This article first appeared in The Edge Financial Daily, on May 20, 2016.

KUALA LUMPUR: UMW Holdings Bhd, which is working on delivering aero engine fan cases under its 25-year Rolls-Royce deal inked last year, is confident it stands a good chance of winning more outsourcing works from Rolls-Royce Holdings plc for aircraft engine parts in the future, if it meets its current contractual obligations.

At a media briefing after the group’s annual general meeting yesterday, president and chief executive officer Badrul Feisal Abdul Rahim said UMW had allocated RM750 million as capital expenditure over the next three years specifically for this aerospace business, and that training of talent will start by August, with manufacturing expected to begin by the fourth quarter of 2017.

“The revenue from this business is expected to begin [coming in] by 2018, but we do not expect the business to report profit straight away,” he said, but declined to reveal the cost and margin quantums of the project. It was previously reported that the deal is worth about RM830 million.

At present, Badrul Feisal said the group is not looking to tie up with any other third-party aerospace players, apart from Rolls-Royce.

“We are the first Tier-1 supplier for this in Malaysia, and since Rolls-Royce has an engine manufacturing plant in Singapore, I believe they might need to outsource some work. As long as we deliver their orders accordingly, I think we stand a good chance to win these outsource [deals] in future,” said chairman Tan Sri Asmat Kamaludin, who was also present.

Hence, at this juncture, the group will focus on meeting its deliveries to Rolls-Royce, to establish a good track record, he added.

UMW secured the 25-year deal to manufacture and assemble fan cases for Rolls-Royce’s aero engines — which comes with an option for a five-year extension — in August 2015, marking the group’s first maiden foray into the aerospace manufacturing industry.

Meanwhile, on the automotive front, Asmat said the group is expecting to sell 80,000 units of Toyota models for the financial year ending Dec 31, 2016 (FY16), and 216,000 units by Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

For FY15, UMW sold 95,861 units of Toyota and Lexus models, and 213,307 units of Perodua models.

Asmat said the lower sales targets were set in consideration of the current market condition, including stricter bank lending and macroeconomic challenges.

With regard to reports that Japan’s Toyota Tsushu Corp and UMW are mulling to form a joint venture to build a new manufacturing plant in Malaysia worth RM1.1 billion, Asmat admitted that talks are ongoing and that the group will make further announcements on the issue by May 25.

“It is still in discussion now. There is nothing much we can talk about until we finalise it,” he said.

According to reports, the facility is slated to come online as early as 2018, and will be capable of producing 50,000 vehicles annually.

UMW closed at RM5.49 yesterday, down 13 sen or 2.31%, with a market capitalisation of RM6.5 billion.