SINGAPORE (Apr 25): Memtech International, the components solution provider, reported a 16.3% y-o-y decline in 1Q18 earnings to US$1.3 million ($1.7 million) on lower margins and bigger forex losses.
For the 1Q18 ended March, revenue rose 14.2% to US$41.6 million, driven by growth in the group’s Automotive and Industrial & Medical segments.
The group’s Automotive segment, which accounted for 54.3% of total revenue, increased 25.5% y-o-y to US$22.6 million.
Similarly, the Industrial & Medical segment more than doubled to US$3.7 million driven by the launch of new products going into mass production.
Conversely, the group’s Consumer Electronics segment declined 5.3% y-o-y to US$11.4 million as the group shift its focus towards the production of high-margin, complex engineering parts.
There was also lower demand from certain customers as they refresh product lines transitioning to newer models and new products.
Gross profit declined 8.2% y-o-y to US$6.1 million mainly attributed to more pronounced labour shortage, reduced labour efficiency and lower manufacturing yield.
The lower manufacturing yield was the result of the allocation of resources for a key customer as the group undergoes the preparation phase of testing and small batch production for an expected mass production in 2H18.
Correspondingly, the group’s gross profit margin declined from 18.1% to 14.5%.
The group also reported foreign exchange losses amounting to US$0.5 million due to the depreciation of the US Dollar against the Chinese Renminbi.
Excluding the impact of foreign exchange losses amounting US$0.5 million, the group’s earnings would be comparable to 1Q17.
The group says its resilient balance sheet remained healthy with cash and cash equivalents of US$33.8 million as at March 31. After factoring total borrowings amounting US$4.9 million, the group’s net cash position stood at US$28.9 million.
Despite the potential headwinds in a challenging business environment, Executive Chairman Chuang Wen Fu says the group remains cautiously optimistic on its outlook.
Shares in Memtech closed 2 cents lower at $1.37 on Wednesday.