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Financial review for current quarter and financial year to date
The Group's current quarter revenue of RM64.6 million (1Q17: RM42.9 million) comprising revenue from the Engineering and Manufacturing sectors of RM51.2 million and RM13.4 million, respectively. Revenue increased by 50.4% compared to the preceding year corresponding first quarter, mainly due to the improvement in revenue of the Group's Steel Pipes and LPG cylinders manufacturing divisions and Civil Construction.
The Group recorded a pre-tax profit of RM2.4 million against pre-tax loss of RM1.5 million in 1Q17, after recognizing the Gain on remeasurement of investment in former associate, OceanMight Sdn Bhd ("OMSB") amounting to RM1.9 million. On 24 January 2018, KKB increased its shareholding in OMSB to 60.81% from 43.0%, resulted in OMSB becoming a subsidiary of KKB.
The newly awarded contract in March 2018 from Petronas Carigali Sdn Bhd for the Provision of Engineering, Procurement, Construction, Installation and Commissioning of Wellhead Platforms for D28 Phase 1 project is still at the preliminary stage to have any significant contribution to the Group's earnings.Engineering Sector
The sector's revenue of RM51.2 million (1Q17: RM41.4 million) was 23.7% higher compared to the preceding year corresponding first quarter, 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 RM44.7 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 commenced during the 4th Quarter 2016.
The Group's Steel Fabrication division recorded lower revenue of RM5.4 million, compared to RM18.0 million achieved in the preceding year corresponding first quarter. The two major fabrication jobs for the fabrication of wellhead platform for Bunga Pakma and Kinabalu Redevelopment Project have been successfully completed in 2H2017. Revenue for the quarter were mainly derived from the additional work order for the Kinabalu Redevelopment Project (HHP Flowlines), and other on-going fabrication works involving the supply of Low/High Tension Steel Poles, steel structure for pipe rack, fabrication of Mild Steel Casing and other miscellaneous fabrication works.
Hot-Dip Galvanising division's revenue of RM1.1 million (1Q17: RM1.1 million) for the quarter remained fairly consistent with the preceding year corresponding quarter, mainly contributed from the supply of Hot Dip Galvanised Low and High Tension Steel Poles.Manufacturing Sector
The Sector's revenue of RM13.4 million registered an improvement of 793.3%, compared to RM1.5 million recorded in the preceding year corresponding first quarter, mainly attributed by higher sales from both the Steel Pipes and LPG cylinders manufacturing divisions.
Revenue of LPG Cylinders manufacturing division for the current quarter shows an increase of 408.7%, mainly due to a higher offtake of LPG cylinders from Petronas Dagangan Berhad and NGC Energy Sdn Bhd as compared to the preceding year first quarter. 1Q18 revenue of RM3.2 million (1Q17: RM629K) was for the supply of LPG cylinders to Petronas Dagangan Berhad, NGC Energy Sdn Bhd, Petron Malaysia Refining & Marketing Sdn Bhd and for requalification works of LPG cylinders to Mygaz Sdn Bhd.
The Group's Steel Pipes manufacturing plant in Kuching, Sarawak and Kota Kinabalu, Sabah under the two subsidiary companies, Harum Bidang Sdn Bhd and KKB Industries (Sabah) Sdn Bhd registered a total revenue of RM10.2 million (1Q17: RM839K). The supply of Mild Steel Pipes & fittings to Jabatan Bekalan Air Luar Bandar and other ad-hoc customers in Kota Kinabalu, Sabah contributed to the positive growth in revenue in the current quarter.
The Group continues to focus on its core business in areas of Structural Steel Fabrication, Hot-Dip Galvanising, Civil Construction works, supply of Steel Pipes for Water works projects and other related infrastructure works. Our Plant in Kota Kinabalu, Sabah is ready and equipped to supply any pipes requirement throughout East Malaysia, Brunei and Kalimantan when the opportunity arises.
In March 2018, OceanMight Sdn Bhd (KKB's subsidiary) has been awarded a contract from Petronas Carigali Sdn Bhd for the Provision of Engineering, Procurement, Construction, Installation and Commissioning of Wellhead Platforms for D18 Phase 2 Project and D28 Phase 1 Project. Commencement of work for D28 Phase 1 Project is March 2018 and scope shall be Engineering, Procurement, Construction, Installation and Commissioning ("EPCIC").
The group remains focused on its effort to identify viable new strategic and potential business opportunities in the Major Onshore Fabrication, in collaboration with OceanMight Sdn Bhd and other strategic partner(s), to acquire technology and competitive edge in the medium to long term.
With the on-going construction works for the development and upgrading of the Proposed Pan Borneo Highway in the State of Sarawak (Phase 1 Works Package Contract - WPC-09), coupled with its existing contracts in hand, the Board anticipates that the Group's performance for 2018 will remain satisfactory, barring any unforeseen circumstances.
The Board however 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.