Latest / Investor Exchange / Sanli Environmental FY2025 Financial Results: Growth, Costs, and Outlook

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Sanli Environmental FY2025 Financial Results: Growth, Costs, and Outlook · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:08
  Welcome to the Deep Dive. Today we're digging into Sanley Environmental Limited,
• 0:12
  specifically their latest financials. That's right.
• 0:14
  The full year results ending March 31st, 2025.
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  We've got the announcement right here. And our mission, as always,
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  is to pull out what really matters, you know, what happened,
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  why, and what they expect next. And the headline is, well, it's interesting.
• 0:30
  Revenue actually jumped quite a bit. Yeah.
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  Significantly up, but then, uh-oh, profit took a nosedive. Big time.
• 0:36
  Exactly. It's a bit of a paradox. So let's try and unpack that.
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  Okay. Let's start with the what?
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  The hard numbers. FY 2025 versus the year before. Right. So revenue, as you said, was up.
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  Climbed 20.7% to S$157.6 million.
• 0:49
  Pretty solid growth there. Solid top line, definitely. But then you get to the
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  profit. Mm-hmm. That's where the story changes.
• 0:54
  Profit for the year dropped 42.0%, landed at just S1.7 million dollars.
• 1:00
  Oh, wow. 42%. That's substantial.
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  And the gross profit margin tells a similar story. Yeah, it does.
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  Fell from 12.4% down to 9.3%. So less profit on each dollar of revenue,
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  basically. Before overheads, even.
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  And wasn't there something about the second half being particularly tough?
• 1:15
  Yes. Good point. The source actually notes they slipped into a small net loss
• 1:20
  in the second half of the year. That's compared to a profit in the same period last year.
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  Okay, so things definitely got tougher as the year went on. Seems that way.
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  Those cost pressures likely intensified. Right. So let's get into the why.
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  How do you have revenue climbing over 20% but profit falling over 40%?
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  Doesn't seem right initially. Well, it breaks down by segment.
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  The big driver for that revenue increase was their operations and maintenance, the O&M side.
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  That segment almost doubled its revenue year on year. Just a higher volume of
• 1:51
  orders coming through. So O&M was firing on all cylinders.
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  But that wasn't enough to carry the profit.
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  Apparently not. Because the other major part, engineering, procurement, and construction EPC.
• 2:03
  That's where the problems were. Ah, the big projects side. Exactly.
• 2:07
  While EPC revenue was up slightly, its gross profit actually fell quite a bit.
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  That dragged the whole group's profit down. So what was squeezing the margins
• 2:16
  in EPC? It sounds like classic cost pressures.
• 2:19
  The announcement mentions higher labor costs, more expensive subcontractors,
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  and rising raw material prices.
• 2:26
  Okay, makes sense in the current climate. And they specifically called out older
• 2:30
  projects, described as legacy COVID-era projects, that are nearing completion.
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  Finishing those seems to be costing more than they originally budgeted.
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  Right. Getting those over the line is hitting the bottom line now.
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  Any other cost issues mentioned? Yeah, a couple of other things. Finance costs were up.
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  They took out a loan for a new property, plus had short-term borrowing for some
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  major projects. Funding costs more.
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  And also higher depreciation, mainly because of that new building they acquired.
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  So investments are adding to the cost base, too. Got it.
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  Did they say anything positive about their newer ventures, the emerging business segments?
• 3:03
  They did touch on it. Mentioned their chemical manufacturing.
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  CHM, entered the marine sector.
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  And the renewable energy side, RES, started generating its first recurring income over in Thailand.
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  So some forward movement there, even if the overall segment dipped a bit because
• 3:19
  a big project finished last year. Exactly.
• 3:22
  Small steps, building blocks for the future, perhaps. OK, so that's the performance and the reasons.
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  What about looking ahead? The what next? What's the outlook?
• 3:30
  Well, first, the order book.
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  As of the end of March 2025, it stood at MOTutor $28.6 million.
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  OK, decent backlog, mostly EPC. Yeah, mostly EPC. And they expect to work through
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  that by fiscal year 2027.
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  And are they actively chasing more work? Oh, yeah. They highlighted several areas.
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  They're expecting a, quote, sizable pipeline of new EPC tenders in Singapore.
• 3:54
  Good. More local projects, potentially.
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  Plus, trying to expand their O&M contracts, that stable base.
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  Also pushing deeper into the market with their chemical products,
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  looking at industrial tenders regionally, and growing that renewable energy portfolio.
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  So building on both the core and the new stuff. Correct. They mentioned they're
• 4:10
  building two more solar projects in Thailand right now. Okay. Sounds like a plan.
• 4:14
  But was there a but? Usually there's a cautionary note. There absolutely was.
• 4:19
  A fairly strong one, actually.
• 4:20
  They flagged ongoing macroeconomic uncertainties, geopolitical tensions.
• 4:26
  Supply chain issues, and inflation. The usual suspects these days.
• 4:30
  Right. They explicitly said these continue to be challenges impacting their costs and operations.
• 4:35
  So those headwinds aren't going away quickly. And that caution is reflected
• 4:38
  in the dividend too, right? Yes.
• 4:40
  Lower profit led to a lower recommended final dividend. It's 0.173 cents per
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  share for FY 2025, down from the year before.
• 4:49
  Okay, so wrapping this up, the picture seems to be one of successful growth
• 4:53
  in revenue, particularly from O&M. Definitely.
• 4:56
  And they're actively pursuing new opportunities across the board.
• 4:58
  And it's a significant but.
• 5:00
  Profitability is really being challenged right now, mainly by those rising costs
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  in the core EPC business, hitting older projects, and just the broader,
• 5:08
  tough economic environment.
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  It really highlights how different parts of a business can perform well,
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  very differently under pressure.
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  So the provocative thought to leave you with is this.
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  Sanley is juggling this revenue growth against some serious cost headwinds.
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  How will that balance between the traditional lumpier EPC work,
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  the more stable O&M income, and these newer emerging businesses ultimately shape
• 5:32
  their profitability going forward?
• 5:34
  Yeah, it's a classic case study playing out. How they navigate these pressures will be key.
• 5:40
  Thank you.