Koda Ltd Faces US Tariffs, Sustainability Challenges, and Shifting Global Demand: What Investors Must Know After AGM 2025

Singapore-listed furniture manufacturer Koda Ltd has released its responses to shareholder and Securities Investors Association (Singapore) questions ahead of its 2025 Annual General Meeting. The detailed disclosures offer investors critical insights into the company’s strategies, risks, and opportunities as the global furniture market faces economic and regulatory headwinds.

1. US Tariffs and Their Impact: Margins, Orders, and Strategic Shifts

The most pressing concern for Koda shareholders is the recent implementation of US tariffs on furniture imports, effective 14 October 2025. North America, encompassing the US and Canada, accounted for nearly two-thirds of Koda’s FY2025 revenue, with sales rising 25% year-on-year to US\$34.9 million. While the first half of the year saw robust sales (US\$18.4 million), the second half slowed (US\$16.4 million) as customers grew cautious in anticipation of tariffs.

Koda management clarified that only under 5% of US exports are directly hit by the new tariffs. Despite some customers requesting early shipments, most orders remained in progress and the financial effects of frontloading were not significant. The order book remains healthy, suggesting that the tariff impact is contained for now. However, the situation is dynamic and any escalation or broadening of tariffs could materially affect future sales and margins.

Importantly, Koda’s sales and purchases are predominantly USD-denominated, insulating operating margins from currency fluctuations, although certain non-operational items in SGD were affected by the weaker USD.

Shareholders should note that any deterioration in US demand or further tariff actions could directly pressure Koda’s top line and profitability. Investors must monitor both trade policy developments and consumer sentiment in the US closely.

2. Manufacturing Footprint: Vietnam and Malaysia as Strategic Hubs

Koda’s multi-country manufacturing footprint offers resilience. Facilities in Vietnam and Malaysia are positioned as strategic alternatives to mitigate tariff and supply chain risks while maintaining cost competitiveness and market access. These locations benefit from competitive cost structures and broad trade access, helping Koda pivot away from China-centric production that is more exposed to US tariffs.

The company does not anticipate any significant capital expenditure for FY2026, as existing facilities are deemed sufficient. Any future capex is expected to be for regular equipment upgrades and is not considered material. This conservative stance on investment supports margin preservation but may limit capacity expansion if demand rebounds sharply.

3. Market Developments: China, Asia-Pacific, and India

Koda’s strategy in China and Asia-Pacific reflects recalibration amid weak consumer sentiment and a prolonged real estate downturn. The company has re-engineered products and streamlined processes to spread costs over a greater scale, aiming to meet price expectations of retail customers. The effectiveness of China’s stimulus measures remains to be seen.

Sales in India, derived from dealer-operated stores in Mumbai and Bangalore, were lower than expected due to cautious discretionary spending. Koda’s management did not outline any new expansion plans for India, indicating limited growth prospects in the near-term unless consumer sentiment improves.

4. Receivable Management and Credit Risk

Trade receivable turnover improved from 65 days in FY2024 to 51 days in FY2025, though this remains higher than the average of 23 days seen between FY2021 and FY2023. Over 80% of receivables are within the normal credit period, and less than 5% are overdue by more than 30 days. Koda employs credit assessments, limits, collection monitoring, and in some cases requires security deposits or advance payments. Export credit insurance is also used. The audit committee oversees receivable quality, and provisions are made under the Expected Credit Loss framework as needed.

Any deterioration in receivable collection or a spike in overdue accounts could signal rising counterparty risk, potentially impacting cash flow and valuation.

5. Sustainability Performance: Emission and Consumption Ratios Worsen Despite Strategic Focus

Koda’s sustainability report highlights ten ESG targets for FY2030. Despite a strategic focus, the group’s GHG emission intensity, fuel consumption intensity, and electricity consumption intensity have all increased from the base year, in some cases by as much as 86%. The company attributes this mainly to lower revenue in 2025 versus 2022, which inflates intensity ratios even as absolute consumption has declined for electricity, water, and waste. GHG emissions and fuel usage rose, primarily due to increased transportation and logistics activity.

The board maintains that the FY2030 targets (set for a 10% improvement from FY2022) are realistic, but current performance in some areas is double the targets, indicating the need for intensified efforts. Targets are reviewed regularly to remain relevant and ambitious. Safety performance is strong, with no serious injuries or occupational illnesses reported for FY2025. The company maintains a non-zero interim target for recordable injuries, reflecting the practical realities of manufacturing.

Any failure to meet sustainability targets could affect Koda’s reputation, compliance costs, and attractiveness to ESG-focused investors.

6. Raw Material Price Volatility

Koda reports relatively stable raw material prices and continues to monitor the supply chain. No significant risks have materialized yet, but unexpected volatility could affect margins.

Key Takeaways for Investors

• US tariffs remain a top risk – currently limited impact, but escalation would be material.
• Vietnam and Malaysia facilities provide strategic flexibility – limiting China exposure.
• Sustainability performance is lagging targets – may require more aggressive action.
• Receivable risk is manageable for now, but investors should watch for any negative trend.
• Limited capex planned – margin preservation prioritized over growth.

Potential Share Price Drivers

• Further US tariff escalation or broader trade restrictions.
• Improved or deteriorated demand in North America, China, or India.
• Material progress or setbacks in sustainability performance.
• Changes in receivable quality or credit risk indicators.

Disclaimer: This article is prepared for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult professional advisors before making any investment decisions. The information is based on management disclosures and may be subject to change.

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