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Stamford Tyres: FY25 Financial Results and Performance Review · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:07
  Welcome to the Deep Dive. Today, we're taking a deep plunge into the financial
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  performance of Stanford Tires Corporation Limited, STCL, a pretty well-established
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  player in the tire and wheel business listed right there on the Singapore Exchange.
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  We've got their latest financials, The full year ended, April 30, 2025, right here.
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  Our mission today, not just reading numbers, we want to unpack why things move
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  the way they did, really focus on the story behind the performance and what
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  it might suggest for the future. Exactly.
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  And what's really fascinating here, I think, is how the surface figures,
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  the headlines, can often hide what's really going on underneath.
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  It's just so crucial to look beyond that top line revenue number to,
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  well, to really get a handle on the health and maybe the challenges,
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  too, of a company like STCL.
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  And just a quick note before we dive in, something you should know.
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  The company states these full year results we're discussing.
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  They're the company's own numbers.
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  They haven't actually been audited or reviewed by external auditors yet. So it's their snapshot.
• 1:03
  Right. That's a really important piece of context. Thanks for highlighting that.
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  Yeah. OK, so let's get straight into it.
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  The thing that immediately jumps out, and honestly, it's quite a jolt from their
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  income statement, is this dramatic drop in profit.
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  I mean, really dramatic. Look at profit before tax.
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  It plummeted down a staggering 75.22 percent for the full year,
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  went from about $7.8 million in FY24, down just as $1.9 million in FY25.
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  That's, well, that's a massive hit. And it looks even starker when you focus
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  on the net profit, the bottom line for the financial year.
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  That saw an 84.67% decline, 84%. It settled at just a $7.9 to $1 million in FY25.
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  Compare that to over $6 million the year before. I mean, to put it simply,
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  for every dollar of profit they made last year, they made less than 15 cents this year.
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  And that, of course, flows straight down to earnings per share.
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  A big drop there too, from 2.53 cents in FY24 to pretty lean 0.39 cents in FY25.
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  So yeah, for investors, it paints a very different picture this year.
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  It's a sharp decline, no doubt about it.
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  But here's where it gets like really interesting, maybe even a bit counterintuitive
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  for some of you listening.
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  Despite this huge hit to profit, STCL's total revenue, it actually went up slightly.
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  So when you see that revenue up,
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  Profit's way down. Where does your mind go first? What's the first thing you start digging into?
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  Yeah, that's the core puzzle, isn't it? My immediate thought,
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  and I think for most analysts, it goes straight to the cost.
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  Has to. If more money's coming in the door, but way less is sticking around
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  at the end, well, it usually means the cost structure is under pressure,
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  or maybe something fundamental changed about how profitable each sale is.
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  For SDCL, total revenue for FY25 was $193.1.8 million.
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  That's a 1.53% from the previous year. And most of that growth came from their
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  main business, tires and wheels, where external revenue grew 1.58%.
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  So they are selling more, which leads straight to that question.
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  If revenue is up, what explains such a huge hit to profit?
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  You really have to dig into the why. Okay, let's unpack that why.
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  You get the nail on the head costs. And yeah, the numbers here definitely tell
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  a story about expenses going up.
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  Their cost of goods sold, cotchiest basically, the direct cost of the tires
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  and wheels they sell that increased by 4.26% for the full year.
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  Went from S136 million dollars to almost S142 million dollars. Right.
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  And that's not just a number going up. It's a real shift in their core profitability per sale.
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  Because Kajias went up faster than revenue, their gross profit sales minus Kajias took a hit.
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  It actually decreased by S2.9 million dollars.
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  Landed at S45.8 million dollars. So their gross profit margin,
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  that key percentage telling you how much is left after paying for the goods,
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  that dropped from 26.3% down to 24.4%. And the company itself points to higher
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  cost of tires is the main reason.
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  It's like running a shop, selling more stuff, but the price you pay your supplier just jumped.
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  Suddenly you're working harder just to make less on each item.
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  So they're moving more product, but each tire, each wheel, is costing them more
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  to get in the first place, squeezing margins right at the start.
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  But it wasn't just CodGS, was it?
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  It seems like there were other significant hits further down the income statement too. Oh, absolutely.
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  Several other key expense lines also increased, putting even more pressure on
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  that profit, other operating expenses, for instance.
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  That category absolutely skyrocketed. It jumped by a massive 92.11% for the
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  full year, hit $5.5 million.
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  62%, wow. Yeah, nearly double what it was the year before.
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  Now that category can include a mix of things, admin costs, maybe some legal
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  fees, other operational stuff.
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  A jump like that really makes you wonder what specifically drove it.
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  We also saw depreciation tick up by about 8 percent, hitting $5.3 million.
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  Lease expenses also rose up around 6 percent to S2.1 million dollars.
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  And finance costs nudged up slightly, about 1.5 percent to $4.9 million.
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  That often suggests, you know, increased borrowing. That 92 percent jump in
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  other operating expenses really does stand out.
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  Were there any sort of one off things that maybe helped them last year but didn't
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  repeat this year, like left cushion?
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  That's a really good point. And yes, something crucial here is the gain on disposal
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  of property, plant, and equipment.
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  It was way lower this year. It was only about $3.7 million in FY25.
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  Compared to almost $2 million in FY24. So basically, they made much less money
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  selling off old assets this year compared to last.
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  Think of it like finding less spare change in the couch cushions this year.
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  It's less extra income boosting the bottom line. Okay, that makes sense.
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  Now, to be fair, it wasn't all negative on the expense side.
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  They did report slightly lower salaries and employee benefits and a bit less
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  spent on marketing, distribution, utilities, and maintenance.
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  But those big increases we talked about, especially Kudgy S and that huge jump
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  in other operating expenses, they definitely outweighed the savings elsewhere.
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  And wasn't there a foreign exchange impact as well?
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  Dealing internationally must have currency risks. Yes, absolutely.
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  Another drag on the bottom line was a bigger foreign exchange loss.
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  It went from about S1.1 million dollars last year to S2.1 million dollars this
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  year. Basically doubled.
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  When you're buying and selling globally, currency swings can really bite,
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  and it seems they took a bigger hit this year. And here's another interesting flip.
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  Last year, FY24, they had a right back of doubtful trade receivables.
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  That's like getting paid for an old debt you thought was lost.
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  It was a positive impact of nearly S1.8 million dollars. Right.
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  But this year, FY25, it flipped. They had an allowance for doubtful trade receivables.
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  That's a negative impact of about $7.7 million.
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  So they went from an unexpected gain last year to having to set aside money
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  this year because they expect not to collect on some current debts.
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  That's quite a negative swing.
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  Okay. Got it. And just quickly, their share of results from joint ventures,
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  that was a small positive, right?
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  It increased a bit. Yeah, it did provide a small boost, up slightly to $0.9
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  million, but like you said, nowhere
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  near enough to offset those bigger pressures we've been discussing.
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  OK, so we've seen the profit drop and the finger points squarely at rising costs
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  and maybe less one-off help.
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  But let's pull back the curtain now on how all this affected their actual financial
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  structure, their balance sheet.
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  What does this all mean for the company's financial position?
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  That's the next logical step.
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  The balance sheet shows us what they own and what they owe. On the asset side,
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  non-current assets like property, plant and equipment or PPE,
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  they actually increased a bit, rose to S-47 million dollars from S-45.9 million dollars.
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  The company says this was mainly because they bought some new properties in Indonesia.
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  So that's an investment in the future. But what's maybe more telling is the jump in current assets.
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  Inventories, their stock of tires and wheels really surged, went from $68.5
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  million up to $81.2 million.
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  That's a big increase. And trade receivables, the money customers owe them,
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  also went up from $30.4 million to S33.7 million.
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  So holding a lot more stock and waiting longer for customer payments, it seems.
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  How did they fund all that? Where did the money come from?
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  Well, if we connect the dots, those increases in inventory and receivables,
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  they have to be funded somehow. And that usually impacts liabilities and cash.
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  On the liability side, trade payables and trust receipts.
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  These are essentially short-term debts often used to finance inventory.
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  They jump significantly.
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  From S45.5 million dollars up to 56.4 million dollars. Trust receipts.
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  Can you just quickly explain what those are? Sure.
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  Think of trust receipts as a common way banks help businesses finance imports
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  or inventory purchases.
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  The bank basically provides the funds and holds title to the goods until the
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  business sells them and repays. It's a specific type of short-term loan tied to inventory.
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  Got it. So more short-term borrowing tied to that inventory jump. Exactly.
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  And overall, total borrowings, including long-term debt, rose quite a bit too,
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  from $60.4 million in FY24 up to $71.8 million in FY25.
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  The company's report explicitly states this increase was mainly for inventory
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  funding during the year. No ambiguity there. And here's the consequence.
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  Despite having more assets tied up in inventory and receivables,
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  their actual cash on hand, their cash and cash equivalents decreased.
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  Went from S32.5 million dollars down to S27.7 million dollars.
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  So yeah, more stock, more IOUs from customers, more debt and less cash in the
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  bank. That's the picture.
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  Okay. And this is where it gets really interesting, I think,
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  for understanding how the business is actually managing day to day.
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  The cash flow statement.
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  Because profit is one thing, the balance sheet is another. But cash flow tells
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  you if the business is actually generating the cash needs to operate.
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  And it reveals a critical, almost alarming shift. Net cash flow used in operating
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  activities in FY25 was negative $6.5 million.
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  That's a huge reversal from FY24 when they generated nearly $20 million from operations.
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  So their core business went from bringing cash in to actively consuming cash.
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  That's a fundamental change. Like you said, it's like the main part of your
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  business now needs feeding from elsewhere.
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  And the manager review pretty much confirms why. That big $12.6 million increase
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  in inventories soaked up cash, and the S2.9 million dollar increase in receivables did too.
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  Basically, cash got tied up in stock and waiting for payments.
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  And that cash drain wasn't just from operations. They also used cash in investing activities.
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  Net cash used there was about 2.6 million dollars.
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  This was mostly because they spent more on buying property, plant, and equipment.
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  5.2 million dollars this year versus S2 million dollars last year.
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  Now, they did get some cash back from selling old assets and dividends from
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  joint ventures, but the increased spending on new assets outweighed that.
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  So investing more, maybe for the future, while the core operations are actually
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  burning through cash right now.
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  That sounds like a tough balancing act. It really is. You need to invest.
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  But if your day-to-day isn't generating cash, where does that investment money
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  come from? Which brings us to financing activities.
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  To cover these cash shortfalls from operations and investing,
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  their net cash flow from financing activities was positive, right?
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  About $3.8 million. That's correct.
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  And that cash came mainly from taking out new long-term loans at $6 million
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  there and also increasing those trust receipts we talked about by another $8.4 million.
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  So, basically, they had to borrow more money to keep the gears turning,
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  to fund the cash used in operations and the money spent on investments.
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  It really highlights the pressure on their liquidity. For you,
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  the listener, it means they needed more loans just to manage things this year.
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  That's a really critical observation, yeah. It shows a company needing external
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  funding to manage its current needs rather than generating enough cash internally.
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  That's a sign of pressure. Okay, let's shift gears slightly.
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  Geographically, how do things look? that overall revenue growth we mentioned
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  earlier, was it spread evenly?
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  Not really, no. The report indicates the growth was mainly driven by higher
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  sales in North Asia and Southeast Asia.
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  So there were definitely some bright spots, some regions performing well on the top line. Yes.
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  And while Southeast Asia is still their biggest market by revenue and showed
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  positive results, there were variations.
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  The Africa segment, for example, actually recorded a loss, a negative segment
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  result of about S1.6 million dollars in FY25.
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  So that contrasts quite sharply with the growth elsewhere.
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  It suggests that while they're doing OK or even well in some core areas,
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  other markets are proving really tough.
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  Maybe intense local competition, specific economic issues there,
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  different cost structures.
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  It tells you the global picture isn't uniform for them. That's interesting, that regional split.
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  OK, so looking ahead then, given everything we've discussed,
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  the profit squeeze, the cash burn, the borrowing, the mixed regional picture,
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  What does Stanford Tires itself say is coming? What's their outlook?
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  Well, their own commentary is pretty cautious, quite direct, actually.
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  They state that the operating environment in the tire business remains challenging.
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  They point directly to intense competition and major geopolitical and macroeconomic events globally.
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  So they're not predicting an easy ride ahead. They see those broader pressures,
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  continuing supply chains, material costs, maybe demand uncertainty.
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  Right. And to deal with that, they've laid out their strategy.
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  Optimize its product mix, manage operating costs, and build on its core markets in Southeast Asia.
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  So that sounds like focusing inward efficiencies, costs, and doubling down on
• 13:00
  their strongest regions rather than maybe aggressive expansion everywhere.
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  It feels like a defensive, consolidate and strengthen kind of strategy for tough times. Makes sense.
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  And inevitably, this performance, especially the profit drop,
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  has a direct impact on shareholders through dividends, doesn't it? It does.
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  The proposed final dividend for FY25 is 1.000 cent per share.
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  That's down from FY24 when the total payout was 2.00 cents per share.
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  That was 1.50 cents final plus 8.50 cents special dividend.
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  So, yeah, less cash coming back to shareholders, a direct reflection of that lower profit. Exactly.
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  It clearly signals that management feels the need to conserve cash,
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  perhaps reinvest in the business, given the challenges and the cash situation
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  we've been talking about.
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  It's prudent from the company's perspective, even if it's not what shareholders
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  ideally want to see. OK, so let's try and wrap this up.
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  To recap our deep dive into Stanford Tire's FY25 results, it really was a year
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  of two stories, wasn't it?
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  Revenue edged up slightly, which sounds okay, but that was completely overshadowed
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  by profits falling off a cliff, driven largely by higher costs,
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  cogs, and those really big other
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  operating expenses, plus less help from one-off gains like asset sales.
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  And critically, we saw that major shift in cash flow.
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  The core business went from generating cash to consuming it,
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  mainly because money got tied up in a lot more inventory and also in waiting
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  for customer of payments.
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  And this cash drain was funded primarily by taking on more debt.
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  That sums it up well. And I think this deep dive really highlights why you have
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  to look beyond just that top-line revenue number.
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  Despite the slight sales increase, the cost pressures, that dramatic flip in
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  operating cash flow, and the increased borrowing, they tell a much more challenging
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  story about the company's financial health right now.
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  And as they themselves acknowledge, the operating environment is tough competition,
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  global events leading them to focus on cost and their core Southeast Asian markets.
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  It just underscores the importance of, you know, critical thinking when you look at these reports.
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  It really does. And it leaves us with something interesting to think about,
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  doesn't it? A question for you, the listener, maybe.
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  Given these ongoing global challenges and STSL strategy to focus on cost and
• 15:03
  product mix, what do you think is the biggest trade-off they'll face over the next year?
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  Will they have to sacrifice, say, aggressive market share gains to focus purely
• 15:13
  on restoring profitability and fixing that cash flow?
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  Or do they need to push for scale, hoping efficiency comes later,
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  even if it means more short-term pain?
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  Maybe think about how these kinds of broad economic and geopolitical pressures
• 15:26
  might be hitting other industries you follow. How are other companies adapting?
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  Similar strategies or different ones? Definitely something to chew on. Until next time.