KUALA LUMPUR (Dec 3): VS Industry Bhd’s latest quarterly net profit dropped 37.53%, mainly due to lower sales orders from existing customers, unfavourable foreign exchange (forex) rates and higher labour costs as a result of an increase in headcount.

Net profit for the first quarter ended Oct 31, 2024 (1QFY2025), stood at RM30.6 million or 0.79 sen per share, compared with RM48.98 million or 1.27 sen per share in the same period a year earlier. Revenue slipped 2.58% to RM1.11 billion from RM1.14 billion in 1QFY2024. 

The group declared its first interim dividend of 0.4 sen per share, payable on Dec 31.

In a bourse filing, VS Industry said its Malaysian operation recorded a net forex loss of RM2.7 million for the quarter under review, compared to a gain of RM8.5 million in the previous period. Profit before tax tumbled 43.13% to RM37.26 million from RM65.52 million while revenue slipped slightly to RM801.55 million from RM802.2 million. 

The Singapore segment, which serves as the marketing arm for Malaysia operations, reported a lower profit before tax of RM960,000 — a 58.19% decline from RM2.3 million registered a year earlier — as revenue fell 24.82% to RM198.18 million from RM263.62 million due to a decrease in orders delivered.

However, the lower earnings were offset by higher contributions from the Indonesia segment, which posted a profit before tax of RM5.7 million compared to a loss before tax of RM1.5 million in the corresponding quarter of the previous year. Revenue for the Indonesia segment also surged 49.2% to RM111.1 million from RM74.46 million, driven by strong customer orders.

Compared to 4QFY2024, the group’s net profit shrank 75.84% from a record high of RM126.66 million as the preceding quarter included a one-off, non-cash accounting gain of RM50.5 million from the discontinued operation following the partial divestment of the group’s equity interest in VS International Group Ltd to 33.66%. 

Revenue decreased 8.45% from RM1.21 billion in 4QFY2024.

On prospects, VS Industry managing director Datuk SY Gan noted that the global macroeconomic environment continues to improve, with the second interest rate cut in the US in November providing further stimulus to businesses and boosting consumer sentiment.

For its Malaysian operations, he said sales orders remain strong and are trending upward, supported by recovering demand and new model launches from key customers.

“In addition, we have also secured another two new models from a key customer, which are slated for production commencement in February/March 2025,” he said in a statement. 

In the Philippines, Gan said renovation work on its newly established facility under VS Industry Philippines Inc is progressing as planned, with completion expected within the next two months.

“Thereafter, test runs shall commence with two product models that are already confirmed for production,” he said. 

VS Industry has adopted an asset-light strategy in the country, which involves renting factory space to enable swifter setup time, optimise capital expenditure and maintain agility in addressing market demand. Its enhanced vertical integration capabilities enable the group to explore additional collaboration with its existing key customers, ensuring continued growth and value creation. 

“Barring unforeseen circumstances, and premised on the abovementioned developments, the board remains positive about the group's outlook and financial performance in the current fiscal year,” Gan added. 

Shares of VS Industry, which have risen over 45% year to date, closed unchanged at RM1.06. This gives the electronic manufacturing services provider a market capitalisation of RM4.1 billion.