PNE reported their 1H FY2019 Results recently and as a follow up from our previous post about the company, let’s take a look at how they have been performing this past 6 months.
Margins affected by cost pressures
For the half year ended March 31, 2019, the PNE recorded revenue and profit for the period of $48.2m and $2.9m respectively. Revenue rose $9.5m or 24.4% vs 1H18 due to higher customer orders from the contract manufacturing business, offset partially by a decline in trading sales. Gross margin declined because of differences in product mix they sold more products that have higher material cost content.
Balance Sheet remains stable
As at March 31, 2019, PNE still has $36.8m of cash and cash equivalents, which is about $0.43 per share. The management highlighted that trade payables declined $5.5m to $13.0m from $18.5m when compared to September 30, 2018. This was due mainly to faster payments to suppliers as the Group purchased relatively more materials from suppliers that gave shorter credit periods. I hope that as they continue to partner with these suppliers, they are able to get better credit terms to improve their cashflow.
They have announced dividend of 3 cents, which is the same as previous year.
Conclusion
As stated in their FY2018 Annual Report, PNE still faces challenges on both the competitive pricing pressures and increasing cost of raw materials. They have to improve on their efficiency to see an improvement of margins.
Balance sheet still remains strong hence I feel that they will be able to navigate through the uncertain economic conditions that we are facing currently. The management delivered positive news when they said that they are not relatively impacted by the current trade war yet, which displayed their resilience.
We remain vested in PNE Industries as they improve on their turnover and hopefully, find a way to increase their margins and profitability.