KUALA LUMPUR: UMW Holdings Bhd’s automotive division posted a strong 45 per cent year-on-year earnings growth in the first quarter ended March 30 2018, said MIDF Research.
This was despite weaker sales volumes in line with industry given the wait-and-see ahead of the 14th General Election.
The group’s automotive margins almost doubled from four per cent a year ago to 6.7 per cent and was highest in the past two years.
“These are sustainable earnings given the strong ringgit now and gradual rollback of discounting in the market as inventories normalise. This was also supported by strong Perodua sales (up 11 per cent year-on-year) following launch of the new Myvi,” MIDF Research said in a report today.
Overall, UMW Holdings’ net profit tripled to RM74 million (or actually RM109 million for continuing operations excluding non-listed oil and gas units) in the first quarter ended March 30 2018.
MIDF Research said the RM74 million was in line and accounts for 20 per cent of its financial year 2018 forecast and 21 per cent of consensus.
UMW had started to deconsolidate its non-listed O&G units during the quarter.
Elaborating on the automotive market, MIDF Research said buyers had been holding back purchases in the first quarter ahead of GE14.
“The trend is obvious for the non-nationals, possibly in anticipation of manifestos related to vehicle duty reduction (which affects mainly the non-nationals). However, as it turns out, duty reduction will only be offered for first car buyers,” it added.
The firm expects a significant boost from the Goods and Services Tax/Sales and Service Tax-free period.
Although effective from June, most key players were already offering GST rebates from mid-May, MIDF Research.