Results for the three months ended 31 March 2007 (3Q FY2007)
Q. MMH's revenue eased by 8.2% quarter-on-quarter to S$8.1 million in 3Q07. What were the reasons for the weak performance during the quarter?
A. Typically, the January-to-March quarter is a seasonally slower period for the semiconductor industry. Together with prevailing concerns over excess inventory in the chip industry, this resulted in the Group's slower sales.
However, the Group anticipates sales in 4Q07 to be higher compared to 3Q07, given our sales for April 2007 and taking into consideration that the typical April-to-June period is seasonally better than the preceding quarter.
Back to topQ. Why did the Group's net profit decline a steeper 16.3% to S$1.7 million?
The steeper decline in net profit was due mainly to increased costs arising from our investments in capital equipment and production personnel. During the first nine months of FY2007, we invested S$4.5 million in new equipment and added about 100 direct production personnel which resulted in higher depreciation and personnel costs of about S$384,000 in 3QFY07.
However, we believe these investments in equipment and personnel are the correct strategy to enhance our utilization, cycle time and capability, especially for our fledgling Custom Machining and Assembly division.
Q. Why did MM increase production headcount by 100 persons over the last 9 months? Where were these new hires and why at these locations?
The decision to add to our production headcount was made after the Group reported a record quarterly revenue of S$8.9 million in 1Q07 to ensure we would be ready to capitalise on the semiconductor industry's growth momentum into 2007 and its longer term prospects. The new personnel are mainly production operators and machinists at our plants in lower cost locations such as Malaysia, China and the Phillippines.
As we move into the last quarter of FY2007 and into FY2008, we foresee limited need for additional capital spending or new hiring. Our focus will now be on developing our personnel, optimising capacity utilization and improving operational capability and efficiency. This will ensure that Micro-Mechanics is better placed to ride the long term growth prospects of the semiconductor industry.
Q. What were the reasons for the weaker performances in the Singapore, the Phillipines and Thailand markets in 3Q07?
Sales to the Singapore market was down 25.2%, compared to 3Q06, due partly to seasonality as well as the ongoing trend of companies relocating their assembly and test operations to lower cost regions. As the Phillippines is considered a sub-contracting market for semiconductor manufacturing, the industry slowdown during the quarter had a more pronounced effect there. As a result, our sales in this market declined 29.8% in 3Q07. In Thailand, our sales fell by 25.5%, mostly due to customers slowing down their production volumes.
Q. What are the industries/customers/products that are currently driving the CMA business? What is the progress of MMH's alliance with D&H?
A. We continue to make encouraging progress with our fledgling CMA business, which notched up year-on-year sales growth of 31.8% in 3Q07. While the bulk of our CMA sales are still geared towards the semiconductor industry, we have also been successful in diversifying our sectoral exposure by securing orders from companies that are involved in handling systems as well as the medical and precision machining industries. Our strategic alliance with D&H Manufacturing Company is also progressing well. Our CMA division has already begun sending product shipments to D&H, which is a direct supplier to a leading semiconductor equipment manufacturer.