KUALA LUMPUR: ES Ceramics Technology Bhd expects to see an earnings rebound in this financial year, mainly backed by a stronger order book following a dip in the financial year ended May 31, 2018 (FY18).
The group, which manufactures glove formers, is now planning to ramp up its production capacity and expand its workforce to meet growing market demand.
“Compared to the hand-to-mouth situation we experienced last year, now our order book has started to pick up. The inquiry is a lot stronger than before (compared to last year), some of which has also turned into [our] order book, which has boosted [the] outstanding order book to three months,” said its chief executive officer Wong Fook Lin.
“We are targeting to ramp up the production capacity [of our] Thailand plant to 200,000 units from the current output of 130,000 units,” he told reporters after the group’s annual general meeting yesterday.
ES Ceramics has two manufacturing plants, which are located in Ipoh, Perak and Sadao, Thailand. Both manufacturing plants have an outstanding order book of between 300,000 and 400,000 pieces of glove formers respectively, Wong said.
According to its annual report, Thailand was the group’s largest revenue source for FY18 at 53%, while the remaining 47% was from its Malaysian operations.
However, Wong said ES Ceramics is currently facing a manpower shortage and had filed an application to hire an additional 70 new foreign workers to fill up the vacant positions. Both plants have a total workforce of 400 people.
On the same note, the group said it will continue to invest in automation machines and equipment to meet customer expectations in terms of quality and prices.
“Through automation, I think this is a long-term approach to solve the manpower and productivity issues we are facing,” Wong said, adding that automation is the key to ensure that the group can deliver consistent quality of products to its customers.
The group expects to spend up to RM5 million on investment in automation plans, mainly from internal funds. The group is in a net cash position, with its cash and cash equivalents standing at RM22.7 million as at FY18.
With investment in automation looming amid a bottom-line recovery, ES Ceramics has also put its planned transfer from the ACE Market to the Main Market of Bursa Malaysia on hold as it was seen to be too costly.
Wong said the group will remain on the ACE Market for at least two more years despite meeting requirements for the move.
In 2015, the group set a target to transfer to the Main Market in three years’ time. The group then recorded a significant growth in net profit, which doubled from RM2.62 million for FY14 to RM5.59 million for FY15.
However, the group’s bottom line dropped on an annual basis for three consecutive financial years after the peak in FY15.
The sharpest annual drop was in FY18, when its net profit plunged 96.31% year-on-year (y-o-y) to RM234,000 from RM6.33 million a year prior. Revenue fell 24.3% y-o-y to RM25.18 million.
The sharp drop was due to a decrease in revenue and lower margins due to its product mix in tandem with higher operating costs.
Yesterday, ES Ceramics reported a 19.28% y-o-y drop in net profit to RM448,000 for the first quarter of FY19 (1QFY19) ended Aug 31, 2018 as higher operating costs squeezed margins. Quarterly revenue improved 18.24% to RM7.36 million.
This resulted in lower earnings per share of 0.2 sen for 1QFY19 from 0.3 sen for 1QFY18. In its filing with Bursa, the group said it remains confident of achieving a favourable financial performance for FY19.