Friday 29 Mar 2024
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KUALA LUMPUR (May 28): Chemical Company of Malaysia Bhd (CCM) is hinting at the likelihood of thinner profit margin for the current financial year ending Dec 31, 2019 (FY19). But, the impact of margin squeeze is expected to be mitigated by higher volume as new capacity comes on stream.

The group's management is cautious of its overall margin as it expects the average caustic soda selling price to remain soft compared with last year.

As such, it will be "tough" to maintain the group's financial performance in FY19, said group managing director Nik Fazila Nik Mohamed Shihabuddin (pictured).

Average caustic soda selling price, Nik Fazila said, fell from around US$600 per tonne in FY18 to around US$400 currently.

"We are not going to enjoy [an] upcycle of caustic soda prices as we have experienced in 2017 and 2018," she told the press after the group's 57th annual general meeting today.

This is because while India's import of the product is expected to normalise soon, the effect may be offset by softer demand in China — a core consumer of caustic soda — due to the temporary shutdown of alumina plants there.

However, the group seeks to address the thinner profit margin with higher volume, amid production capacity that will come in this year and 2020, as well as its continuous efficiency efforts such as reducing finance costs, energy consumption, and more automation.

"We have maxed up [production capacity of] both of our chemicals and polymers plants, thus the reason we are embarking on our capacity expansion drive. That is key," she said.

The additional 50% capacity for its chemicals business will come in full from the expanded chlor-alkali plant in Johor, Pasir Gudang Works 1 (PGW1) in as early as August this year, said Nik Fazila.

The increase to 60,000 electro-chemical units (ECU) will allow CCM to produce as much as 135,000 tonnes of caustic soda annually from 90,000 tonnes currently. Current production contributed around 57% of the group's chemical business revenue or around RM170 million in FY18.

Meanwhile, the new facility for its cleaning solution for glovemakers 'Kleeners' under its polymers business in Bangi will be fully commissioned in the second half of 2020, to add another 90% of its existing Kleeners production — which accounted for around RM15 million in annual sales in FY18.

At 3.30pm, shares of CCM traded unchanged at RM1.98, giving it a market capitalisation of RM332.04 million.

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