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CosmoSteel Holdings 1HY2025 Factsheet · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:07
  You know, when you look at a company's financial report, all those numbers,
• 0:12
  the jargon, it can feel a bit much, can't it? Oh, definitely.
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  You just want to know, simply, is this company doing okay?
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  Where are they headed? Because understanding that, well, it's crucial,
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  whether you're thinking about investments or checking out the competition,
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  or maybe you just find business fascinating. Absolutely.
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  Think of them like a company's story, but told with numbers. Yeah.
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  And our job today really is to help you read between those lines to understand
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  what that story is actually saying about their present and their future.
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  Okay, so today let's zoom in on Cosmo Steel Holdings Limited.
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  They're a pretty established name in Southeast Asia, nearly 40 years in the game.
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  Right. Supplying piping system
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  components, vital stuff, mainly for the energy and marine industries.
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  And it's a big operation. I think huge warehouses in Singapore and Malaysia.
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  Something like 466,000 square feet.
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  Massive. And packed with inventory, over 20,000 different items.
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  Exactly. Plus, they've got a whole suite of certifications, ISO 9001,
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  others, and they actually ranked pretty decently, 151st out of nearly 500 in
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  the Singapore Governance and Transparency Index this year.
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  And those things, the long history, the certifications, they do suggest a certain
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  level of operational solidity.
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  A baseline commitment to standards. It's a good backdrop for diving into the
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  finances. Precisely. So that's our mission for this deep dive.
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  Get into Cosmo Steel's numbers for the first half of 2025 1HY 2025.
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  We want to understand not just what happened, but why. What drove the performance
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  and what do they think is coming next? And we've got the key documents here.
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  The 1HY 2025 fact sheet, the investor update that breaks down segments and markets
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  and the main results announcement itself.
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  Okay, ready to dig in? Let's do it. Starting with the big picture financials
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  for this first half and maybe compare them to previous periods.
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  All right. So headline numbers for 1HY 2025, that pretty eye-catching,
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  revenue hit $71.5 million.
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  OK. Now get this. Same time last year, 1HY 2024, it was only $35.5 million.
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  That's what, 101.3% jump? Wow. More than double. That's huge.
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  Huge. And just for context, their total revenue for all of 2024 was $71.9 million. dollars.
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  So they basically matched their full prior year revenue in just six months.
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  That's some serious acceleration.
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  It really is. Yeah. That immediately makes you ask, OK, what's behind that surge?
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  Is it just booming demand in their
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  main sectors or did they crack some new markets? Maybe a bit of both.
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  And the good news continues when you look at profit.
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  They flipped from a loss to, well, a solid profit. Profit before tax for 1HY 2025 was $2.3 million.
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  Compare that to a $1.5 million loss before tax in 1HY 2024.
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  Right. And remember, for the full year 2024, they lost $5.1 million before tax.
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  So yeah, quite the turnaround.
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  That swing to profitability is definitely a key development.
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  It suggests that massive revenue jump isn't just empty calories.
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  It's actually hitting the bottom line.
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  That's what you want to see, right? Growth driving profit. The net profit story is similar.
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  $2.3 million profit this half versus a $1.3 million net loss last year and a
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  $4.9 million net loss for all of FY 2024.
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  Earnings per share followed suit 0.00087 profit per share this half compared to losses previously.
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  Now, one point for anyone tracking dividends. No dividend declared for 1HY 2025. Same as 1HY 2024.
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  And while that positive EPS is good news, the lack of a dividend might make
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  you wonder about their priorities.
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  You know, are they plowing everything back into the business for more growth
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  or maybe shoring up the balance sheet? The reports might give us some hints there. Good point.
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  Let's try and pinpoint where that big revenue boost came from sector wise.
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  The energy sector was up 101.5%, pretty much in line with the overall jump.
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  Makes sense. Core business doing well.
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  Marine sector up a healthy 83.5%, trading up 50%. But here's the really interesting bit.
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  The other sector. It shot up by 270.2%. Whoa, okay.
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  270%. That really stands out. It does. For you listening, that kind of explosive
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  growth in a category just called others, well, it makes you wonder what exactly is that.
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  Exactly. That's something you want to dig into in the full reports.
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  Is it a new service line? a completely different product category,
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  maybe some project work.
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  Understanding what's driving that specific growth could tell you a lot about
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  where Cosmo Steel might be heading, maybe beyond their traditional areas.
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  Definitely worth watching.
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  Now, geographically, Singapore was the powerhouse. Revenue there grew an incredible 292.1%.
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  292%. Yeah. It now makes up over 71% of their total revenue this half.
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  We also saw more coming from Vietnam and Uzbekistan, which sounds positive for
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  those markets, but the share from other countries actually dropped.
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  Hmm. So a heavy reliance on Singapore for this growth spurt.
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  Seems like it could be something to keep an eye on, that concentration.
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  Yeah, it shows really strong performance domestically. But you might ask,
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  is that sustainable at that level? And why the drop-off elsewhere?
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  Was it strategic or just market conditions?
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  The growth in Vietnam and Uzbekistan, though, that's promising.
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  Okay, let's switch gears to profitability factors.
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  Gross profit did go up by 38.4%, which sounds good on the surface.
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  Right, more profit dollars.
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  But, and this is key, their gross profit margin actually fell from 13.9% last
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  year down to 9.5% this half.
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  Okay, so they're making more money overall, but less profit on each dollar of
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  sales. That seems incredible.
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  Counterintuitive. It does feel that way initially. What's going on there?
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  Well, the key is likely in the cost of sales.
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  While revenue more than doubled, their cost of sales must have increased even faster.
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  The report likely confirms this, showing a jump of, say, 111.4% or something similar. Yeah, I see.
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  That faster rise in costs eats into the margin on each sale.
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  Could be higher material prices, maybe increased shipping costs with the higher
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  volume, or even just selling more or lower margin products, perhaps.
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  So for you, it underlines why just looking at revenue isn't enough.
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  You have to see how much it costs to get that revenue. That makes perfect sense.
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  Okay, another big item impacting profit. Yeah. Finance costs.
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  They went up massively, 182.9%. The company attributes this mainly to higher
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  use of trust receipts financing.
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  Can you quickly explain what trust receipts are and why the big increase? Sure.
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  Trust receipts are a common tool in international trade finance.
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  Essentially, the bank pays the supplier, releases the goods to the buyer,
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  Cosmos Steel in this case, but technically retains ownership until Cosmo Steel
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  pays the bank back, often after selling the goods.
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  The huge jump in financing using these suggests they're really leaning on this
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  method to fund the increased purchasing needed for that big revenue growth we saw.
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  It helps cash flow for trade, but yeah, it comes with higher interest costs
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  hitting that profit line. Got it.
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  On the positive side for profit, depreciation expense dropped quite a bit,
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  down 44.6%. Okay, less depreciation.
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  Why? They explain it's mostly because they reclassified a property 92nd Luck
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  Yang Road as held for sale.
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  Ah, the accounting treatment. Exactly. Once it's held for sale,
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  you stop depreciating it.
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  They expect to sell it roughly within a year from September 2024 when the option was exercised.
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  So for you, this change directly bumps up reported profit in the short term,
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  even if no cash changed hands yet. Precisely.
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  It's an accounting impact, not an operational one right now.
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  The real financial impact comes later when they actually sell the property.
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  You'll want to watch for the gain or loss they eventually realize on that sale
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  that tells you more about their asset management.
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  And one more profit factor. Other gains losses.
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  There is a big positive swing here. This half, they had gains mainly from foreign
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  exchange FX transactions and translation.
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  Last year, they had losses in this category. Ah, FX.
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  Always a factor for international players. Yeah, those currency movements can
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  really swing things, can't they?
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  For you, it just highlights how global factors like the USDSGD rate they mentioned
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  can impact the bottom line. Absolutely.
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  Given their operations and that specific mention in their outlook about the
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  USDSGD rate, these FX gains clearly help the profit picture this half.
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  But, and this is crucial for you to remember, FX gains aren't usually stable.
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  They can easily reverse next period depending on market moves.
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  It's not core operational profit.
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  Okay, let's pivot to the balance sheet. Assets first.
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  Current assets increased, mostly because trade and other receivables shot up.
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  Okay, selling more but waiting longer for the cash. Seems like it.
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  This was partly offset by drops in cash and cash equivalents and also inventories were down.
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  What does that mix tell you about operations?
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  For you, these shifts can signal changes in how they manage working capital?
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  Well, the big rise in receivables often goes hand in hand with higher sales.
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  There's just a lag collecting the cash. It ties up working capital.
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  The lower inventory could be good, efficient management selling stock quickly.
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  Or maybe they deliberately cut stock levels, the lower cash.
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  Well, that could be funding the higher receivables, paying for higher costs
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  or servicing that increased debt. Makes sense. Now, liabilities.
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  Current liabilities also jumped significantly, mainly higher short-term loans
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  and borrowings. Probably linked to that trust receipt financing.
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  Very likely. Although trade and other payables actually decreased a bit,
• 9:28
  non-current liabilities dipped slightly.
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  Overall, total equity went up thanks to the profit they made.
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  Good to see equity growing.
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  But interestingly, the net asset value, the NAV per share, actually fell slightly,
• 9:41
  from 29.74 cents to 29.31 cents. How does that square?
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  Hmm, equity up, but NAV per share down slightly.
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  It could be due to various factors, maybe an increase in the number of shares
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  outstanding, or perhaps other comprehensive income changes not reflected in the net profit.
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  For you, that's another detail worth checking in the full statement of changes in equity.
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  But the main takeaway is the increased reliance on short-term debt.
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  Okay, finally on the numbers, cashflow.
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  Bit of a mixed bag here. Cash used in operating activities increased significantly. Even with profit.
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  Yes, mainly due to those working capital changes, like the receivables buildup.
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  Right. Profit on paper doesn't always equal cash in the bank immediately.
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  Cash used in investing activities decreased, though, because they spent less
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  on capital expenditures, like new equipment.
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  Scaling back on investment for now. Seems so. And cash from financing activities
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  saw a substantial increase, mainly for more borrowing. Okay,
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  borrowing more to cover operations and maybe compensate for lower operating cash flow.
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  The net result, a decrease in their overall cash and cash equivalents during the half.
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  So what's the key message from these cash movements?
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  For you, tracking how cash is generated and used is vital for judging sustainability,
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  isn't it? Absolutely critical.
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  This picture shows profit, yes, but also that profit isn't fully converting
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  to operating cash flow right now, likely due to working capital needs from growth.
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  They're bridging the gap with financing.
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  You'd want to monitor if that operating cash generation improves in the future.
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  So shifting to their outlook, what does Cosmo Steel itself say about the future?
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  Their strategies sound, well, pretty standard.
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  Boost revenue, find new markets, stay competitive, manage costs carefully.
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  Yeah, those are common goals for growth-focused companies. The emphasis on new
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  markets and competitiveness suggests they want to keep this momentum going.
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  For the rest of 2025, they expect revenue to keep improving,
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  even though they mention challenging conditions.
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  OK, optimistic on the top line. But they expect continued pressure on profit margins.
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  Basically, they need to stay competitive on price, which will squeeze margins.
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  Right. So the margin issue we saw in the first half might persist.
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  And they specifically flag, again, that the USD to SGD exchange rate will likely affect results.
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  So for you, these forward-looking comments give clues about the headwinds and
• 12:02
  tailwinds they anticipate. Definitely.
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  Continued margin pressure is a key watch point. And that FX sensitivity is clearly
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  front of mind for them, so should be for...
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  Anyone analyzing them, too. They do mention some specific expansion plans,
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  notably getting into Vietnam's wind energy sector. That sounds interesting.
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  It does. Wind energy is a major global growth area.
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  So tapping into that in Vietnam could be a significant long-term opportunity.
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  They're also looking at new markets in Central Asia and trying to build more
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  recurring income by offering more non-steel products.
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  Diversification, essentially. Which makes sense. Expanding geographically into
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  Central Asia and diversifying products away from just steel piping components,
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  those are classic strategies to reduce risk and build a more resilient business over time.
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  Whether they execute successfully, that's what you'll need to track.
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  All right, let's try and wrap this up.
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  Our deep dive into Cosmo Steel's first half of 2025. Well, it showed a really striking turnaround.
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  Yeah, strong revenue growth back in the black on profit, driven largely by that
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  energy sector and especially the Singapore market.
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  But as we discussed, it's crucial for you to look underneath that headline.
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  Remember the squeezed gross margins, the big jump in finance costs and the impact
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  of things like that property reclassification and the foreign exchange gains,
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  which aren't necessarily core operational improvements.
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  You need the full picture. And looking forward, they're hopeful about revenue,
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  but cautious about margins and very aware of currency risks.
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  Right. And those strategic plans for Vietnam wind energy, Central Asia,
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  non-steel products, those are the potential future growth stories to watch.
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  But it's important to remember, these are their expectations.
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  Actual results depend on markets, competition, execution, all the usual uncertainties. Exactly.
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  Management outlook is one thing, reality can be another. So for you listening,
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  thinking about Cosmosteel's results and their plans, what are the key things
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  you would monitor going forward?
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  How would you gauge if their strategies are really working.
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  We've covered a lot, but there's always more detail in the full reports.
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  Definitely encourage you to take your own deeper look if you're interested.
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  What other factors might influence their path from here? That's something to multiply.
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  Music.