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Singapore Investment


 ATAIMS 8176 ATA IMS BERHAD  posts second straight quarterly losses; warns of 60% revenue contraction in FY23

KUALA LUMPUR (Aug 24): ATA IMS warns of possible further 60% revenue contraction for the financial year ending March 31, 2023 (FY23) after a 38% annual drop in FY22, as a result of the loss of manufacturing contract from Dyson.

Nonetheless, the management is optimistic that ATA IMS will return to reasonable profitability in FY23, banking on its existing business and potential new customers.

For the first quarter ended June 30, 2022 (1QFY23), ATA IMS posted a net loss of RM15.25 million compared to a net profit of RM23.38 million a year ago, as the group continued to operate below its production capacity, following the termination of manufacturing contract by Dyson.

Its loss per share was at 1.27 sen, compared to an earnings per share of 1.94 sen previously, Johor-based electronic manufacturing services (EMS) company’s bourse filing showed.

Quarterly revenue dropped 56.6% to RM387.36 million, from RM893.05 million a year ago.

Compared with its preceding quarter of 4QFY22, the net loss narrowed from RM29.22 million, as revenue fell 10.14% from RM431.06 million. Apart from Dyson’s contract termination, it said the higher losses in the immediate preceding quarter was also contributed by an impairment of assets amounting to RM12 million.

ATA IMS was embroiled in forced labour allegations last year. Consequently, its single largest client Dyson, which made up 80% of its revenue, was scheduled for termination from June 1 this year onwards.

The company posted an annual net loss of RM11.48 million for the full year ended March 31, 2022 (FY22), compared with a net profit of RM150.3 million in FY21. Annual revenue shrank 38.36% to RM2.6 billion, from RM4.2 billion previously.

A back-of-the-envelope calculation showed that ATA IMS’ revenue might shrink to roughly RM1 billion, based on a 60% drop in the previous year’s revenue.

In response to the termination of Dyson's contracts, the group said it will continue to undertake cost-cutting measures and work towards downsizing its capacity, such as selling off its excess machinery and excess stocks.

It disclosed that two factories and two warehouses have been vacated and returned to the landlord.

The remaining six out of the ten rented factories or warehouses that the management had earlier identified to be discontinued, are still in the process of discussions with the landlords to return the properties before the expiry of the tenancy agreements, said ATA IMS in its result announcement.

Furthermore, ATA IMS is in discussions with Dyson to ensure all stocks can be cleared by year-end.

All five analysts covering ATA IMS are bearish on the stock, with an average 12-month target price of 28 sen.

ATA IMS' share price dropped 4.8% at 29.5 sen on Wednesday (Aug 24), bringing a market capitalisation of RM355 million. Compared to one year ago when its share price was traded at RM2.70, it has lost 89% since then.


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