Superlon sees growth momentum continuing till FY22

This article first appeared in The Edge Financial Daily, on September 27, 2017.
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KUALA LUMPUR: After achieving record-breaking revenue and net profit for the financial year 2017 (FY17), thermal insulation materials manufacturer Superlon Holdings Bhd is upbeat it can push its strong earnings growth momentum of the past five years into the next five.

Though the group’s net profit for the first quarter ended July 31, 2017 (1QFY18), released yesterday, fell 41% year-on-year (y-o-y), the company — which told The Edge Malaysia weekly in July that it was expecting FY18 to be another record year for the company — remains optimistic.

“Over five years, we will continue to do the same, and not just to sell more, but also to improve internally,” executive director Liu Han Chao told The Edge Financial Daily after the group’s annual general meeting yesterday.

Net profit for 1QFY18 came in at RM3.57 million against RM6.05 million a year ago, dragged down by lower contribution from its manufacturing segment, which saw a decline in earnings due to lower sales volume and higher cost of materials.

Lower other income recorded and higher other operating expenses during the quarter also impacted the bottom line, according to its quarterly results filing with Bursa Malaysia. Quarterly revenue, however, grew 3% to RM26.33 million from RM25.63 million.

In the past five years, Superlon’s top line almost doubled from RM58.9 million in FY13 to RM106.2 million in FY17. Net profit rose almost sixfold from RM4.1 million to RM23.7 million. Y-o-y, its FY17 net profit was up 42%, while revenue grew 18%.

Yesterday, Liu attributed the company’s earnings growth streak to a combination of product development, marketing efforts and an expanding customer base. “So, it’s a balance between internal productivity and efficiency, and marketing efforts as well.”

Going forward, Superlon’s focus is on its recent foray into Vietnam, where it is planning to set up a new plant in Ho Chi Minh City to expand its manufacturing capacity to meet encouraging demand.

Liu said the planned US$4 million (RM16.84 million) factory will strengthen the company’s position in Vietnam, since it has been exporting there for the past 15 years, making it Superlon’s biggest overseas contributor in terms of revenue.

“We are one of the market leaders in Vietnam, so the factory’s purpose is to keep that position. We see the opportunity because our competitors have yet to start a plant there.” The construction of the factory is expected to start in the first half of FY18, with production expected to commence by FY19.

Meanwhile, Liu said Superlon is also looking to increase its sales by exploring untapped countries in Africa as well as South America. Superlon shares slid three sen or 1.07% to RM2.76, with a market capitalisation of RM439.88 million.