What caused the additional staff costs for BHIC in Q2 2020?

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Additional staff costs in Q2 2020 were due to retrenchment from business closures.

Boustead Heavy Industries Corporation Bhd (BHIC) incurred additional staff costs of RM5.7 million in the second quarter of 2020. This expense arose from retrenchment activities associated with the closure of non-profitable business operations. The company experienced a net loss of RM567,000 in Q2 2020, a significant shift from the RM2.94 million net profit recorded in the same quarter of 2019, with revenue also declining to RM35.90 million from RM53.93 million.
Retrenchment Linked to Business Restructuring

The RM5.7 million in additional staff costs directly resulted from retrenchment measures. These measures were a consequence of BHIC's decision to close business operations that were not generating profits. This strategic move to streamline operations led to the increased expenditure on personnel during the second quarter.
Impact on Financial Performance

The higher expenses, primarily driven by these retrenchment costs, contributed to BHIC's net loss in Q2 2020. This financial downturn contrasts sharply with the company's performance in the prior year's corresponding quarter, where it reported a net profit. The revenue shortfall further exacerbated the financial challenges faced by the company during this period.
Broader Economic and Operational Concerns

BHIC indicated a cautious outlook for the remainder of the financial year, citing the adverse effects of the COVID-19 pandemic on the global and Malaysian economies. The company anticipates that the economic slowdown may impact defence budgets. Furthermore, movement restrictions in China and Malaysia caused delays in the Littoral Mission Ship (LMS) programme, necessitating a review of project milestones.

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What caused the additional staff costs for BHIC in Q2 2020?

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