Concepcion Industrial Corp. (CIC) said its attributable net income for the second quarter fell 89.4% to P37.7 million from P355.4 million a year earlier, as lower gross profit, increased operating expenses, and weaker equity earnings from associate Concepcion Midea, Inc. (CMI) weighed on its performance.

For the April-to-June period, net income declined 75% to P123.9 million from P498.13 million in the same period last year, while net sales edged down 1% to P5.1 billion, the company said in a regulatory filing on Friday. Attributable net income refers to profit assigned to the parent company’s shareholders after accounting for interests held by other owners in consolidated subsidiaries.

When associate CMI is included, combined net sales increased 4% to P7.8 billion.

CIC said its second-quarter results were affected by higher energy, import, and raw material costs, the depreciation of the Philippine peso, and softer consumer sentiment amid the continuing conflict in the Middle East.

“These conditions reduced retail demand, increased freight, import, and manufacturing costs, and resulted in lower production volumes and factory under-absorption,” the company said.

Factory under-absorption typically occurs when lower production volumes leave fixed manufacturing costs spread across fewer units, pressuring margins even when sales are broadly stable.

The company said these pressures were partly offset by growth in commercial air-conditioning projects, aftermarket parts and services, and appliance sales through e-commerce channels.

CIC’s consumer segment recorded net sales of P3.4 billion, down 6% from a year earlier, due to lower sales of air-conditioning and selected refrigeration products. The decline was partly offset by higher e-commerce sales of other appliance categories.

The commercial segment posted net sales of P1.7 billion, up 9% year on year, supported by stronger sales from commercial air-conditioning projects as well as aftermarket parts and services. However, the increase was partly offset by lower elevator equipment sales, which the company attributed to a smaller backlog and fewer completed projects.

The split between CIC’s consumer and commercial businesses is relevant because retail appliance demand can be more sensitive to household sentiment, while commercial air-conditioning and elevator sales are tied to project pipelines, backlog conversion, and aftersales activity.

CIC generates revenue through its subsidiaries Concepcion-Carrier Air Conditioning Co., Concepcion Durables, Inc., Cortex Technologies Corp., and Tenex Services, Inc., which sell and service air conditioners, refrigeration products, and laundry and kitchen appliances.

The company also operates Concepcion-OTIS Philippines, Inc., which provides elevator and escalator products and services, as well as Teko, its appliance repair and maintenance platform.

At the stock exchange on Monday, CIC shares dropped 8.25% to P11.56 each. — Alexandria Grace C. Magno