Integrated logistics services provider Tasco (BM: 5140) has reported second quarter 2019 revenues of 190.7 million Malaysian ringgit ($45.5 million) alongside a net profit of 4.3 million ringgit ($1.0 million). Although net profits have surged in the company’s second quarter, analysts are disappointed by the six month results.
The company’s financial year runs from April to March.
Results to the first six months of 2019 are marginally down in revenues but general costs are substantially up compared to the same period in 2018. And that means net profit for the six months to September 30 is decidedly down.
Tasco is both an air and sea freight forwarder as well as a warehouse and truck operator (long-distance and drayage). The company’s financial year runs from April through to the following March.
Trucking, air freight forwarding and cold supply chain logistics dragged down the results, wrote analysts at JF Apex Securities, a local stockbroking and research firm.
Results were “below expectations,” the analysts said and slashed their net profit forecast for the full financial year after lowering margin expectations, particularly for the company’s cold supply chain and trucking business. JF Apex Securities maintained a neutral posture on Tasco because of the company’s “uninspiring earnings outlook coupled with prevailing global economic and international trade headwinds.”
Second quarter results July to September
Revenues for the second quarter of 2019 fell by a marginal 0.2% from the 191.1 million ringgit ($46.2 million) recorded in the same quarter last year. The company’s cost of sales fell by 1.5% to 164.3 million ringgit ($39.2 million).
Gross profits received a year on year 8.3% boost to stand at 26.4 million ringgit ($8.3 million) in the July-September 2019 quarter.
Unfortunately, administrative and general expenses also increased, by 9.6% in the quarter ending September 30, 2019, to stand at 17.7 million Malaysian ringgit ($9.6 million).
The company’s finance costs took a 22.5% dive to 4.6 million ringgit ($1.1 million) and, ultimately, the company’s net profit for the July to September 2019 quarter stood at 4.3 million ringgit, an increase of 52.9%.
Six months results for April to September
The company’s half year results for the period running April to September 2019 did not show the same trend as the most recent quarterly results.
Half year revenues in the 2019-2020 financial year were 371.1 million ringgit ($88.6 million), which was essentially flat compared to the same period last year.
Ocean freight forwarding revenues were “uplifted” the company said by shipments from solar, aerospace, healthcare and chemicals customers. But that was “largely offset” by a fall in revenues in Air freight forwarding due to a decline in volumes by capacitor and chemicals customers. However, air freight experienced a boost in business from cigarettes and tobacco, which offset the damage a little.
Tasco’s cold supply chain division provided a boost to revenues but that was more or less offset by a decline in contract logistics business. The biggest contributor within the contract logistics business was “haulage” (drayage) trucking. Although the company handled more solar panels in its ocean freight division, the company’s customs clearance business experienced a decrease in solar panel shipments. The cessation of business with an “energy manufacturer” caused a further decline in six month revenues. However, there was also an offsetting boost in other containerized deliveries such as musical instruments.
Meanwhile, the company’s trucking (non-drayage) division experienced a drop in deliveries for a wide range of cargoes such as telecommunications equipment, cigarettes and tobacco, in addition to automotive parts.
The cost of sales was, again, essentially flat at 320.6 million ringgit ($76.5 million).
Gross profits experienced a small 1.7% decline to stand at 50.5 million ringgit ($12.1 million).
Profitability from operations was down by 12.8% to stand at 17.3 million ringgit ($4.1 million) while finance costs increased by 1.1% to 9.4 million ringgit ($2.2 million). Net profit after tax fell off a cliff by 28.9% to stand at just under 5.7 million ringgit ($1.3 million).
“Lower profit was mainly due to lower gross margins as a result of more competitive environment especially in Trucking and [air freight forwarding] sectors. Lower profit in [cold supply chain] was due to the internal reorganization whereby loss-making convenience retail business was transferred to [cold supply chain] from warehousing business,” the company reported.
Tasco cited an October 2019 World Economic Report from the International Monetary Fund which states that the global economy is in a “synchronized slowdown” with growth forecast for 3%.
“This is the slowest growth pace since the global financial crisis of 2008-09, and 0.3 percentage points lower than the April 2019 WEO forecast. The subdued growth is a serious climbdown from 3.8% in 2017, when the world was in a synchronized upswing, and resulted from, amongst other factors, rising trade barriers; elevated uncertainty surrounding trade and geopolitics; idiosyncratic factors causing macroeconomic strain in several emerging market economies; and structural factors,” the company said.
In Malaysia, the pace of growth was declared in November by Bank Negara Malaysia (the Malaysian central bank) to have slowed to 4.4% from the second quarter high of 4.9%. The bank thinks the pace of growth will be sustained and underpinned by the private sector, particularly household spending, for the rest of the year and in 2020.
Commenting on the economic situation, Tasco management said, “the prospects of the Group are closely tied to the performance of the global as well as the Malaysian economy, as the health of the logistics industry is closely aligned with the economic activity and international trade. According to the economic reports produced by the esteemed organizations above, both the global and domestic economies are currently facing uncertainties due to aforementioned reasons, with risks tilted towards the downside… Going forward into the second half of the financial year… downside risks for the Group continue to include rising operational costs (in particular new minimum wages as well as higher overtime threshold as announced in the recent national Budget); substantial interest costs (of which we expect to start reducing significantly from the next [financial year] following scheduled repayments); and a more competitive market environment in our traditional core businesses.”
Kuala Lumpur-based Tasco was founded in September 1974 and listed on the Bursa Malaysia in December 2007. It is a subsidiary of Yusen Logistics, which is part of Japan’s NYK Group.
In its March 2019 full year report, the company disclosed revenues of 173 million ringgit ($42.4 million) in its air freight division; 73.8 million ringgit ($18.1 million) in its ocean freight forwarding division; 309.7 million ringgit ($75.9 million) in its contract logistics division; 81.3 million ringgit ($19.9 million) in its trucking division; and 99.0 million ringgit ($24.2 million) in its cold supply chain division.
Tasco employs 2,500 staff in-country, operates over 550 prime movers and trucks, maintains over 250,000 square meters of warehouse space and runs 26 logistics centers across Malaysia.