PWR Holdings - Trading Update and Profit Forecast for H1 FY25
PWH (PWH) Share Update November 2024 Tuesday 19th
PWR Holdings Announces Lower Profit Forecast Amid Market Challenges
PWR Holdings Limited (ASX: PWH) has released a trading update, forecasting a notable decrease in net profit for the first half of FY25, citing challenges in the OEM and Aftermarket sectors.
Instant Summary:
- H1 FY25 NPAT forecasted between $3.2m and $3.7m, down from $9.8m in H1 FY24.
- OEM revenue expected to drop by 44.2% due to non-proceeding EV programs.
- Aerospace & Defence revenue projected to grow by 67.1%.
- Semi-fixed production costs impacting earnings due to lower volumes.
- New headquarters at Stapylton impacting NPAT by $276,000.
Financial Forecast
PWR Holdings Limited has announced a significant reduction in its net profit after tax (NPAT) expectations for the first half of fiscal year 2025. The company forecasts NPAT to be between $3.2 million and $3.7 million, a sharp decline from the $9.8 million achieved in the same period last year.
This decrease is largely attributed to challenges in the Original Equipment Manufacturer (OEM) and Aftermarket sectors. Revenue from OEM is expected to fall by 44.2% due to the cancellation of three niche electric vehicle programs that were anticipated to proceed in FY25. Meanwhile, Aftermarket revenue is projected to decrease by 18.7% due to global economic pressures.
Market Performance
Despite these setbacks, PWR's Motorsports and Aerospace & Defence segments are showing resilience. Revenue from Motorsports is expected to remain stable, with potential growth anticipated in the second half of FY25 due to Formula 1 regulation changes. The Aerospace & Defence sector is forecasted to experience a significant 67.1% increase in revenue, driven by a solid pipeline of opportunities.
Operational Adjustments
The company is facing higher semi-fixed production costs, which cannot be immediately reduced to match the lower-than-expected volumes, thus impacting earnings. Additionally, the transition to a new headquarters in Stapylton is expected to affect NPAT by $276,000.
PWR's Managing Director, Kees Weel, emphasized the company's commitment to aligning its cost base with the current trading environment while pursuing growth opportunities in the Aerospace & Defence market.
The forecasted decrease in NPAT is likely to affect PWR Holdings' stock price negatively, as investors react to the lower profit expectations. The challenges in the OEM and Aftermarket sectors highlight the volatility and unpredictability in these markets, particularly in the EV segment. However, the growth in the Aerospace & Defence sector could provide a buffer and potential upside in the future.
Investor Reaction:
Analysts may express concerns over the significant drop in NPAT and the challenges faced in the OEM and Aftermarket sectors. However, the strong performance in Aerospace & Defence could be seen as a positive sign for future growth.
Conclusion:
Investors should closely monitor PWR Holdings' strategic responses to these challenges and assess the potential long-term impacts on their portfolios. The upcoming investor briefing may provide further insights into the company's plans and market outlook.