Union Steel Holdings Limited: 1HFY2026 Interim Financial Analysis

Union Steel Holdings Limited released its unaudited condensed interim financial statements for the six months ended 31 December 2025. The report covers key financial metrics, segment performance, asset changes, and provides insights into the industry outlook and management’s commentary. Below is a detailed breakdown for investors and analysts.

Key Financial Metrics and Performance Comparison

Segment Highlights

• Metals: Revenue decreased by 3.7% YoY to S\$23.7m, reflecting competitive market conditions in scrap metal and steel leasing.
• Engineering: Revenue fell 6.8% YoY to S\$28.8m, due to slower project execution and fewer large project starts in offshore marine/oil & gas.
• Scaffolding: Revenue improved 19.4% YoY to S\$3.7m, supported by recurring customers and expanded project mix.

Historical Performance Trends

Union Steel’s performance shows a downward trend in revenue, profit, and margins compared to the previous year’s corresponding period. Gross profit margin shrank, and net profit declined sharply. The company’s largest segment, Engineering, saw notable revenue contraction, offset slightly by growth in Scaffolding.

Asset Changes and Revaluation

• Property, plant & equipment increased by S\$5.5m mainly due to asset acquisition and replacement, partially offset by depreciation and disposals.
• Right-of-use assets rose S\$7.8m, primarily from new lease additions.
• Investment in associated company (Eneco Energy Limited) increased S\$1.8m, due to exercise of warrants and conversion to new shares, offset by partial disposal.
• Fair value of investment properties was not revalued during the interim period; last valuation was as at 30 June 2025.

Exceptional Earnings and Expenses

• Other income declined 12.5% YoY, mainly due to lower bad debt recovery.
• Other operating expenses decreased 40.9% YoY, driven by reduced loss allowances and lower depreciation of fully depreciated assets.
• Finance costs fell by S\$0.2m, reflecting lower interest rates.

Chairman’s Statement and Tone

The Chairman’s statement is concise and neutral, confirming the accuracy of the interim results:

“The Directors of the Company confirm that to the best of their knowledge, nothing has come to their attention which may render these unaudited interim financial statements for the six-month period ended 31 December 2025, to be false or misleading in any material aspect.”

Tone: Neutral – no explicit optimism or caution, but the absence of material concern suggests confidence in the accuracy of reporting.

Directors’ Remuneration

• Total remuneration for directors and key management in the reporting period was S\$1.71m (1HFY2025: S\$1.76m).

Corporate Actions and Events

• Divestment: In January 2026, Union Engineering Pte Ltd entered into a non-binding MOU to potentially divest Fastweld Engineering Construction Pte Ltd to Eneco Singapore Pte Ltd. The outcome of this transaction is pending further negotiation and due diligence.
• Associated Company Transactions: Continued investments and partial disposals in Eneco Energy Limited, as well as warrant exercises, have adjusted the Group’s effective stake and investment values.

Industry Outlook and Trends

• Metals: Challenging market conditions due to subdued pricing; management focused on asset utilization.
• Scaffolding: Recurring customers provide stability; efforts are underway to broaden project mix and customer base.
• Engineering: Offshore marine and oil & gas markets face slower execution and longer lead times, with opportunities expected as conditions stabilize.

Related Party and Fund Flows

• No unusual fund flows or related party transactions disclosed. The Group does not have a general mandate for Interested Person Transactions.

Cash Flow and Gearing

• Cash and cash equivalents at period end: S\$16.7m (previous year: S\$15.97m).
• Net gearing increased to 32.4% from 30.7%, mainly due to new bank borrowings for property acquisition.

Dividend Summary

• No interim dividend declared for the current period.
• Final dividend for FY2025 was 0.85 cents/share, down from 1.30 cents/share for FY2024.

Conclusion & Investor Recommendations

Overall Financial Performance: Union Steel Holdings’ results for 1HFY2026 are neutral to weak. The company experienced declining revenues, profits, and margins year-on-year amid tough market environments in metals and engineering. The scaffolding segment showed resilience, and management has acted to stabilize performance and expand into overseas markets. Cash position remains stable, gearing is manageable, and asset growth is positive.

If you are currently holding this stock:

• Consider maintaining your position if you believe in the company’s long-term strategy and ability to diversify revenue sources, but monitor quarterly earnings closely for signs of sustained recovery or further deterioration.
• Given the weaker performance and lower dividends, reassess your risk tolerance and portfolio objectives; trimming exposure may be prudent if you seek higher growth or dividend yield elsewhere.

If you are currently not holding this stock:

• Wait for clearer signs of earnings recovery or improvement in margins before initiating a position.
• Monitor for successful execution of divestments and strategic moves, as these could unlock shareholder value.
• Consider entry only if the share price offers an attractive margin of safety and the company demonstrates turnaround in its core segments.

Disclaimer: This analysis is based solely on information disclosed in Union Steel Holdings Limited’s interim financial report for 1HFY2026. It does not constitute investment advice. Investors should consider their own risk profile and seek professional advice before making investment decisions.

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