KUALA LUMPUR: UMW Holdings Bhd has declared a special dividend of four sen per share payable on Dec 23 for its financial year ending Dec 31, 2019 (FY19), despite reporting a near 14% year-on-year drop in quarterly net profit for the third quarter ended Sept 30 (3QFY19).

UMW Holdings, whose net profit for the quarter fell to RM110.29 million from RM128.12 million previously, attributed the earnings contraction to lower vehicle sales in the automotive segment due to a high-base effect and weaker performance in the equipment segment.

“The corresponding period’s sales were boosted by the GST (goods and services tax)-free period from June 1, 2018 to Aug 31, 2018,” said UMW Holdings, which has exited the oil and gas industry, in its quarterly results announcement.

The revenue generated by the automotive division fell 13.1% to RM2.29 billion from RM2.64 billion. The impact of lower car sales was reflected in the 12% year-on-year (y-o-y) decline in the group’s quarterly revenue to RM2.88 billion from RM3.28 billion. The automotive division contributed 79% of the group’s revenue.

UMW Holdings owns a 38% stake in national carmaker Perusahaan Otomobil Kedua Sdn Bhd or Perodua. The associated company reported a 7.4% y-o-y decline in profit before tax to RM140.1 million from RM151.3 million.

For the nine months ended Sept 30, 2019 (9MFY19), the group’s cumulative net profit was down 22.3% y-o-y to RM253.9 million from RM326.58 million, while revenue was flat at RM8.62 billion. Its profit before tax (PBT) shrank to RM355.8 million from RM405.46 million.

UMW Holdings explained the drop in earnings for 9MFY19 was mainly due to the one-off reversal of provision amounting to RM207 million for the previous corresponding period.

“Excluding the reversal of provision, the current year’s cumulative PBT of RM443.1 million was higher compared with RM415 million for the corresponding period,” said UMW Holdings.

Moving forward, UMW Holdings said its automotive business remains competitive and aggressive marketing and promotions are expected to continue in the last quarter of the year.

“Nevertheless, the recent launch of an all-new model in 3Q of 2019 as well as enhancements added to current product offerings are expected to contribute positively to the automotive segment’s sales performance in the coming quarters.

“Meanwhile, the performance of our investment in an associated company is expected to remain strong for the rest of this year,” the group added yesterday.

On its equipment segment, UMW Holdings said the outlook is still bearish, dragged by sluggish demand in the construction, manufacturing, mining and logging sectors.

“However, the revival of some major infrastructure projects in Malaysia, an improving demand in Singapore and Papua New Guinea, and an expansion of the product line-up in Vietnam, are anticipated to minimise the downward pressure on the segment’s performance,” it added.