The Straits Times / The Business Times News on Hyflux

Hyflux profit slides 45% without one-off gains

Water treatment company Hyflux has reported that half-year profits fell 45 per cent to $12.6 million, mainly because one-off gains inflated profits in the same period last year.

The group, which uses membrane technology to treat water and other fluids, suffered an even more acute slide in the second quarter ended June 30, as net profits dropped 79 per cent from $14 million to $3 million.

Previously, it had booked gains from the sale of its property, as well as accounting gains from revaluing financial instruments.

However, Hyflux stressed that there was 'strong core earnings growth'.

Stripping out the one-off gains, profits for the first half actually soared 114 per cent from $5.8 million to $12.4 million.

Revenue surged 65 per cent in the first half to $71.2 million, with strong sales to industrial clients in the pharmaceuticals and biotechnology sectors. Looking ahead, Hyflux expects the second half to be stronger than the first half.

The company is focused on completing its projects in China, while chasing for opportunities in India and South-east Asia.

The previous day, Hyflux had announced its entry into the India market with a $17.1 million investment in an industrial water plant in Bangalore supplying industries.

As well, the rising oil prices may benefit Hyflux. Chief executive Olivia Lum said: 'The increasing oil price offers us a tremendous growth opportunity to apply our membrane technologies in oil recovery processing.'

The first phase of such a plant in Singapore is going well and will contribute to Hyflux's profits next year, she added.

Hyflux continues to focus on completing its 12 municipal projects in China - supplying drinking water to towns, for example - which will generate cash flow over the long term for the group. The order book for contracts stood at $382 million as at June 30, lower than the $465 million as at Dec 31.

Earnings per share fell from 4.67 cents to 2.44 cents, while net asset value per share marginally rose from 36.8 cents as at Dec 31 to 38.6 cents as at June 30.

Hyflux share price closed two cents higher at $2.16. It has drifted down and lost some 20 per cent of its market value since the start of the year. Last September, Ms Lum and investment firm 2G Capital pared their stakes to increase liquidity in the stock.

Analysts have expressed concerns over the lower profit-margin municipal projects in China. They are also concerned over whether Hyflux is able to win more contracts and deliver on existing ones.