CTS Q1 profit: P6.7-M (down 72% y/y, up 346% q/q)

CTS Global [CTS 0.50 unch] [link] made P6.7 million in Q1 net income (-72% y/y, +346% q/q) and declared P0.004368/share in regular and special cash dividends from its FY24 unappropriated retained earnings (combined annualized yield = 0.9%). CTS reported P2.2 million in global trading revenue (-73% y/y) and P5.5 million in local trading revenue (-47% y/y); the company blamed its performance on “heightened volatility in global financial markets, driven by the U.S. administration’s aggressive tariff measures, especially those targeting China, which intensified trade tensions and reignited concerns over a potential slowdown in global economic growth.” CTS reported P21.2 million in interest income from its fixed-income securities (-11.9% y/y), which fell due to the BSP’s recent interest rate cuts.

 MB BOTTOM-LINE:  It’s like if your friend borrowed your car, and returned it with the right-front tire flat and the rim warped by an obvious impact. You ask him, “What happened to the car? Why is it like this?” And he answers, “The traffic was really bad on NLEX, your air conditioning wasn’t working so well, and it was actually a very windy day compared to normal.” You look at him. You point at the damage: “Yeah, but how did THAT happen?” He has the audacity to look you in the eyes: “Bro, trust me, it was crazy out there on the roads with all those cars, rules, and obstacles!” I’m being a bit of an ass, but I’m just trying to underline how these explanations are not sufficient “discussions” from management on why its quarterly profit is down 72%. They do a great job of narrating the sterile context of the local market and the global financial markets during the period, but they completely fail to connect how their own actions--when combined with that context--created their outcome. What is it about their trading strategy that failed? Are they going to fix the strategy? What does that fix look like? How do we know if it’s working?