SINGAPORE (Nov 13): Sapphire Corporation, the railway infrastructure engineering firm, has announced earnings of RMB17.6 million ($3.6 million) for the 3Q ended Sept, a 31.1% improvement from RMB13.4 million a year ago on higher revenue.

Revenue for the quarter grew 22.6% to RMB369.5 million from RMB301.4 million previously on the completion of its subsidiary Ranken Infrastructure Limited’s site preparation works and commencement of the construction phase of several recently secured projects, in addition to a higher number of ongoing projects in China.

As such, gross profit grew 34% to RMB53 million while gross profit margin was 14.4% compared to 13.1% in 3Q16.

Over the quarter, other income rose to a total of RMB5.7 million from RMB3.3 million previously due to a foreign exchange (forex) gain from the reversal of translation differences, offset in part by lower government grants during the period under review.

Administrative expenses rose 57% to RMB 19.3 million on Ranken’s higher staff costs and professional fees incurred for new projects secured, while other expenses fell by 30.6%  to RMB2 million due to lower loss on disposal of equipment compared to the previous year.

In its outlook, Sapphire says that some forms of competitive pressure can be expected from state-owned enterprises going forward, and emphasises that it is of operational importance for Ranken to gain efficiency and scale in order to sustain margins.

In order to improve Ranken’s ability in bidding for larger-scale projects, the group says it will require large strategic partners in China.

Separately, the group has announced that its board of directors intends to voluntarily step down to facilitate a board renewal upon the completion of a proposed acquisition of a 27.97%-stake in the company by Hong Kong International Construction Investment Management Group (HKICIM).

Two of its largest shareholders, Ou Rui and Best Feast, will be swapping their stakes with the Hong Kong listed HKICIM as part of the share-swap deal, which Sapphire believes will open more doors for Ranken in China.

In a press release on Monday, Sapphire’s chairman and independent director Steven Lim says that most of his fellow directors, including himself, intend to step down to facilitate the board transition upon completion of the share-swap deal – which he believes will augur a new era of growth for Sapphire as it sharpens its focus on China’s infrastructure sector.

“A strong corporate foundation has been laid for Sapphire and its core business is now supported by Ranken’s full-fledged engineering team. I believe the new board leadership will help us to expand our business networks in China; and in a meaningful way,” adds Teh Wing Kwan, who was appointed group CEO and managing director in 2013.

The group says it will announce the new compositions of the board and related committees in due course.  

Shares in Sapphire closed 1.6% lower at 32 cents on Monday.