This article first appeared in The Edge Financial Daily on May 13, 2019

SHAH ALAM: Logistics and warehousing player Tasco Bhd is expecting to see better days ahead following its venture into the cold chain and consumer segments.

“The cold chain business, some people may suspect that we bought it at an expensive price (but) it is performing better than our expectations,” said Tasco executive chairman Lee Check Poh.

The group moved into this segment in early 2017 after acquiring Gold Cold Transport Sdn Bhd for RM188 million.

Speaking to The Edge Financial Daily after Tasco’s extraordinary general meeting last Friday, Lee said the demand for goods transported through its cold chain business is getting “higher and higher”.

The cold chain business oversees the transportation of ice cream and fast food, he said, pointing out that the group transports about 80% of all ice cream in Malaysia.

As for Tasco’s expansion into the consumer retailing business, Lee said the inclusion of convenience stores and petrol station stores in its logistics network will benefit the group moving forward.

This, he said, is because demand for the transport of convenience store products will continue to rise, especially during festive periods.

“During normal times, we transport a million pieces of product for convenience stores a day, but for festive periods such as Hari Raya we are looking at transporting up to 1.9 million pieces a day,” he added.

Tasco went into the consumer business by forming a joint venture (JV) in late 2017 with Yee Lee Corp Bhd, which is involved in the manufacturing and distribution of fast-moving consumer products.

The JV will be representing its customers in dealing with their vendors.

Under the system, the company informs the customers of the inventories they will need, the supplies in the neighbourhood and the area where the retail stores operate.

Lee admitted that the group’s foray into providing logistics support for convenience stores and petrol stations was not entirely smooth sailing, as it had to shift from transporting items that are measured in cartons to pieces, thus contributing to higher labour costs arising from the overtime work performed by the staff in ensuring that all pieces earmarked for delivery were sent.

Tasco deputy managing director K Y Tan said the group expects earnings for the fourth financial quarter ended March 31, 2019 to be at the same level as the third quarter. The group posted a net profit of RM3.14 million on revenue of RM184.69 million in the third quarter.

The group’s cumulative net profit for the nine months ended Dec 31,2018 fell 55.16% to RM10.92 million compared with the same period a year ago, while revenue rose 3.09% to RM557.43 million.

Moving forward, Tasco expects earnings for the current financial year to be better than the just ended year.

On long-term aspirations, Lee said the group is looking to ensure that its manufacturing logistics and consumer logistics top line contribution reach parity. Currently, 70% to 75% of the revenue comes from the manufacturing logistics segment.

Lee said 55% of Tasco’s clients are Japanese. The group is a subsidiary of Japan-based shipping and logistics company Nippon Yusen Kabushiki Kaisha.

Recently, Tasco announced that a Japanese government fund is taking up a 30% stake in the group’s wholly-owned unit, Tasco Yusen Gold Cold Sdn Bhd, for RM125 million.

At the EGM last Friday, shareholders approved the Japanese Overseas Investment Corp for Transport and Urban Development’s acquisition of the stake.

Tan said RM97 million from the RN125 million would be used to pare down the group’s bank borrowings that are due within the next 12 months.

He said the group has close to RM400 million in loans, mostly long-term.

Tasco Yusen managing director Andy Lee said the implementation of the sugar tax on July 1 presents an unknown to the company.

“We do not know the impact on the whole supply chain from the factory to the consumer,” he said.

Meanwhile, Tasco managing director Freddie Lim said the group stands to benefit if the US-China trade war continues.

This is because it would result in more Chinese and Japanese goods being transported through Malaysia.

Tasco’s share price closed up one sen or 0.72% at RM1.40 last Friday, bringing a market capitalisation of RM280 million.