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How Growth Concealed Vicplas International’s Massive Loss In FY2025 · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:08
  Welcome to the Deep Dive. We sift through the numbers and reports so you get the core insights.
• 0:12
  Today, we're digging into VicPlace International LTD's FY 2025 results.
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  Now, this is an interesting one. It's kind of two companies in one, really.
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  You've got medical devices, which is all about growth, and then pipes and pipe
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  fittings, much more steady.
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  And the first look at the numbers, It's a bit of a head-scratcher,
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  group revenues up, operational profit, adjusted EBITDA, that's up too.
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  But somehow, the losses got bigger. We need to figure out why.
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  Yeah, that's the paradox, isn't it? And it really tells the story of where VicPlace is right now.
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  Let's just lay out the top-line numbers for FY2025. These are all in Singapore
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  dollars, so total revenue.
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  S-115.8 million dollars, that's a pretty healthy jump.
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  13.1% from the previous year. Okay, solid growth there. And adjusted EBITDA,
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  which gives you a sense of the core operating performance, that also climbed,
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  up 16.2% to $8.5 million.
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  So the business operations themselves, they generated more profit.
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  Right. So things are moving in the right direction operationally.
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  But then the bottom line.
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  Exactly. The loss after tax actually widened quite a bit. They ended FY 2025
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  with a loss of S2.4 million dollars.
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  Compare that to the S1.4 million dollar loss in FY 2024.
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  Well, it's a 73.1% bigger loss. Wow. Okay. So that S 2.4 million dollars.
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  That's the cost of something strategic, right? Not just operational inefficiency.
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  Precisely. It's the price tag for positioning themselves for the future,
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  especially in that medical devices space.
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  Let's focus on that medical devices part then. Yeah. Forefront medical.
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  That seems to be where the action is. It's now, what, two-thirds of their business? Yeah.
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  A huge 66.7% of group revenue in FY 2025 came from medical devices.
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  It's absolutely the growth engine. So what powered that engine?
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  Why the big jump in medical revenue over 22%? Well, a lot of it comes down to
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  timing and inventory levels.
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  Remember the post-pandemic supply chain chaos?
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  Oh, yeah, the de-stocking wave. Exactly. So their major customers basically
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  finished adjusting the inventories from that period.
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  Orders started flowing more normally, maybe even catching up a bit.
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  That pushed their segment revenue up 22.3% to S77.2 million dollars.
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  Makes sense. Did it pick up pace during the year?
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  It really did. The second half of FY 2025 was particularly strong.
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  Sales hit S42.2 million just in H2, that's 34.1% higher than the second half of the previous year.
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  So real momentum building there. And they mentioned something about China specifically.
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  Yes, they're in China for China. Strategy seems to be paying off big time.
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  That specific business line grew, get this, 121.5% in FY 2025, reached $6.7 million.
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  So they're definitely making inroads locally there. Okay. Impressive top line growth in medical.
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  Yeah. But you said the segment still posted a loss. It did, still in the red.
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  But, and this is important, the loss is shrinking.
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  It was a negative S2.6 million dollar result for the segment.
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  Which is better then. Better than the S4.2 million dollar loss they had in FY 2024.
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  So they've improved it by S1.6 million dollars year on year.
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  They're heading towards profitability.
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  But, well, those big investments we'll talk about are keeping it negative for now. Got it.
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  Okay, before we dive into those costs that seem to be dragging the whole group
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  down, let's look at the other side of the business.
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  The pipes and pipe fitting segment, big glass pipes.
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  This is supposed to be the stable profitable part, right?
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  The cash count. Traditionally, yes, it's the consistently profitable arm,
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  but its contribution actually dipped a bit this year.
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  How much did it dip? Well, revenue was down slightly, just 1.7%,
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  landing at $38.6 million.
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  But the segmental profit, the positive result, came in at $6.7 million.
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  That's down 13.0% from the $7.7 million they made last year.
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  A million-dollar drop in profit from the steady segment. Why the slip there? Was demand down?
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  Not necessarily demand overall. They mentioned facing more intense competition,
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  which squeezed margins, plus dealing with voluble raw material prices and being
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  cautious about credit risks with customers.
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  So they chose stability over maybe pushing for higher sales.
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  Seems like it. They called it a prudent sales approach, basically managing credit
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  risk carefully and adjusting their selling prices quickly when raw material costs change.
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  So maybe sacrificing a bit of volume or margin for, you know, lower risk.
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  Are they doing anything new in that segment? Yeah, they've expanded into UPVC door products.
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  It's still early days, just starting commercialization, but it's an attempt
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  to diversify within that building material space.
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  Demand from Singapore housing is still expected to be strong, though.
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  Okay. All right. So now the big question. We had the pipe segment, profitable but less so.
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  We have medical devices growing fast, losses shrinking but still losing money.
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  How do those two combine to create a bigger overall group loss of S2.4 million dollars?
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  Where's the extra red ink coming from? This is where the strategy really hits
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  the financial statements.
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  The increased group loss is almost entirely down to the cost of getting their
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  major new expansions up and running, specifically the new plant in Juarez,
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  Mexico, and also an extension in Chengdu, China.
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  Ah, the startup costs. What kind of costs are we talking about? Let's tick them off.
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  First, raw materials and consumables used, up 8.9% to S54.7 million dollars.
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  That reflects the higher production activity, mostly in medical.
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  Okay, making more stuff cost more. Makes sense.
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  Second, employee benefits. Payroll, basically. That jumped 11.3% to $39.5 million.
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  And the main reason, hiring staff for the New Mexico plant before it was fully operational.
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  Right. So you're paying people while the factory is still ramping up.
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  That's a drag. A significant one.
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  Then you have the cost of the building and machines themselves.
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  Depreciation and amortization rose 10.6% to $7.7 million.
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  Again, mostly the New Mexico facility is starting to depreciate in the second
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  half of the year. So paying for the assets even before they're running at full steam. Exactly.
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  And fourth, how did they pay for this new factory? Borrowing.
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  So finance costs were way up 65.3% higher, reaching, I'll go, $1.7 million.
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  That's the interest on the debt taken on mainly for the Mexico plant. Okay.
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  Prior material costs, higher payroll for the new plant, depreciation on the
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  new plant, interest on debt for the new plant.
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  That paints a clear picture. Anything else significant? Yes.
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  One more big swing factor, especially when comparing year on year, foreign exchange.
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  Ah, the Forex impact. Was it bad this year? It was.
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  In FY2025, they recorded a net foreign exchange loss of Sibahoff $9 million.
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  But here's the kicker. In FY2024, they actually had a Forex gain of S1.1 million dollars.
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  Wow. So that's an S2 million dollar negative swing just from currency movements
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  comparing the two years. Precisely.
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  That swing alone accounts for a huge chunk of the increase in the net loss from FY24 to FY25.
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  It's not an operational cost from the expansion itself, but it definitely made
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  the headline loss look worse this year. Okay, that helps connect the dots.
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  So the bigger loss isn't really about the core business failing.
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  It's the upfront investment pain for Mexico and Chengdu, plus an unlucky forex swing.
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  So what's the outlook now? When does this pain potentially turn into gain?
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  Management sounds, I say, cautiously
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  optimistic. They expect overall group revenue growth to continue.
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  And for the medical segment specifically, will that turn profitable soon?
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  Revenue should keep improving there. They've got new projects coming online,
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  and the Mexico plant will gradually ramp up its commercial production.
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  But, and they're quite clear on this, the segmental result, the profit or loss
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  for medical devices, will likely be constrained in the short term.
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  Meaning still loss-making for a while.
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  Probably. Or maybe just hovering around breakeven. They still have to absorb
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  all those fixed operating costs and the depreciation from both Mexico and the Chengdu extension.
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  Utilization needs to climb higher before those fixed costs are properly covered.
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  So profitability lags revenue growth for now.
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  What's the prize at the end of this tunnel? Why take on all this cost and complexity?
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  The long-term strategic prize is significant. This Mexico plant isn't just about
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  adding capacity. It's about geographic diversification.
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  It gives them a near-shoring option for U.S. customers, a China plus one capability,
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  which is really important for supply chain resilience these days.
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  A big draw for medtech companies, I bet. Absolutely.
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  They know that it's already proving popular and attracting new projects.
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  So once they get through this phase of absorbing the startup costs,
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  They should have much greater manufacturing flexibility and be really well-positioned
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  for growth in the U.S., Europe,
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  and even Japan. And the outlook for the steady pipe segment.
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  Stable. Demand in Singapore is expected to hold up, especially from public sector construction.
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  But they'll have to keep managing that competition, the cost pressures,
• 8:44
  and the credit risks very carefully, and keep an eye on those new door products.
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  Any big worries on the horizon?
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  Macro stuff. They mentioned being vigilant about global challenges,
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  specifically calling out global trade and tariff policies.
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  Standard, cautious corporate language, but something they're watching.
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  OK, so if we boil it all down for the listener. Yeah. Vic Plus is basically playing the long game.
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  Absolutely. They're consciously trading short term profit.
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  Hence the $2.4 million loss driven by those expansion costs for what they hope
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  will be a much stronger, more flexible long term position in the medical device
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  manufacturing market. Building the foundation now, paying the price now for
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  future growth. That's the strategy.
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  Recognizing that building this kind of global footprint, especially with the
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  Mexico facility, it just comes with a hefty upfront cost.
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  Right. And that sets up our final thought for you, the listener.
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  The source material highlights the massive market VicPlus is targeting.
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  The global medical device contract manufacturing space could hit something like U.S.
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  $216 billion by 2034. Vic Plus has clearly taken on significant financial pressure
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  today, higher costs, more debt to build the capacity and the strategic footprint
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  they believe they need to capture a bigger slice of that pie tomorrow.
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  So the question is, do you think this big expensive bet on expansion,
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  prioritizing future market share over current profitability,
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  will actually pay off over the next decade?
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  Will they successfully navigate this costum and achieve that market leadership?
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  Something to think about.
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  That's it for this deep dive. We'll catch you on the next one.