KUALA LUMPUR (May 21): Conglomerate KUB Malaysia Bhd kicked off its financial year 2020 (FY20) with a first-quarter (1Q) net profit of RM4.93 million, compared with a net loss of RM69,000 last year, thanks to higher revenue and the return to profit in its agro division.

Revenue for the three months ended March 31 rose 7% year-on-year to RM109.38 million from RM102.26 million, contributed by revenue expansion in all business segments except for its ICT division, the group's stock exchange filing today showed.

Its ICT division's revenue fell by 17% or RM1.1 million, due mainly to lower value of contracts recognised because of delays in contract fulfillment and commencement for certain projects.

More notably, its agro division's revenue jumped 54% or RM4.5 million, on higher average crude palm oil prices and increased fresh fruit bunches production.

"These factors, combined with the absence of contribution from the loss-making mill in Mukah, Sarawak, which was disposed of in the previous year, reversed the division's overall performance from a loss position of RM2 million in the corresponding period last year to a profit after tax (PAT) of RM1.5 million," KUB said.

This also helped offset the fall in profitability in its liquefied petroleum gas (LPG) division, which, despite a 3% rise in revenue from a higher average contract price, saw its PAT fall by 49% to RM2.2 million due to intense competition and higher production cost that ate into operating margins.

On prospects, KUB said the group foresees economic uncertainty, market turbulence and weak consumer sentiment to remain as issues throughout FY20, due to the Covid-19 pandemic and extreme volatility in global crude oil prices.

Against this backdrop, KUB said its LPG division, being the primary revenue and earnings driver of the group, will potentially experience continued demand disruptions and adverse effects from contract price instability in the medium term.

"Notwithstanding, the group will implement mitigation measures to cushion the impact including enhancing the robustness of our customer and product mix model, improving supply and inventory management capabilities and initiate cost containment efforts across the division," it said.

Meanwhile, KUB is anticipating an overall improvement in performance for its agro division, following the operational and cost optimisation initiatives it has carried out, and a reduced drag on earnings following the mill disposal.

It added that a pre-emptive balance sheet and effective cash flow management will also be the group's priority in the coming quarters in order to provide KUB with the resilience to weather the current storm.

"As such, we will proactively reassess our capital expenditure plans, tighten up operating expenditure, review investment decisions and re-optimise our capital structure where necessary," KUB said.

At 2.50pm, KUB shares were trading three sen or 8.33% higher at 33 sen per share, after 4.85 million shares crossed. It has a market capitalisation of RM166.94 million.