our operating environment EXTERNAL FACTORS (TRENDS & MARKET DEVELOPMENTS) IMPACT TO MATRIX Implementation of Higher Minimum Wages The upwards revision in minimum wages, which came into effect on 1st February 2025, led to a new salary scale of a minimum of RM1,700 for workers. This translated into a cost pass through effect as suppliers passed on the cost of increased wages to property developers. The new ruling sঞpulates that employees paid RM4,000 and below monthly are enঞtled to overঞme pay for hours worked beyond normal working hours has also led to increased wages. This includes companies adjusঞng salaries above the RM4,000 level. In addiঞon, the sঞpulaঞon for mandatory EPF contribuঞons for foreign workers also had a further cost increase effect on operaঞons. Rising wages typically lead to increased domesঞc consumpঞon and spending, especially for retail purchases including big-ঞcket items such as properঞes. However, businesses face higher labor costs, which can strain profit margins-parঞcularly in labor-intensive industries like construcঞon and services. To remain compeঞঞve, Matrix shall adopt automaঞon, adjust pricing, or streamline operaঞons. Stipulation of Provision of Social Housing For New Property Projects In a move to provide more supply of social housing in urban locaঞons, more stringent requirements were introduced for the provision of social housing, notably for townships and larger projects. Increased requirements for social housing provision is welcome towards promoঞng more equitable socio-economic development and shared value creaঞon and prosperity. However, the direct impact is property developers having to make changes in their project masterplans to accommodate addiঞonal or larger social housing components or to even alter development plans. These may have direct or indirect value creaঞon impacts for projects, including commercial feasibility i.e. prices of units to cross subsidise the provision of addiঞonal social housing components. Rising Operational Expenditures (“OPEX”) A key development in 2024 was the removal of diesel subsidies and hikes in electricity tariffs. In addiঞon, rising building material costs had also led to increased OPEX. These were in addiঞon to the above-menঞoned inflaঞonary pressures arising from higher wages and labour costs. Subsidy removal leads to higher operaঞonal costs, as diesel is used not just consumed by Matrix, but also by subcontractors and suppliers across the value chain. Hence, a pass-through effect was felt as higher energy prices translated into increased OPEX. This either would necessitate absorbing the increases which would erode operaঞonal profits or passing on the cost to property buyers through higher prices, which may affect the appeal and affordability of properঞes, notably among more cost sensiঞve buyers i.e. the B40 and M40 segments. Related Capitals: Financial Manufactured Intellectual Human Social Natural 72 MATRIX CONCEPTS HOLDINGS BERHAD INTEGRATED ANNUAL REPORT 2025 05 VALUE CREATION STRATEGIC REVIEW
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