CFA Society Singapore
SINGAPORE (Feb 26): UMS Holdings, the precision engineering group which specialises in the manufacture of semiconductor components, reported 4Q18 earnings of $9.3 million, down 41% from a year ago.
Revenue in 4Q18 declined 33% to $25.9 million due mainly to a 36% decline in the semiconductor segment which was offset by a 63% rise in sales surge from its others segment comprising mainly revenue from subsidiaries Starke Singapore and Kalf Engineering.
Sales from semiconductor integrated systems dropped 57% for the quarter to $7.8 million from $18.2 million in 4Q17. Revenue from component sales also dipped by 16% to $16.2 million in 4Q18.
Gross material margin, however, edged up to 60.9% from 58.3% for the year-ago quarter due to the group's product mix, with more higher-margin component sales.
The group benefitted from a bargain purchase gain of $1.6 million from its 70% stake in Starke Singapore. Also, it continued to benefit from contributions from its associate JEP Holdings which saw significant improvement in its profitability in the second half of FY18.
The group took steps to reduce its costs. Personnel costs eased mainly due to lower bonuses while other expenses dipped 8% over last year; legal and professional fees fell 38%, rental expense were 46% lower due to the consolidation of US operations into the Milpitas facility. Foreign exchange losses were lower by half to $0.4 million. Its income tax for the period was lower too.
For FY2018 UMS posted earnings of $43.1 million, a 17% dip from a year ago. Revenue for the full year came in at $127.9 million, down 21%.
UMS says the near-term outlook continues to be challenging due to much uncertainty in the order flows of customers due in part to the ongoing China-US trade tensions which affected demand from semiconductor chipmakers.
UMS has proposed final dividend of 2 cents.
However, the longer term outlook remains upbeat with SEMI, the global industry association representing the electronics manufacturing supply chain, reporting that even though worldwide sales of new semiconductor manufacturing equipment are projected to contract slightly by 4% in 2019, it will grow 20.7% to reach US$71.9 billion, an all-time high in 2020.
Andy Luong, UMS’s executive chairman and CEO, says, :Our FY2018 results demonstrate our resilience in the face of significant market challenges. We managed to improve our profit margins by boosting our product mix while our diversification strategy into new sectors has enabled us to reap positive returns. Our subsidiary Starke Singapore has reported a profitable performance, and our associate JEP Holdings has done well and made much improved contributions to the group.”
Shares in UMS closed at 2.5 cents higher at 74 cents on Tuesday.