MFEC expects lower profit this year

President Siriwat Vongjarukorn yesterday said problems such as rising operating costs had caused many private firms to cut unnecessary expenses, including maintenance costs. In the second quarter, three major clients reduced the value of their maintenanceservice contracts with MFEC.

The company declined to reveal how much this had lost them, but Siriwat said there had been no further cuts by clients in July and August.

Providing maintenance services accounted for 24 per cent of MFEC's revenue in the first half of the year.

Siriwat said the other problem affecting net profit was the delay in undertaking work for customers. This was because some of MFEC's outsourcing companies - which were hired to install computer and other IT systems - shut their operations in the second quarter due to financial problems.

MFEC has a delivery backlog of about Bt100 million for work that was postponed from the second quarter to the third.

Invoices from this year's projects are now expected to be similar to last year's, against MFEC's earlier target of 25percent growth.

"At present, our clients are not seeking penalties [for late delivery]. The only damage is that the compa¬ny's gross profit margin as well as net profit margin will drop from last year," Siriwat said.

Gross profit margin this year is expected to drop to 20 per cent, while net profit margin is forecast to decline from last year's 8 per cent to 6 per cent, he added. Siriwat said the company was waiting for the bidding results for projects worth a combined Bt1.7 billion from TOT, CAT Telecom and private firms. The results are expected to be available by the end of the year.

MFEC hopes to win about half of the value of these projects.