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 KNM 7164 KNM GROUP BERHAD posts third straight loss-making quarter

KUALA LUMPUR (May 30): KNM Group Bhd posted a net loss of RM88.74 million for the three months ended March 31, 2022 — its third consecutive quarter in the red — on the back of RM157.43 million revenue.

For the cumulative 15 months ended March 31, 2022, it posted a net loss of RM690.21 million on the back of revenue of RM1.18 billion. No comparative figures for the current and cumulative periods were available due to a change in the group’s financial year-end from Dec 31 to June 30.

The cumulative loss, it said, was due to its booking RM511.07 million impairment losses on goodwill and other non-cash accounting adjustments, finance costs incurred for certain assets including ethanol plant under construction in Thailand.

“It is noticeable that, without all these non-cash accounting adjustments, the group would have reported an earnings before interest, tax, depreciation and amortisation (EBITDA) of RM61.32 million in the current financial period,” it explained.

Meanwhile, the revenue recognition of RM1.18 billion was mainly contributed from the fabrication business amid slower order intakes caused by the slowdown in global economic activities resulting from the impact of Covid-19 pandemic worldwide.

Going forward, KNM said it anticipates that the outlook for the financial year ending June 30, 2022 will remain challenging due to the continuous uncertainties in the global economic outlook arising from the impacts of the Covid-19 pandemic and geopolitical conflicts in Europe.

Notwithstanding that, it said the underlying industries that drive the group’s business prospects such as oil and gas, petrochemical and energy have begun to grow.

“The exceptionally strong oil price augurs well for some of our customers in the oil and gas sector. In addition, the continuous easing of lockdowns in major economies including the United States of America, Europe and most Asia countries will encourage further recovery of the global economy. These factors will encourage more capital expenditure by the oil majors. The group will continue to pursue these opportunities and secure more new contracts by leveraging its agility, assets and proven track record.

“The growing demand for liquefied natural gas globally currently is expected to spur the capital expenditure for gas storage and processing facilities. This will certainly benefit our operation in Italy, which is one of the global leading manufacturers of air coolers, a critical equipment necessary for the gas liquefaction process,” it added.

Meanwhile, KNM said the proposed disposal of the entire stake in Borsig GmbH, a German-based process equipment manufacturer, is expected to improve KNM’s cash position significantly and increase its financial capability to undertake contracts for the fabrication of process equipment and/or renewable energy projects moving forward.

“The group's deleveraging will also improve its ability to obtain additional financing for future capital expenditure and/or strategic acquisitions as well as improve the group's bottom line by reducing its finance costs,” it added.

KNM’s share price closed up one sen or 6.9% to 15.5 sen, giving it a market capitalisation of RM570 million.


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