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Valuetronics reports 39% decline in net profit in FY2022 due to component shortage

Goola Warden and Lim Hui Jie
Goola Warden and Lim Hui Jie5/26/2022 07:52 AM GMT+08  • 3 min read
Valuetronics reports 39% decline in net profit in FY2022 due to component shortage
Valuetronics reports 39% decline in net profits in FY2022 due to component shortage and expects challenging conditions to persist
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Valuetronics reported an 11.1% y-o-y decline in revenue to HK$2.03 billion ($355.5 million) and a 39.3% y-o-y decline in net profit to HK$113.5 million in FY2022, for the 12 months to Mar 31, 2022.

The poor results were attributed to a global shortage in components. The supply problem for a wide range of electronics components resulted in extreme price surges, prolonged order lead times, frequent delivery delinquent and consequential productivity losses, the company said in a statement.

Furthermore, the ongoing Covid pandemic and lockdowns in major cities also further disrupted the capacity and logistics of the electronic component industry, which worsened the situation.

In light of the weaker performance, it has declared a final dividend of 10 HK cents, which, together with the interim dividend of 4 HK cents, amounts to a dividend of 14 HK cents per share for FY2022, down from 21 HK cents a share in FY2021.

While these external macro factors have affected its performance, Valuetronics has proactively implemented various mitigation measures. These measures include identifying alternative parts, re-engineering products to lower cost, and leveraging the group’s supply chain knowledge to identify new sources of supply, Valuetronics said in a statement.

See also: NTUC Income reports premium growth for FY2021 but lower net operating surplus on fair value loss

Despite all these efforts, Valuetronics says it expects the components shortages, together with the cost pressure resulting from inflation, to continue to affect its gross profit margin until the global components market is back to normal.

A bright spot is that selling and distribution expenses fell by 32.4% to HK$21.6 million from HK$32 million in FY2021, in line with the decline in revenue, while administration expenses decreased by 13.3% y-o-y to HK$141.6 million due to more stringent cost control measures put in place by management and a decrease in staff costs.

Despite the weaker performance, Valuetronics says it still remains in a “resilient financial position”, with no bank borrowings as at end-March and supported by its strong operating cash flows, with cash and cash equivalents of HK$936.7 million.

Moving forward, the company highlights that its Vietnam expansion has remained on track, with the factory commencing mass production for three customers in the last quarter of FY2022.

See also: Serial System reports lower 1QFY2022 earnings on allowance for obsolete stocks

Furthermore, it is also preparing for the trial production for its newly acquired industrial and commercial customers.

This includes a hardware provider customer for retail chain stores and a customer providing cooling solutions for high-performance computing environments, and these are expected to contribute in FY2023.

However, the revenue rebound in the consumer electronics segment that was seen in FY2022 is not expected to continue due to lower customer forecasts and the components shortage problem.

Valuetronics also foresees potential headwinds, like lockdowns in China affecting global supply chains, the Russia-Ukraine conflict, and US-China trade tensions.

“Barring unforeseen circumstances, Valuetronics is cautiously optimistic to remain profitable for FY2023, given its track record and strong fundamentals in terms of capability that is supported by its strong balance sheet.”

As at 10.55 am, shares of Valuetronics traded at 52 cents, down 0.5 cents or 0.95% compared to its previous close.

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