said the “slowly rebounding momentum” will lead to higher sales compared with the previous financial year. “The division will strategically broaden its client portfolio by entering the renewable energy sector,” the company said.

Kobay said it has a “positive view” of its property business amid rising tourist arrivals but flagged escalating expenses of building materials and the surge in borrowing costs. In response, the company said it will “judiciously time new product launches in accordance with prevailing market dynamics.”

On its pharmaceutical business, the company said it is also concerned about rising raw material costs and a surge in borrowing expenses. Nevertheless, the company still has a “positive outlook” on the business amid strong demand for healthcare and wellness products, it added.

For its first half, net profit plummeted 76% to RM4.6 million from RM19.55 million over the same six-month a year earlier. Revenue for the June-December period declined 13% to RM150.01 million versus RM171.59 million in the preceding year’s corresponding period.