SINGAPORE (Nov 12): Halcyon Agri Corporation reported earnings of US$1.7 million ($2.3 million) for the 3Q ended Sept, down 75.8% from restated 3Q17 earnings of $7.2 million due to lower margins and higher costs.
In particular, the group’s Global Tyre Majors segment continues to experience margin compression as a result of low rubber prices, which limits the supply of raw materials to its factories. This was however partially offset in part by a higher distribution margin from the Global Non-Tyre and Specialty Tyre segment.
The overall y-o-y decline in group profit came despite 7.6% higher 3Q revenue of US$552.9 million as compared to revenue of US$513.8 million a year ago, driven by a 17.2% growth in total sales volume to 374.4 metric tonnes (mT) from 319.3 mT in 3Q17.
Revenue per tonne was notably lower in US$1,477 compared to US$1,609 in the previous year, which Halcyon says is in line with the movement of natural rubber market prices during these periods.
This resulted in a lower gross profit per tonne of US$87 versus US$128 in 3Q17, leading to a 20.4% fall in group gross profit to US$32.5 million from US$40.9 million previously.
Due to the increase in volume, cost of sales for 3Q18 rose by 10% to US$520.4 million from US$472.9 million a year ago.
Finance costs grew 17% to US$8.6 million from US$7.4 million previously on higher working capital loans, as a result of interest rate hikes and higher utilisation of banking facilities to support new acquisitions.
Robert Meyer, executive director and CEO of Halcyon Agri, says the group is on track to launch its digital marketplace HeveaConnect to address the current pricing model’s structural deficiencies by offering producers and consumers prices in accordance with sustainability criteria.
“With regards to segmental performance, the Corrie MacColl Group generated a 110% jump in gross profit compared to Q3 in 2017,” says Meyer.
“The strategic decision to carve out the Global NonTyre and Specialty Tyre segment has reached its first milestone and will continue to be a key focus of corporate development in the quarters to come, and further illustrates that the strategic move from commodity pricing to industrial pricing is the way to go,” he adds.
As at 11.39am, shares in Halcyon Agri are trading 1 cent lower at 46 cents.