HG Metal Manufacturing Limited: 1H2025 Financial Analysis

HG Metal Manufacturing Limited released its condensed interim financial statements for the half year ended 30 June 2025. The report provides comprehensive insights into the Group’s financial health, recent performance, and the macroeconomic context affecting its operations. Below is a detailed analysis based strictly on the disclosed information.

Key Financial Metrics and Performance Table

Historical Performance and Trends

• Revenue: Rose 20% YoY, driven by a 35% increase in sales volume, despite an 11% fall in average selling prices due to continued steel price declines.
• Gross Profit: Increased by 11% YoY, but gross margin fell by 1.0 percentage point to 12.6%, reflecting margin pressure from lower steel prices.
• Net Profit: Net profit from continuing operations dipped slightly by 2% YoY, while total net profit (including discontinued operations last year) rose 5%.
• Cash Position: The Group maintained a strong cash position, with S\$54.8m as of 30 June 2025 compared to S\$19.1m in the prior year, though slightly lower than at the end of 2024.
• Bank Borrowings: Decreased to S\$5.6m from S\$6.7m at the previous year-end, indicating deleveraging.

Operational Review and Exceptional Items

• Other Operating Income: Fell from S\$1.0m to S\$0.7m due to the absence of prior-year foreign exchange and derivative gains, partly offset by higher interest income.
• Selling & Distribution Costs: Up 48% YoY to S\$0.9m, reflecting higher sales activity and increased use of outsourced logistics.
• Administrative Expenses: Down 11% due to lower salary costs.
• Other Operating Expenses: Jumped 67% to S\$2.7m, mainly from a S\$1.2m loss on foreign exchange and derivatives, partially offset by a lower provision for inventory write-downs.
• Finance Costs: Dropped by 23% due to reduced trade financing and loan repayments.
• Discontinued Operations: The Group completed the disposal of its Myanmar subsidiary in February 2024, with no further losses in 1H2025. The prior year included a S\$2.53m loss from discontinued ops, distorting the YoY EPS comparison.

Divestments, Fundraising, and Corporate Actions

• Divestment: Completed the sale of First Fortune International Company Limited (Myanmar) in February 2024, with total losses (including waiver of intercompany debts) of S\$3.25m recognized by 31 Dec 2024.
• Fundraising: No new share placements in 1H2025. In the past year, S\$39.4m was raised via rights issues and placements, with the majority of proceeds still unutilized.
• Share Capital: Remained at S\$109.9m, with 274.7m shares outstanding (excluding 1.9% held as treasury shares).

Related-Party and Exceptional Transactions

• Related-Party Transactions: Continued purchases from BRC Asia Limited under renewed shareholder mandate, amounting to S\$25.5m in 1H2025.
• No Dividends: No interim dividend declared, as management prioritizes cash conservation for operational needs and expansion.

Macroeconomic and Industry Context

• Macroeconomic Environment: Singapore’s GDP grew by 4.3% in Q2 2025. The manufacturing sector (including construction steel) rebounded 5.5% YoY, and the construction sector grew 4.9% due to robust public sector projects.
• Steel Price Trends: Singapore steel rebar prices dropped 13% YoY, extending a price decline since 2023 due to global oversupply and redirected Chinese exports.
• Industry Outlook: The Building and Construction Authority forecasts S\$47–S\$53 billion in construction contract demand for 2025, above 2024 levels, supporting future demand for construction steel.

Management Discussion and Outlook

• Management notes that while revenue grew strongly, margin pressure from lower steel prices and increased operating costs offset much of the top-line gain.
• Price volatility in the steel market increases inventory and procurement risks, including the risk of inventory devaluation.
• The Group is focusing on tighter inventory management, just-in-time purchasing, operational efficiencies, and cost control to defend margins and navigate market volatility.
• No dividend payout is planned in the near term as the company aims to conserve cash for operational and financial flexibility.

Conclusion: Financial Strength and Outlook

HG Metal Manufacturing Limited delivered a solid top-line performance in 1H2025, overcoming a challenging pricing environment with increased sales volumes. However, net profit and margins remain under pressure from falling steel prices and higher costs, and the absence of extraordinary gains seen in the prior period.

The company’s balance sheet is strong, with high cash reserves, lower borrowings, and a healthy net asset value per share. The successful divestment of the Myanmar operation removes a loss-making segment from the Group’s results.

The outlook is cautiously optimistic: while robust construction demand in Singapore supports future revenue, global steel oversupply and price volatility are expected to persist, posing risks to margin recovery. Management’s focus on inventory control and operational efficiency is appropriate for the current environment.

Overall, the Group’s financial performance and outlook appear neutral to modestly positive: revenue growth is robust, the balance sheet is strong, but earnings growth is constrained by external market forces and cost pressures. Investors should watch for sustained margin recovery and prudent capital allocation as key drivers of future performance.

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