This article first appeared in The Edge Financial Daily, on May 16, 2016.

Butterworth: After suffering losses for three consecutive years, Wong Engineering Corp Bhd (WEC) is bullish about returning to the black this financial year ending Oct 31, 2016 (FY16), after having tightened its costs and converted half its billings into US dollars  to hedge against volatile exchange rates.

The original equipment manufacturer (OEM) and seller of high precision metal stamped parts and components is on the lookout for some good buys in a related business to boost the company’s growth inorganically. It is even contemplating mergers, which could be with a firm in any sector, including property.

WEC recorded a net loss of RM3.34 million (FY13), which expanded to RM5.14 million in FY14, before narrowing to RM3.4 million the following year, as revenue improved and costs lowered.

Its prospects are looking better in FY16. It recorded a net profit of RM327,000 in its 1QFY16, compared to a net loss of RM1 million a year ago, as revenue rose 10.8% to RM7.7 million.

“Our operating cost or fixed cost was one of the reasons we made a loss because it was high. When the turnover is not high, it cannot break even or offset the high cost, so we make a loss. “So we had to find ways to reduce cost which was through manpower [in order to cut overhead cost]. We try to balance to the minimum [by using] both machines and labour,” chief executive officer Datuk Wong Kem Woh told The Edge Financial Daily.

Wong attributed the loss in FY15 partly to the weaker ringgit, which was compounded by the rise in minimum wage.

“The loss in FY13 and FY14 was because we lost Motorola Solutions Inc, a major customer that contributed 40% to our revenue. We were in the midst of recovering our losses when we were hit by the forex rise and minimum wages [last year].

“Customers don’t increase their orders when staff wages increase. That’s why we were hit hard. But we have settled some issues last year.

“This year, we also converted 50% of our billings into US dollars from 20% last year, so we have a natural hedge. So give or take, we should be okay this year,” he said.

WEC’s customers include printed circuit board contract manufacturers based in Malaysia, Europe, the America and Asia. Meanwhile, the group is looking at mergers and acquisitions (M&A) opportunities to cultivate growth.

“If I only focus on engineering, even with more customers or bigger orders, I cannot come up with it (a jump in revenue growth) because it is a very service-oriented business. And again, there is less big volume [orders] these days. “That is why I am looking at M&A to boost revenue. I am looking at businesses that are inter-related downstream or upstream. It can be a diversification into a new project, where we merge to increase the turnover,” he said, adding that there were no concrete decisions yet.