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The Group's current quarter revenue of RM42.9 million (1Q16: RM22.2 million) comprising revenue from the Engineering and Manufacturing sectors of RM41.4 million and RM1.5 million respectively. Revenue increased by 93.2% compared to the preceding year corresponding 1st Quarter, mainly due to the improved revenue of the Group's Construction division and Steel Pipes manufacturing division but offset by lower revenue of the LP Gas cylinder manufacturing division.
Despite recorded higher revenue, the Group recorded a pre-tax loss of RM1.5 million (1Q16: Pretax loss of RM2.7 million) partly due to the increasing cost of raw materials and higher direct overhead costs.Engineering Sector
The sector's revenue of RM41.4 million (1Q16: RM18.3 million) was 126.2% higher, as a result of higher progress billings from on-going projects under the Civil Construction division. The Construction Division's revenue for the quarter of RM22.4 million was solely derived from the development and upgrading of the Proposed Pan Borneo Highway in the State of Sarawak (Phase 1 Works Package Contract - WPC-09) which has just commenced during the 4th Quarter 2016.
Revenue from the Steel Fabrication Division of RM17.9 million remain more or less consistent with the preceding year corresponding quarter of RM17.5 million. Revenue for the quarter were mainly derived from the on-going fabrication works involving the supply of Low/High Tension Steel Poles, subcontract works for the fabrication of Wellhead Platforms and other on-going miscellaneous fabrication works.
HDG Division recorded an increase in revenue of 47.1% from RM748K registered in the preceding year corresponding quarter to RM1.1 million in 1Q17. The improved performance was mainly contributed from the supply of Hot Dip Galvanised Low and High Tension Steel Poles.Manufacturing Sector
Revenue of RM1.5 million for the Group's Manufacturing sector decreased by 61.5% over the preceding year corresponding 1st quarter of RM3.9 million, mainly triggered by the lower offtake of LP Gas Cylinders.
LPG Cylinders manufacturing division recorded a decrease in revenue of approximately RM3.0 million, due to lower offtake of LPG cylinders from the Petroleum Companies. 1Q17 revenue was for the supply of LPG cylinders to Petron Malaysia Refining & Marketing Bhd (formerly known as Esso Malaysia Bhd), Mygaz Sdn Bhd and for export of LPG cylinders to Brunei Shell Marketing Company Sdn Bhd.
The Group's Steel Pipes Manufacturing division under the two subsidiaries registered aggregate revenue of RM839K (1Q16: RM246K), increased by 241.0% mainly from the supply of Mild Steel Cement Lined Pipes by the Group's Steel Pipes plant in Kota Kinabalu, Sabah.
2017 will be a challenging year for the Group. The Board is cautious that the continued uncertainties in the global economic environment, escalation of costs due to inflationary pressure, volatility of global raw material steel prices and fluctuation of exchange rates are amongst factors that may impact the Group's performance.
The Group continues to exercise its effort on prudent cost management and operational efficiency to stay competitive and focused on its effort to identify viable new strategic and business opportunities available in our specialized and growing structural steel engineering services with more focus given to the energy related projects.
The decline in crude oil prices has caused Major Oil Companies in Malaysia to make substantial cuts in their capital expenditures on field developments by Petronas and resulted in the slow down of both the Upstream and Downstream industry, which will have an impact on the Group's Engineering sector.
Notwithstanding, the Group is actively participating in potential business opportunities in the Major Onshore Fabrication to move up the value chain in Fabrication Engineering and related disciplines, in collaboration with OceanMight Sdn Bhd and other strategic partner(s).
Our diverse portfolio of businesses coupled with the Group's healthy financial position with relatively low gearing will provide us with the resilience to mitigate the adverse effects under the prevailing competitive and challenging business environment. The Board remains cautious that the Group's performance for financial year ending 2017 will prove to be challenging.