KUALA LUMPUR: Local jewellery distributor Habib Group announced yesterday it will absorb the 6% goods and services tax (GST) imposed on its jewellery in an effort to maintain its turnover this year.

Habib Group managing director Datuk Meer Habib said the absorption of GST will cost the company RM20 million to RM30 million this year.

“If our turnover is high, we can cover the extra expenditure,” he said after launching the group’s Diamond Fest 2015 campaign.

“So this year, we are working with low profit margins but high turnover. This is going to be a tough year for us,” he said.

Meer said the group recorded a turnover of close to RM500 million last year and expects growth to be flat this year, with sales from Habib Jewels Sdn Bhd constituting RM350 million to RM400 million of the total.

“We don’t want to increase prices, which will affect consumer sentiment and subsequently our sales,” he said.

“If we can have the same amount of sales this year compared with last year, we will be happy because we are aware of the GST’s impact,” he said.

He also said the weak ringgit will cost the group RM10 million to RM20 million this year as it purchases gold bars and gemstones in US dollars, which places downward pressure on its earnings.

Meer said the group will also reduce the prices of its jewellery if the ringgit strengthens this year. 

The ringgit is currently trading at 3.66795 against the greenback.

As such, the group has modest expansion plans this year, with RM30 million to RM40 million allocated for capital expenditure.

“We are planning to open [Habib Jewels] branches in places where we don’t have a strong presence such as Alor Setar and Sabah and Sarawak,” he said. “We plan to open less than five branches this year.”

He said the group plans to capitalise on its affordable product offerings whereby prices of its jewellery begin from RM180. These product offerings include the Bloom Diamond collection, a stackable ring collection. 

Also, the group’s Diamond Fest, held in conjunction with April’s birthstone, the diamond, will offer a wide range of diamond jewellery with discounts of up to 70%.

Habib Group owns Habib Jewels and Habib Jewellery Manufacturing Sdn Bhd, among others.

It also has partnered with Danish jewellery producer Pandora and luxury watch brand Ice Watch from Belgium to distribute the brands’ products in Malaysia.

This article first appeared in The Edge Financial Daily, on April 3, 2015.