Hoe Leong Corporation (H20) H2 2023 earnings summary

Executive summary

• FY2023 revenue was S$40.0m, down from S$41.8m; profit before tax was S$0.5m versus S$0.6m, while profit attributable to owners fell to S$0.25m from S$0.795m.

• Australian revenue grew, supported by mining-sector demand and track-frame rebuilds; weaker North American and European sales reflected slower activity and geopolitical disruption.

Financial highlights

• Gross profit rose to S$6.6m from S$3.2m and gross margin to 16.5% from 7.6%; lower cost of sales more than offset the revenue decline.

• Operating activities reported S$1.1m profit versus S$3.25m in FY2022; FY2022 included S$2.4m gain on disposal of a freehold property, while FY2023 other income was S$0.425m.

• Net reversal of impairment losses was S$3.25m versus S$6.16m, mainly reflecting inventory allowance reversals of S$2.97m versus S$5.55m.

• Distribution and administrative expenses fell to S$3.0m and S$4.3m, respectively, from S$3.4m and S$4.9m; finance costs increased to S$0.554m from S$0.537m.

Outlook and guidance

• FY2024 priorities include expanding Australian track-frame rebuild capacity with a new assembly area and redesigned workflow to improve quality, throughput and turnaround times.

• Sales plans target deeper adoption of undercarriage solutions in selected accounts and a larger Singapore-led customer base generating at least S$500,000 annual revenue per customer within 18 months.

• Strategy includes progressively moving away from the stockist model and clearing older inventory to reduce costs and strengthen operating cash flow.

• Newer European markets supported positive revenue momentum into Q1 2024; exploration of additional markets is intended to diversify revenue streams.