Korvest’s Earnings Hit by Galvanising Disruption—Recovery Hinges on Project Pipeline
Korvest Ltd reported a 1.1% decline in revenue and a sharp 28.5% drop in net profit for the half-year ending December 2024, impacted by operational disruptions and competitive pressures. Despite these challenges, the company anticipates a robust rebound in project activity in the second half of FY25.
- Revenue down 1.1% to $51.1 million
- Net profit after tax declined 28.5% to $4.1 million
- Operational issues in galvanising caused one-off costs of approximately $670k
- Dividend maintained with a fully franked interim dividend of 25 cents per share
- Record order book positions Korvest for significant project growth in H2 FY25
Financial Performance Overview
Korvest Ltd has released its half-year financial results for the period ending 31 December 2024, revealing a modest 1.1% decrease in revenue to $51.1 million and a more pronounced 28.5% decline in net profit after tax to $4.1 million. The profit contraction reflects a combination of reduced galvanising business activity, project timing effects, and competitive margin pressures.
The company’s industrial products segment, including the EzyStrut business, saw flat revenue performance, balancing improved small project sales against a slowdown in major projects. Meanwhile, the galvanising division faced operational challenges that significantly impacted profitability.
Operational Challenges and One-Off Costs
A key factor in the profit decline was a significant operational disruption in the galvanising plant during November, which halted production for 17 days. This incident, along with an engineering claim, resulted in one-off costs of approximately $670,000. Korvest expects some insurance recoveries related to these costs, though none have been recognised in the reported half-year results.
Additionally, the company faced margin compression due to competitive pressures in day-to-day markets and project phasing effects, particularly in the industrial products segment. Staff costs increased slightly due to salary adjustments and additional hires aimed at bolstering business development and sales capabilities.
Capital Investment and Dividends
Korvest continued to invest heavily in its operations, with capital expenditure focused on expanding roll forming capacity at its Kilburn site and enlarging the EzyStrut transport fleet. Development plans for the Kilburn site are progressing, with a final investment decision expected in the second half of FY25.
The board declared a fully franked interim dividend of 25 cents per share, consistent with the prior period, underscoring confidence in the company’s cash flow and financial position despite the earnings dip. The Dividend Reinvestment Plan will not operate for this interim dividend.
Outlook and Market Positioning
Looking ahead, Korvest signals optimism with a record order book entering the second half of FY25. The company anticipates a significant uplift in project work value, driven by major project customers’ delivery schedules combined with steady small project and day-to-day work. This positions Korvest well to recover from the first half’s setbacks and potentially restore profitability levels.
However, the volatile zinc market and ongoing competitive pressures remain factors to monitor, alongside the company’s ability to manage operational risks and execute on its capital projects.
Bottom Line?
Korvest’s near-term challenges have weighed on earnings, but a strong project pipeline offers a promising path to recovery in FY25.
Questions in the middle?
- Will insurance recoveries fully offset the one-off galvanising plant costs?
- How will Korvest navigate ongoing competitive margin pressures in its industrial products segment?
- What impact will volatile zinc and gas prices have on production costs in the coming quarters?
