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UMS posts 4% dip in 4Q earnings to $9.2 mil as lower margins offset surge in revenue

Uma Devi
Uma Devi • 3 min read
UMS posts 4% dip in 4Q earnings to $9.2 mil as lower margins offset surge in revenue
The shift to a product mix with higher concentration in semiconductor system integrated sales had resulted in lower margins for the group.
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SINGAPORE (Feb 24): UMS Holdings reported earnings of $9.2 million for 4QFY2019 ended December, a 4% dip from earnings of $9.4 million a year ago. This comes despite a 56% increase in revenue as a change in product mix resulted in lower margins for the group.

As a result, the group’s FY2019 earnings came in at $33.2 million, some 22% lower than earnings of $42.7 million in FY2018.

Revenue for the quarter surged 56% to $40.4 million from $25.9 million from the corresponding quarter in the previous year. This was attributable mainly to the higher sales contributions from the group’s semiconductor and other segments, which posted increases of 53% and 88% respectively.

The higher semiconductor sales were driven by a spike in demand for the group’s semiconductor integrated systems, which reported a158% surge in sales for 4QFY2019.

Geographically, revenue in Singapore surged 113% on the back of a strong demand for semiconductor integrated systems sales, while Malaysia clocked a 60% increase in revenue from higher material distribution sales.

However, the group’s overall gross material margins fell to 51.1% from 60.9% in the previous year due to a shift in product mix which saw a higher concentration in semiconductor system integrated sales. These had commanded lower margins compared to the previous year’s mix which had a higher concentration of component sales.

Notably, UMS also benefited from a treble of share of profits from its associate, JEP Holdings, to $0.6 million from $0.2 million in 4QFY2018.

JEP Holdings reported earnings of $6.5 million for FY2019 ended December, a threefold increase from $2.2 million in FY2018. Revenue for the quarter inched up 3.6% to $89.0 million due to higher contributions from its precision manufacturing segment.

The group’s overall performance was also dragged down by higher expenses, such as personnel, professional fees, freight and upkeep of machinery cost.

As at end-December, cash and cash equivalents stood at $34.4 million.

Earnings per share for the quarter came in at 1.72 cents for the quarter.

The group is proposing a final tax-exempt dividend of 2 cents and a special dividend of 0.5 cent per share for FY2019. The dividend, subject to approval at the group’s forthcoming annual general meeting, will be paid on May 22. UMS paid two cents for FY2018.

In its outlook statement, the group remains positive that growth in the semiconductor industry will return in FY2020, and is expecting to remain a beneficiary of sustained capital equipment spending and the global memory rebound.

“Barring any unforeseen circumstances, UMS will remain profitable in FY2020,” says UMS.

However, the group remains cautiously optimistic about the outlook, citing continuing US-China trade disputes and the ongoing Covid-19 outbreak as risk factors that may dent investment appetite and delay recovery in the chip sector.

“In view of the rapidly changing conditions caused by the Covid-19 outbreak, the group’s management is working closely with its customers on mitigation measures to ensure minimal disruption to our operations. Going forward, we are confident that our business strategies will stand us in good stead,” says CEO of UMS Andy Luong.

Luong adds that the group will continue to maintain both its quarterly reporting and quarterly dividend payments, as part of the group’s efforts to keep shareholders and the investing community updated on its financial performance.

Shares in UMS Holdings closed 6.5 cents lower, or 6.4% down, at 95.5 cents on Monday prior to the results announcement.

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