KUALA LUMPUR (Nov 11): Xin Hwa Holdings Bhd (KL:XINHWA) said a three-month suspension of its cargo transport unit's licence is expected to impact about 4% to 5% of the group's annual revenue, with losses estimated at around 21% — being the gross profit that it would have made from the affected revenue.
The unit, Xin Hwa Trading & Transport Sdn Bhd (XHTT), is a major subsidiary, Xin Hwa said in a bourse filing on Monday in response to queries from Bursa Malaysia. Last week, Xin Hwa announced that XHTT's licence had been suspended by the Johor Bahru Land Public Transport Agency (Apad) due to its failure to comply with safety requirements.
"By making reference to the financial performance of September 2024, the adverse financial impact arising from the suspension is estimated at 15% to 20% of the group’s revenue (monthly basis). In the event the suspension period remains at three months, the adverse impact on the group’s revenue throughout the entire financial year would be in the region of 4% to 5%.
"The expected losses are estimated to be about 21% (being the gross profit margin taken from the Audited Financial Statements for the financial year ended March 31, 2024) of the affected revenue," Xin Hwa said.
In the meantime, the company said it is arranging vehicles registered under other subsidiaries to fulfil urgent deliveries for XHTT, while outsourcing some of the services to competent third-party transporters.
"A formal written appeal has been submitted to Apad on Nov 6, 2024, with the supporting facts that the compliance issues raised by Apad have since been solved. In the appeal, the company has requested for the suspension to [be] lifted as soon as possible in order for the operations of XHTT to be resumed," it added.
Xin Hwa added that its board is "optimistic" of getting a positive reply from Apad.
Xin Hwa recorded a net profit of RM773,000 for the first quarter ended June 30, 2024 (1QFY2025), compared to RM3.92 million in the same period a year earlier, contributed by the land transport segment and gain on the disposal of property, plant and equipment. Revenue for the first quarter dropped to RM33.3 million from RM37.1 million, primarily due to the completion of contracts in the manufacturing and fabrication of trailers division.
Prior to the latest earnings, Xin Hwa had been in the red for eight consecutive quarters.
At the time of writing, Xin Hwa shares were trading down half a sen or 2.94% at 16.5 sen, giving it a market capitalisation of RM42.18 million.