Hyflux

[Musicwhiz]

Business Times - 05 Aug 2011

Hyflux net slides 47% in 'transition' quarter

By LYNN KAN

DESALINATION player Hyflux recorded a net profit of $14.5 million for the second quarter ended June 30, down 47 per cent from $27.3 million for the corresponding quarter last year.

Turnover shrank 21 per cent to $111.1 million from $140.4 million, as Hyflux went through a 'transition' quarter, reallocating its attention from the Middle East to Asia - particularly China, Singapore and possible projects on the horizon in India.

'Q2 is a turning point for us as we move between the different regions,' said group chief financial officer Cho Wee Peng.

Upcoming quarters will be brighter as revenue is recognised on its Tuaspring Desalination Plant project.

What gnawed away at earnings were higher staff costs and higher financing costs in the run-up to the Tuaspring Plant and higher amortisation from its intangible assets.

Earnings per share for the second quarter fell to 1.22 cents from 3.22 cents in Q2 FY10. The company also announced an interim dividend of 0.67 cent per share. Hyflux's order book is at a record $2.1 billion.

While Hyflux's Q2 revenue underperformed - DBS Vickers forecast $150 million - its shares were not penalised yesterday, sliding just half a cent to $1.95.

Hyflux said that the fire that occurred at a warehouse on its Algerian project site in Magtaa in late July was still under investigation and its causes are still unknown.

Hyflux would need to reprocure the damaged membranes, pumps and cables. The total damage tally was estimated at US$50 million.

Though the Magtaa plant's commissioning would be delayed nine months to May 2012, the insurance taken out on the project would cover damages as well as the overheads incurred during the nine months.

Revenue growth in H1 for Hyflux was powered by China, which went up to $70.7 million or 36 per cent of total revenue from $45.7 million or 19 per cent of total sales in H1 FY10.

The Chinese government has recently made a commitment to clean water, a boon to desalination players like Hyflux.

And with recent Chinese central bank tightening, companies like Hyflux with access to foreign capital funding have the upper hand, said Mr Cho.

'Domestic Chinese players who don't have access to offshore funding will face funding difficulties. Chinese banks are holding back new loans so they will face difficulties,' he said.

Hyflux is also scouting out a project in the Dahej region in Gujarat, India, in a consortium with Hitachi and Itochu Corporation, but declined to elaborate more on its development.