SINGAPORE (May 8): Mun Siong Engineering reported a loss of $0.5 million for 1Q18 compared to $0.1 million in earnings a year ago, due to a significant decline in quarterly revenue and compressed profit margins.
Revenue fell 36.7% to $13.5 million from $21.4 million previously due to lower sales, which resulted from the group’s management adopting “careful stances towards acceptance of new jobs” in view of prevailing market conditions and to preserve profitability.
This was due to plants and facilities owners reducing their capital expenditure – an ongoing trend since mid-2017 – which led to a significant reduction in jobs in the market, says Mun Siong, such that many service providers including the group’s competitors becoming willing to accept jobs at significantly lower profit margin to maintain their workforce.
Mun Siong adds that the sharp revenue decline has made it such that the group has been unable to cover a significant portion of its fixed operating expenses.
In tandem with the reduced revenue, cost of sales nearly halved to $12.9 million from $20.1 million a year ago.
Gross profit margin for the group fell to 5.1% for the latest quarter from 6.1% in 1Q17.
In its outlook, Mun Siong says its management believes the current depressed market conditions will continue into FY18 although its business partners are currently in preliminary discussions with service providers, such as the group, on possible new projects where work is likely to commence in late-2019 or early 2020 if they are to materialise.
However, these potential projects may be deferred if global financial markets or commodity markets were to turn negative, cautions Mun Siong.
Shares in the group closed flat at 6.6 cents on Tuesday.
