Sern Kou Resources Berhad (SERNKOU, 7180), engaged in the timber processing and furniture industry, recently announced impressive financial results, surpassing RM100.00 million in revenue once again. Without further ado, let's delve into the latest financial performance of SERNKOU.

Revenue Comparison (YoY +41.29%, QoQ -14.28%)

For the second quarter ending on December 31, 2023, the company's revenue stood at approximately RM117.55 million, marking an increase of around 41.29% compared to the RM83.19 million recorded in the same period last year. According to the quarterly report, this revenue growth is primarily attributed to a surge in demand for tropical wood, propelling the revenue growth in the timber processing and trading segment.

Out of the RM117.55 million in revenue, approximately RM106.64 million is derived from timber processing and trading, reflecting a YoY increase of about 43.22%. The remaining revenue of approximately RM10.91 million comes from furniture manufacturing and trading, experiencing a YoY growth of approximately 24.89%.

However, compared to the previous quarter, the company's revenue decreased by about RM19.58 million or 14.28%, mainly due to a decline in demand for Tropical Wood and furniture.

Net Profit Comparison (YoY +104.36%, QoQ +193.87%)

In contrast to the net loss reported in the same period last year (Q2 FY23), the company exhibited a significant turnaround, achieving a net profit growth of approximately 104.46% to around RM0.28 million in this quarter. This turnaround was influenced by a fire incident at the furniture factory in Muar, Johor during Q2 FY23, resulting in a recorded loss of approximately RM5.84 million in inventory and fixed assets.

Fortunately, on December 21, 2023, the company received a second partial compensation from the insurance company, amounting to RM0.40 million. As a result, the net profit for this quarter increased by approximately RM0.19 million or 193.97% on a QoQ basis.

Regarding insurance compensation, the quarterly report for Q4 FY23 mentioned a total fire compensation of approximately RM10.04 million, and the company had already received about RM7.79 million in insurance compensation during Q4 FY23. Through calculations, the company is expected to receive approximately RM1.85 million in remaining insurance compensation in the upcoming quarters.

Outlook

Factors such as rising raw material costs, increased US interest rates, decreased furniture demand, higher debt levels, and reduced profit margins across all product lines are anticipated to impact SERNKOU's financial performance negatively.

Despite facing multifaceted challenges, the company is committed to implementing various strategies, focusing on increasing revenue and improving operational efficiency. Additionally, the implementation of automation and the execution of cost control measures are in the pipeline. Therefore, the management maintains an optimistic outlook on the company's long-term business prospects.

So, dear readers, are you excited about SERNKOU's future prospects?

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Disclaimer: The above is purely for educational purposes and reflects personal opinions. It does not constitute any buying or selling recommendations.

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