KUALA LUMPUR (Aug 9): KKB Engineering Bhd reported a pre-tax loss of RM9.2 million in the second financial quarter ended June 30, 2017 (2QFY17), compared with a pre-tax profit of RM345,000 a year ago, due to profit margin erosion.

In a filing with Bursa today, KKB said that its RM9.2 million loss in its second quarter was due to the highly competitive environment, coupled with escalation of costs due to the weakening of the ringgit, volatility of global raw material prices and direct overhead costs, mainly in the Steel Fabrication division. These had led to a reduction in profit margins.

With that, KKB registered a cumulative pre-tax loss of RM10.7 million for the first half of the year compared with RM2.3 million of H1FY16.

Meanwhile, the group’s 2QFY17 revenue of RM46.9 million surged 72.4% year-on-year from RM27.2 million for 2QFY16, mainly attributed to higher revenue recognition from the Group's civil construction division.

KKB's engineering sector revenue expanded 78.8% to contribute a significant RM42.2 million for the quarter under review, while RM4.6 million came from its manufacturing sector, which recorded a 27.8% rise.

This brought its six-month accumulative revenue to RM89.8 million, an 82.2% increase from the RM49.3 million recorded in 1HFY16.

For its engineering sector, the group said revenue from its steel fabrication division slipped by 35.2% over the preceding year's corresponding quarter to RM14.7 million, while Hot-Dip Galvanising (HDG) sales remained fairly consistent at RM850,000.

Over at its civil construction division, quarterly revenue generated amounted to RM26.7 million which was solely derived from the development and upgrading of the Proposed Pan Borneo Highway in Sarawak (Phase 1 Works Package Contract – WPC-09) that commenced during the final quarter of last financial year.

As for its manufacturing sector, KKB Engineering said that both its Steel Pipes and Liquified Petroleum Gas (LPG) Cylinders manufacturing divisions enjoyed improved sales in the quarter under review, thanks to customers such as Petron Malaysia Refining & Marketing Bhd, Boustead Petroleum Marketing Sdn Bhd, Mygaz Sdn Bhd, CMS Infra Trading Sdn Bhd and other ad-hoc customers.

Moving forward, the group is cautious that its engineering sector might be impacted by weak crude oil prices, as major oil companies in Malaysia cut capital expenditure on field developments substantially, resulting in the slow-down of both upstream and downstream industries.

The group aims to bid for new contracts, particularly government infrastructure jobs when the opportunity arises, and continues to seek new strategic and potential business opportunities in Major Onshore Fabrication, in collaboration with OceanMight Sdn Bhd and other strategic partner(s).