Cahya Mata Sarawak Bhd's (Cahya Mata Sarawak) core net profit for the third quarter of financial year 2023 (3QFY23) came in 65.8 per cent year on year (y-oy) lower to RM21.1 million, despite recording a stronger revenue by 8.4 per cent y-o-y to RM301.9 million.

For the cumulative 9MFY23, revenue came in 23.6 per cent y-oy higher at RM868.1 million while the core earnings declined 63.2 per cent y-o-y to RM68.1 million.

This came in below expectations, making up only 39.7 per cent of MIDF Amanah Investment Bank Bhd (MIDF Research) and 48.2 per cent of street's estimates.

“The weaker performance was mainly due to a lower share of results from associates following the disposal of its stake OM Materials and losses from its phosphates which is now in the commissioning phase,” it said yesterday.

“The cement division contributed 58.7 per cent to the group's revenue during the quarter, rising 6.3 per cent y-o-y to RM177.1 million and delivering an operating profit of RM31 million, indicating a margin of 17.5 per cent, an improvement over 15.9 per cent a year ago.

“The improvement was attributable to stronger sales and lower input costs.”

During the quarter, Cahya Mata Sarawak's road maintenance business delivered a revenue of RM27.3 million and an operating profit of RM2.1 million.

The oiltools division generated a revenue of RM72.9 million with an operating profit of RM9.6 million.

The RM63 million operating profit in the previous year's corresponding quarter was almost entirely the recognition of negative goodwill on consolidation.

As for the property development division, it recorded a revenue of RM16.1 million, with an operating profit of RM2.6 million, mainly due to slower property sales and no land sale this year.

“The phosphate division posted a higher quarterly operating loss of RM43.6 million due to the commissioning and financing costs incurred. Most of the costs incurred in FY22 were capitalised as the plant was still in construction phase."

Meanwhile, Cahya Mata Sarawak still has an ongoing arbitration with Sesco Bhd following a dispute that led to the electrical supply termination to the phosphate plant in Samalaju.

The plant is still in operation using generator sets, as per management's update in September 2023.

Analysts are awaiting further information in the upcoming briefing, which is expected to be next week.

Researchers with Maybank Investment Bank Bhd (Maybank Research) recapped the latest development being that Sesco has filed a Notice of Arbitration with AIAC on November 24, with the evidentiary hearing now fixed on August 26-30, 2024.

“With electricity supply to the phosphate complex having been terminated since July 10, the question remains as to when electricity supply can resume, to enable commercial operations to start.

“We estimate at least a RM10 million loss at Cahya Mata Phosphates Industries for every month of delay in the start of CMPI's commercial ops.

“Our earlier RM58 million loss projection for the phosphate ops in FY23 assumed the start of commercial ops in mid-2023. This is no longer realistic and we now assume the start of commercial ops in mid-2024.

“We now project a larger RM136 million loss at CMPI in FY23, RM68 million loss in FY24. This leads to us cutting our FY23 core net profit forecast for Cahya Mata Sarawak by 28 per cent and FY24 by 12 per cent.”