Hyflux

Hyflux: Posted another set of uninspiring results which were largely in line, with 3Q14 net profit down 55% to $11.3m on revenue of $101.0m (-46%). The fall in revenue was due to the timing of projects commencement in FY14, with the municipal sector continuing to be the main contributor to the group’s revenue, accounting for 84% of total revenue during the quarter, while industrial sector made up 15% of total revenue. Asia ex-China accounted for 81% of total revenue, China 11%, while the Middle East and North Africa made up the remaining 8%. Bottom-line was aided by a 42% drop in raw materials and subcontractor costs to $43.4m, in line with the lower revenue and effective cost management, while depreciation, amortisation and impairment expenses fell 83% to $4.8m, primarily due to non-recurring impairment charge made in 3Q13 relating to the group’s non-core assets. Going forward, Hyflux remains cautious on its business outlook given the mixed global economic conditions and expects 4Q14 to remain slow. While the overall outlook for the global water industry is positive, the momentum of municipal projects being made available for tender has been slower than anticipated in 2014. The delay in the connection of the national power grid to the Tuaspring power plant will continue to have operating cost implications over the next few quarters, while over in India the group is actively working with the relevant authorities and partners on the Dahej project in Gujarat, although financial close is not expected to be achieved before year end. Hyflux will continue to actively pursue municipal and industrial projects in selective markets in the Middle East, Africa, Asia and Latin America, while exploring opportunities to recycle capital. The group also sees opportunities in infrastructure development projects in Africa and Asia where it can offer value through affordable water and accessible power.