This article first appeared in The Edge Financial Daily, on November 27, 2015.
BUKIT MERTAJAM: Chin Well Holdings Bhd, the country’s largest carbon steel fastener manufacturer, expects revenue contribution from its do-it-yourself (DIY) fastener business in Europe to grow to 30% in the current financial year ending June 30, 2016 (FY16), from 18% now, boosted by increasing sales from existing customers and new customers there.
Its executive director Tsai Chi-Yun said the European market, which makes up half of its overseas revenue, has been growing steadily in the past four years.
The overseas market contributes 78% of the group’s total revenue, with the rest coming from the domestic market.
“We want to catch more DIY business to mitigate the slowdown in the industrial fasteners and wire products sector. Despite the economic conditions in Europe, England, Germany and Poland have maintained their orders and purchases,” Chi-Yun told reporters after the group’s annual general meeting yesterday.
“However, business in France, Spain and Italy has dropped by between 10% and 20% for industrial fasteners. Overall, Europe has pledged an order boost of 20% for DIY products,” she said.
Chi-Yun said the group currently supplies fasteners to eight customers in the United States, the United Kingdom, Germany and France, including British home improvement chain B&Q plc. B&Q has increased its orders for DIY products from 20% last year to 30% this year.
She added that Chin Well is in talks to supply fasteners with two to three potential clients in Europe and hopes to secure their business next year.
In a statement yesterday, Chin Well managing director Tsai Yung Chuan said revenue from the DIY segment has grown substantially year-on-year, increasing by 68% to RM89 million in FY15 from RM53 million in FY14, as the group increases its reach within Europe.
“Going forward, we are seeing increasing sales from existing customers and are currently in talks with potential DIY retailers in Europe who are open to sourcing comparable-quality fasteners from manufacturers other than China,” he said.
“With our existing track record in serving international customers, and status as one of the Malaysian producers exempted from the European Union (EU) anti-dumping duties, we are optimistic about the increasing DIY revenue going forward,” added Yung Chuan.
The EU had, in March 2015, renewed tariffs on anti-dumping for the China-made fasteners for another five-year period until March 2020. The duty imposed was as high as 74.1% on imports of steel fasteners originating from China, and was extended to Malaysia-based manufacturers except for nine exempted companies.
Meanwhile, Chin Well saw its first-quarter net profit more than double to RM18.2 million from RM8.9 million a year ago, on consolidated profits from Chin Well Vietnam and foreign exchange (forex) gain.
The group recorded a forex gain of RM4.7 million in the three months ended Sept 30, 2015 (1QFY16) in light of the strengthening euro and the US dollar against the ringgit.
Revenue for 1QFY16 rose 10.3% to RM140.6 million from RM127.5 million in 1QFY15, on higher sales of trading goods in Malaysia and sustained sales to the eurozone.
“The outlook for the global political and economic condition remains uncertain and the group will continue with the ongoing efforts to raise operational efficiency and productivity so as to further enhance our competitive edge,” said Yung Chuan.
Chin Well shares closed up five sen or 3.05% to RM1.69 yesterday, with a market capitalisation of RM503.22 million.