KUALA LUMPUR (Nov 19): Dutch Lady Milk Industries Bhd (KL:DLADY) reported a marginal 2.5% increase in its third quarter net profit to RM17.22 million from RM16.79 million a year ago, despite a drop in revenue, thanks to lower tax expenses following a positive correction on costs that were initially disallowed for tax deduction.

Operating profit for the quarter ended Sept 30, 2024 (3QFY2024), however, dropped 16.5% to RM21.83 million from RM26.14 million in 3QFY2023, dragged by lower revenue and products mix, negative foreign exchanges, accelerated depreciation of assets tied to its Petaling Jaya facility, which ceased operations in 3QFY2024, and one-off costs related to the transition to its new Bandar Enstek facility, its bourse filing on Tuesday showed.

Excluding these adjustments, the group said its adjusted operating profit amounted to RM35 million, down 21.2% from 3QFY2023, driven primarily by the lower sales and a less profitable product mix. Even though raw material costs were lower, this was offset by the fast and strong appreciation of the ringgit against the US dollar, which impacted its currency hedges.

Revenue for the quarter fell 4.6% to RM355.45 million from RM372.78 million a year ago, as the group’s transition into the new factory in Bandar Enstek temporarily impacted the availability of products for sales, while promotional campaigns drove sales higher in the same period last year.

“The availability of Dutch Lady’s core product range on shelves for consumers was not impacted. As part of the transition Dutch Lady discontinued the production and distribution of some of our non-core Dutch Lady range of products,” the group said.

The group declared a second interim dividend of 25 sen per share, bringing its full-year dividend for FY2024 to 50 sen per share — the same as last year.

For the first nine months ended Sept 30 (9MFY2024), the group’s net profit rose 33% to RM65.92 million from RM49.57 million, while revenue was largely unchanged at RM1.079 billion versus RM1.078 billion.

On prospects, Dutch Lady said it will continue to focus on optimising costs and cash flow and is implementing a fit-for-purpose organisation. It is also employing cash generated from its operations and working capital to fund the investments into the new production and distribution facility at Bandar Enstek.

“In the event of a shortfall in working capital, the company has sufficient committed undrawn overdraft facilities and an intercompany credit facility that can be utilised,” it added.

Dutch Lady managing director Ramjeet Kaur Virik said the strategic expansion is a pivotal move that not only facilitates Dutch Lady's continued growth but opens new opportunities to solidify its position as the leader in the Malaysian dairy industry. “The outlook for Dutch Lady remains cautiously optimistic due to the strength of our brands, and the increasing need for and recognition of the goodness and nutritional value of milk amongst Malaysians,” she said.

Shares in Dutch Lady closed six sen or 0.2% higher at RM30.06, giving it a market capitalisation of RM1.92 billion. Year-to-date, the stock has risen 29.8%.