LHT Holdings Limited: 1H2025 Financial Analysis and Investor Outlook

LHT Holdings Limited has published its unaudited interim results for the six months ended 30 June 2025. The report reveals a nuanced operational performance amid ongoing changes within the business and macroeconomic uncertainties. Below, we break down the key financial metrics, business trends, and notable corporate developments for investors.

Key Financial Metrics and Comparative Performance

Financial Performance Highlights

• Revenue: Rose 6.6% year-on-year to S\$14.47 million, driven primarily by a robust rebound in pallet and packaging sales (+13.9%). Other segments (timber-related, woodchip supply, pallet rental) saw declines due to operational shifts and lower volumes.
• Gross Profit: Fell 3.0% to S\$5.07 million, with gross margin narrowing to 35.1% (from 38.5%). The margin compression reflects a greater contribution from lower-margin pallet and packaging business.
• Net Profit: Dropped 9.7% to S\$1.34 million, attributable to weaker gross profit and other income, despite cost controls in distribution and administrative expenses.
• EPS: Declined 10.0% to 2.51 cents per share.
• Net Asset Value: Fell 2.7% to 99.03 cents per share, mainly due to dividend payouts and asset depreciation/amortisation.
• Dividend: No interim dividend declared for 1H2025, in line with the Group’s annual dividend policy.

Cash Flow and Balance Sheet Overview

• Operating Cash Flow: Improved to S\$2.86 million (1H2024: S\$2.51 million), supported by working capital discipline.
• Investing Cash Flow: Strong inflow of S\$8.91 million, mainly from fixed deposit withdrawals offsetting capital expenditure.
• Financing Cash Flow: Outflow of S\$3.39 million, less than last year due to reduced dividends and lease repayments.
• Current Assets: Down 4.1% to S\$45.94 million, as cash, inventories, and receivables were trimmed.
• Current Liabilities: Down 22.5% to S\$3.96 million, reflecting lower payables and tax provisions.
• Net Current Assets: Remained strong at S\$41.98 million.

Business Trends and Exceptional Items

• Business Mix Shift: The Group is actively relocating production bases (notably vacating Sungei Kadut Street 1 by March 2026), which impacts woodchip supply volumes and leads to short-term cost pressures but is expected to yield longer-term efficiency gains.
• Exceptional Items: No significant exceptional gains or losses were reported. The Group recorded S\$427,000 gain from disposal of assets in preparation for relocation.
• Related-Party Transactions: Aggregate value of transport services provided by related parties was S\$236,987, below the reporting threshold for shareholder mandates.
• Legal/Contract Risk: A customer notified subsidiary LHT Ecotech Resources of intent to terminate a woodchip supply agreement by end of the financial year, with negotiations ongoing.
• Potential Asset Sale: The Group received an irrevocable offer for its assets and business (deposit of S\$100,000 received), but no binding agreement has been reached.

Chairman’s Statement and Outlook

In light of the persistent global economic headwinds and evolving geopolitical tensions, the Group anticipates continued volatility and uncertainty across the industry. This will likely weigh on near-term growth visibility.

The ongoing relocation of production bases is part of long term capacity realignment strategy to better position the Group for scalable growth. While short term relocation costs will be incurred, the new setup is expected to yield cost efficiencies and operational flexibility post-transition.

The Company’s wholly-owned subsidiary, LHT Ecotech Resources Pte. Ltd. (“LHT Ecotech”), was notified by a customer of the termination of an agreement for the supply of woodchips (the “Agreement”). LHT Ecotech has engaged in discussions with such customer in relation to the continuation of the Agreement. If no mutually agreed terms are reached, the Agreement will expire on or around the end of the current financial year. The Company will make such necessary announcement(s) as required under the Mainboard Rules as and when there is any material development.

The tone of the statement is cautious, acknowledging industry volatility and the costs of transition, but remains constructive about long-term prospects following the relocation and capacity realignment.

Conclusion and Investment Recommendations

Overall Financial Position: LHT Holdings demonstrates resilience in revenue growth but faces margin compression and lower profits due to business mix changes, relocation costs, and contract uncertainty. Its balance sheet remains robust, with strong net current assets and prudent cash management, though near-term earnings visibility is clouded by ongoing transitions and macroeconomic risks.

Recommendations

• If you currently hold LHT Holdings stock: Consider maintaining your position if you are a long-term investor and can tolerate short-term earnings volatility. The Group’s proactive restructuring and strong balance sheet position it for future operational gains post-relocation. However, monitor developments on the woodchip contract and asset sale offer closely, as these could materially impact future results.
• If you do not currently hold LHT Holdings stock: Exercise caution before initiating a new position. Wait for greater clarity on the Group’s relocation progress, resolution of contractual issues, and confirmation of the asset sale offer. Entry may be appropriate once earnings visibility improves and strategic transitions are completed.

Disclaimer: The above recommendations are based solely on information disclosed in the company’s 1H2025 financial report and do not constitute investment advice. All investments carry risk. Please consult your own financial advisor before making investment decisions.

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