This article first appeared in The Edge Financial Daily, on May 27, 2016.

KUALA LUMPUR: Chemical Company of Malaysia Bhd (CCM), which has endured two consecutive fiscal year of losses, said it could turn profitable after disposing of its two fertiliser facilities in Bintulu, Sarawak, and Lahad Datu, Sabah.

At a media briefing after the group’s annual general meeting yesterday, chief executive officer Leonard Ariff Abdul Shatar said CCM had begun negotiations with several bidders to take over the said assets.

“Both of these assets are burning us about RM2 million [of losses] a month, that is RM6 million a quarter. We want to dispose of them as soon as we get the price right,” he said.

CCM was in the red in its first quarter ended March 31, 2016 (1QFY16), with a net loss of RM250,000, against a net profit of RM3.95 million, dragged by lower revenue and trading margins, and higher loss from its discontinued fertiliser division. Revenue was down 7.08% to RM151.53 million, from RM163.08 million.

But stripping off the fertiliser business, Leonard Ariff said all its other business segments are profitable.

“Our group will be smaller after we completely dispose of the fertiliser business, but with robust businesses like the pharmaceutical and chemical division,” he said.

Leonard Ariff said there is much upside to the group’s pharmaceutical business moving forward, particularly from the government segment.

He said half of CCM’s pharmaceutical products are presently sold to government, with the other half to the private sector.

“That was when the government recalibrated its budget 2016, with an assumption that oil prices will hover around US$30 (RM122.40), but now it is around US$50,” he said, adding that consumer demand may improve in the subsequent quarters.

As for capital expenditure (capex) for FY16, Leonard Ariff said the group will still spend around RM100 million, in total, on its pharmaceutical and chemical divisions.

“We will be spending around RM40 million to RM50 million on our Pasir Gudang Two chemical facility, while mothballing Pasir Gudang One, because we have a better technology for our production that gives us the same capacity with some cost savings,” he said.

The remaining RM50 million of capex, Leonard Ariff said, will be allocated for the expansion of CCM’s Klang pharmaceutical facility.

CCM closed two sen or 2.17% lower at 90 sen yesterday, with a market capitalisation of RM411.87 million.