HG Metal’s 1H FY2026 Results Are Better Than The Topline Suggests

The Steel Market Paradox

The 1H 2026 results released by HG Metal Manufacturing Limited on 8 May 2026 present a classic case of the “Steel Market Paradox.” To the casual observer focused only on the headline, a 5% dip in revenue might signal a softening business. However, for the sophisticated investor, these results reveal a group that has significantly enhanced its operating leverage. Beneath a cooling topline, HG Metal is hitting new highs in operational efficiency, transforming a challenging external market into a showcase of margin resilience and core profitability.

Efficiency Over Volume and the Margin Expansion Story

Revenue for the six months ended 31 March 2026 came in at S81.0 million**, a decrease from the **S85.4 million reported in 1H 2025. This was the result of a 1% contraction in sales volume and a 4% decline in average selling prices—a direct consequence of the persistent deflationary environment in global steel prices.

The real narrative, however, is found in the group’s gross profit, which surged 21% to S$13.8 million. By prioritizing margin over pure volume, HG Metal saw its gross profit margin expand from 13.3% to 17.1%, a robust increase of 3.8 percentage points. This expansion reflects the success of the group’s “disciplined procurement” and a strategic pivot to lower average material costs.

As CEO Ms. Xiao Xia stated: “Our gross profit margin improved to 17.1%, underpinned by disciplined procurement and cost management.”

Underlying Profit Growth Hidden by One Off Items

Technical investors must look past the reported Profit Before Tax (PBT) of S7.2 million** to understand the true trajectory of the business. In 1H 2025, the group’s “Other Operating Income” was heavily inflated by **S2.2 million in non-operating gains from foreign exchange and fair value adjustments on currency contracts. In 1H 2026, these gains were reduced by S1.8 million**, totaling only **S0.4 million.

When we strip away these volatile, one-off gains to view the core operating performance, the surge is undeniable:

• Reported PBT (1H 2026): S$7.2 million
• Less: FX/Fair Value Gains: (S$0.4 million)
• Underlying Operating PBT (1H 2026): S$6.8 million
• Comparison: Underlying Operating PBT (1H 2025): S$4.8 million

This represents a 40% increase in underlying profitability, demonstrating that the group’s fundamental operations are significantly more robust than they were a year ago.

Performance Snapshot 1H 2025 vs 1H 2026

Metric	1H 2025 (S$’000)	1H 2026 (S$’000)	% Change
Revenue	85,363	80,970	(5)
Gross Profit	11,372	13,806	21
Gross Profit Margin	13.3%	17.1%	3.8 % pts
Net Profit	6,252	6,015	(4)
Underlying PBT (Excl. One-offs)	4,788	6,721	40

Fleet Optimization and Working Capital Discipline

Management has been proactive in protecting the bottom line through aggressive cost discipline. Selling and distribution expenses fell by 8%, a result of “internal fleet optimization” that reduced reliance on expensive outsourced logistics.

Further evidence of management’s rigor is found in the balance sheet’s inventory right-sizing. Inventories were reduced to S7.9 million** from **S9.8 million at the end of FY2025. This working capital discipline ensures the company remains lean and agile, even as the broader macroeconomic environment softens.

The Green Steel Pivot and Future Capacity

HG Metal is currently undergoing a strategic transition from a traditional middleman distributor to a vertically integrated producer. This shift is centered on its S$5.7 million subscription to preference shares in Eden Flame Sdn Bhd.

The investment secures a stake in a Pasir Gudang facility specializing in low-carbon electric arc furnace steel. This is not a niche play; the plant boasts a significant annual capacity of 500,000 tonnes and is targeted for commissioning by the end of Q3 2026. This move, combined with the planned acquisition of 47 Tuas View Circuit for production expansion, positions the group to control its own supply chain, reducing its exposure to volatile third-party suppliers.

A Robust Balance Sheet for Strategic Reinvestment

While the cash position decreased to S55.5 million** from **S68.5 million in September 2025, this reduction is the result of disciplined capital allocation rather than operational weakness. Senior analysts will note that of the S$7.0 million utilized in investing activities:

• S$5.7 million was allocated to the Eden Flame “green steel” subscription.
• S$1.0 million was used as a deposit for the 47 Tuas View Circuit facility.

The group also returned S4.1 million** to shareholders via dividends and lowered its bank borrowings to **S4.4 million. With a sound net asset position of S$155.4 million, HG Metal possesses the financial strength to weather external volatility while funding its vertical integration.

The Outlook for 2027

As we look toward 2027, the macro environment remains cautious, with Singapore’s GDP growth moderating to 4.6% in 1Q 2026. However, the construction sector remains a bright spot, with the Building and Construction Authority forecasting steady demand between S47 billion and S53 billion for 2026.

The defining question for investors is whether HG Metal’s move into “green steel” will allow it to command a premium in an increasingly ESG-conscious market. By securing an annual capacity of 500,000 tonnes of sustainable steel, the group is not just expanding—it is evolving. For the technical investor, the current results suggest that HG Metal’s operational foundation is now strong enough to support this high-value transformation.

Related stories: Lion Asiapac’s Strategic Q3 2026 Rebirth