KUALA LUMPUR: KYM Holdings Bhd, which is in the midst of reviving its loss-making corrugated carton business, expects to return to the black in the current financial year ending Jan 31, 2016 (FY16). 

KYM (fundamental: 0.55; valuation: 0.9) chairman Datuk Seri Isahak Yeop Mohamad Shar said the cost-efficiency measures taken would start to bear fruit and help revamp the company’s earnings performance.

“We started the cost-saving efforts early last year. They should be showing some positive results mid-year,” Isahak Yeop told reporters after KYM’s annual general meeting yesterday.

He expects KYM’s revenue growth to be maintained at 10% in FY16. In FY15, its net loss stood at RM2.95 million against a higher revenue of RM99.36 million from a year ago.

In the first quarter (1QFY16), the industrial packaging material maker’s net loss widened to RM746,000 compared with RM509,000 a year earlier. Revenue, however, was 8.2% higher at RM25.66 million against RM23.71 million.

Isahak Yeop said the loss incurred was mainly from its carton business that faced stiff competition.

He said the carton industry continues to be challenging in view of the rising raw material costs due to the weakening of the ringgit as most of the imported papers were sold in US dollars.

As for the industrial bags business, Isahak Yeop pointed out that KYM has an excessive capacity after upgrading its manufacturing facilities in Tapah.

“We are now ready for bigger orders,” he said, adding that the company is looking to increase its overall utilisation rate of 60% to 70% by year end.

KYM currently has three manufacturing facilities with a combined capacity of 15 million bags per month.

Isahak Yeop said KYM is eyeing new markets in Asean, such as the Philippines, Vietnam and Indonesia. The company currently exports to Thailand, Singapore and Maritius, making up 20% of its total sales.

Currently, about 60% of KYM’s revenue comes from its industrial bags business with the remaining 40% from the corrugated carton business.

Isahak Yeop also noted that KYM is looking at divesting its non-core assets. He said the company is in talks to divest two residential tracts in Lumut and Ipoh in Perak each.

The land in Lumut is about 28ha (70 acres) and the tract in Ipoh is 17ha (43 acres), with a combined net book value of RM26.82 million.

Proceeds from the land sale will be used for KYM’s business expansion, according to Isahak Yeop.

The company’s latest annual report shows that the tract in Lumut has a net book value of RM14.82 million while that of the land in Ipoh is RM12 million. 

Earlier, KYM completed the disposal of two pieces of leasehold industrial land in Johor for RM9 million cash.

KYM shares were last traded on July 10 at 55 sen, with a market capitalisation of RM82.4 million. As at April 30, the company’s net assets per share was 61 sen.

This article first appeared in The Edge Financial Daily, on July 22, 2015.