An update on Able Global Berhad’s (“Ableglob”) (formerly known as Johore Tin Berhad)’s latest quarter (3Q2021) results for the period 1 July to 30 September 2021. Our first article on Ableglob was published on 7 December 2020.
1. The Group’s core segment i.e. the F&B segment was impacted in 9M2021 due to reduced sales and increase in the cost of production. The market’s resistance to a full selling price increase caused the dilution of the segment’s margin.
2. In the latest quarter announcement, Management indicated plans to pass down the increase in cost of production to its end customers. We view this as potential good news to the Group if they manage to pass down the costs.
3. In our view, key risks to the Group remain with the uncertainty of the new Covid-19 variant and the loss-making operations of the Mexico JV. We expect FY2022 to be another rough year for the Group given the two key risks mentioned above.
Compared to the preceding quarter, Ableglob’s revenue and gross profit (and margin) were consistent with a stable contribution from both its tin manufacturing (“Tin”) and food & beverage (“F&B”) segments.
However, net profit fell by RM2.6m / 23% during the quarter due to RM1.6mil loss of equity in its Mexico joint venture. The additional RM1mil loss was caused by a reduction in production output following the Government enforced Enhanced Movement Control Order (“EMCO”) in July which led to several weeks of factory shut down.
During the quarter, the Tin segment was resilient with slight growth in terms of Revenue and PBT, however, was insufficient to compensate for the drop in F&B segment results.
For 9M2021, revenue from the Tin segment increased by RM11.5m to RM93.7m contributed from the effect of selling prices adjustment on tin cans. Profit before tax (“PBT”) increased by RM7.2m to RM18.10m. The previous year’s result was lower due to lower demand across all industries caused by the initial outbreak of Covid-19.
For the F&B segment, revenue decreased by RM23.3m to RM258.5m mainly caused by a reduction in production output during the several periods of MCOs. PBT decreased by RM9.7m to RM23.0m partly due to the increasing cost of production. The market’s resistance to a full selling price increase resulted in dilution of the F&B segment’s margin.
In the latest quarter report, the management has mentioned that:
“…we are constantly highlighting to buyers about the increase in commodity prices and the market is beginning to accept the inevitable passing down of the costs as other manufacturers are also pushing the cost increases to buyers…”
A piece of potentially good news is if the Group manages to pass down costs to its buyers.
With reference to Ableglob’s latest results, we have revised our projection of the Group’s FY2022 full-year results accordingly.
In our view, key risks to the Group remain with the uncertainty of the new Covid-19 variant and the loss-making operations of the Mexico JV. We expect FY2022 to be another rough year for the Group given the two key risks mentioned above.
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