Darco Water Technologies (BLR) H2 2023 earnings summary

Executive summary

• FY2023 revenue fell 9.6% YoY to $70.2m; gross margin declined to 13.6% from 16.5%, and attributable net loss was $5.4m versus $0.9m profit in FY2022.

• Performance was pressured by competition and rising costs in Malaysia, weaker margins on China projects, increased impairment charges, and higher finance costs.

• Long-term regional demand for water and waste solutions remains positive; Ba Lai began commercial operations in Vietnam on 1 July 2023 under a 50-year concession.

Financial highlights

• Revenue was $70.247m versus $77.705m; gross profit was $9.575m versus $12.828m, and cost of sales declined 6.5% versus the 9.6% revenue decline.

• Net loss was $5.990m versus net profit of $0.871m; loss attributable to equity holders was $5.419m versus profit of $0.813m.

• Basic and diluted EPS was a loss of 5.78 cents versus earnings of 0.87 cents.

• Impairment loss on financial assets rose to $3.537m from $0.623m; finance costs increased to $0.984m from $0.465m.

• Adjusted for the $1.0m FY2022 shareholder ex-gratia settlement payment, other income was $0.509m in FY2023 versus $0.519m in FY2022.

Outlook and guidance

• Long-term prospects for water treatment and clean water supply remain positive, while project risk management and ongoing reassessment of operating conditions are priorities.

• Near-term 2024 conditions remain uncertain amid geopolitical tensions, trade protectionism, inflationary pressure on materials, and high financing costs; World Bank forecast Asia-Pacific growth slowing to 4.5% from 5.1% in 2023.

• Business development will focus on regional project bids, direct negotiations with owners and main contractors, and strategic partnerships across China, Malaysia, Singapore and Vietnam.

• Singapore HDB’s 19,600-flat BTO launch plan for 2024 and ongoing Tengah development support prospective demand for pneumatic waste-conveyance systems.