KUALA LUMPUR (Aug 21): Cape EMS Bhd’s (KL:CEB) net profit shrank 42.6% to RM8.7 million in the second quarter ended June 30, 2024 (2QFY2024) from RM15.16 million a year ago, despite higher revenue of RM166.57 million versus RM121.78 million previously.

The electronics manufacturing services provider, whose share price plummeted nearly 60% within a month to an all-time low, attributed the large earnings contraction to narrower gross profit margin, due to the exclusion of sales from thermal energy devices and increase in freight costs.

The sharp fall in the quarterly profit was also dragged by higher administrative expenses, which more than doubled to RM10.75 million in 2QFY2024 against RM4.92 million a year ago, according to the company’s filing to Bursa Malaysia.

Furthermore, Cape EMS also booked an impairment loss on trade receivables of RM2.2 million. The company also blamed the strengthening of the ringgit against the greenback for lower earnings.

Earnings per share came in lower at 0.88 sen in 2QFY2024, from 1.64 sen in 2QFY2023.

Quarterly revenue, which climbed to RM166.57 million — the highest since it was listed in March 2023, was driven by increasing demand for its services and stronger contributions from both industrial and consumer electronic products under the electronics manufacturing services segment as well as the newly acquired subsidiary.

It did not declare any dividend for the quarter under review.

For the first half of FY2024 (1HFY2024), its net profit dropped 6.57% to RM22.11 million, from RM23.66 million a year earlier, while revenue rose 23.9% to RM321.05 million, from RM259.13 million.

Looking ahead, its managing director cum group chief executive director Christina Tee Kim Chin said the group remains vigilant and prudent in managing its operations as it navigates a challenging global landscape characterised by factors beyond its control, including the ongoing US-China trade tensions, global geopolitical conflicts, the Red Sea shipping crisis, and the weakening US dollar.

Tee has trimmed her stake in the company from 38.05% (377.50 million shares) as at July 29 to 11.13% (110.38 million shares) on Aug 9, having sold over 260 million shares within the period.

As at June 30, 2024, Cape EMS’ balance sheet remained fundamentally strong with cash and cash equivalents of RM162.2 million, a low net gearing ratio of 0.03 times and net assets per share of 48 sen.

Cape EMS shares closed 2.5 sen or 6.25% higher to 42.5 sen, bringing the group a market capitalisation of RM421.6 million. Year-to-date the stock has fallen 59.9%.