Chin Well Profits could Bottom up After Stagnant Final Quarter Financial Performance

     Chin Well saw a stagnant final quarter performance ended June 30 2019 where its profits shrunk over 35% year on year. However, the company's sales remained on a healthy growth path, given its revenues growing 10.78% year on year. The reason for decreased profits is that its two business pillars— carbon steel fasteners and metal wires—had different problems to tackle in the final quarter.

     Chin Well's fastener business in the final quarter rose 10.71% year on year to MYR 126.88 million, but its pretax profit fell 20.72% to MYR 15.26 million. This was because its trading business with a lower profit margin had increased proportion of income that undermined the profits. 

     Its metal wire business in the final quarter rose 11% to MYR 39.34 million. However, Chin Well launched a new production line this April, and higher initial expenses increased the production cost, rendering the business to turn profits into a loss of MYR 250 thousand before tax.

     The above indicates that Chin Well's undermined performance in the final quarter was not triggered by structural factors, which means its current weakness is only temporary. The company's fundamentals remains unharmed and the future profits are expected to bottom up. Meanwhile, Chin Well is one of the beneficiaries in China-U.S. trade war. Its sales to the American market continued to increase in the final quarter. During the whole financial year, it exported MYR 72 million worth of products to the U.S. at a year-on-year 363% growth.

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