Hovid sees revenue rising 50% in FY09

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KUALA LUMPUR: Hovid Bhd aims to increase group revenue by 50% this year, underpinned by the completion of its second Carotech plant in Lumut last December and its RM200 million biodiesel supply contract with Trafigura Beheer BV in Amsterdam signed in November.

The completion of Hovid's Lumut plant was set to increase manufacturing capacity to 120,000 tonnes per annum, Hovid managing director David Ho told The Edge Financial Daily in a recent interview.

The company is in the midst of completing its RM9.63 million acquisition of a 51% stake in India-based Biodeal Pharmaceuticals Pvt Ltd (BPPL), a move that will increase tablet and capsule production capacity by 100%, as well as leverage on patent laws and lower operating costs in India."BPPL will allow us to increase the sale of our products globally; we can now produce products that were too costly to be produced locally due to its lower operating costs (in India) and proximity to suppliers of raw materials," he said.

Due to the long-drawn product licensing process, Ho said BPPL would only be able to manufacture Hovid products in its financial year ending June 30, 2010, and — correspondingly — financial contribution from the Indian plant would only start then.

Hovid incurred a net loss of RM1.48 million in its second quarter ended Dec 31, 2008, versus a net profit of RM4.04 million a year earlier, while revenue fell 23% to RM40.67 million from RM53.14 million.

For the six months to Dec 31, 2008, it incurred a net loss of RM5.89 million versus a net profit of RM8.44 million a year earlier, while revenue fell 9% to RM88.06 million from RM96.8 million.

Moving forward, Ho said while the pharmaceutical business was not recession-proof, Hovid was not as affected by the economic downturn as "most of the markets we're in are the less developed countries that were not affected by the credit crunch".

He said the US and Europe, which were the main markets for its tocotrienol, biodiesel and carotene, would be affected but the contract with Trafigura would cushion the impact.

Under the agreement, which is valued at up to RM200 million, Hovid subsidiary Carotech Bhd is supplying 60,000 to 84,000 tonnes of its "Carodiesel"— which has more than 50% of its biodiesel capacity — to Europe and US from January this year.

Asked whether the company is prepared to meet Malaysia's demand for B5 (a blend of 5% palm oil with diesel) with the recent implementation of B5 in government vehicles, Ho said the local demand was very small.

"About 500,000 tonnes split over 15 players… it'll only take 10% to 20% of our manufacturing capacity, as our business is mostly dependent on exports," he said. The export market accounts for 98% of Carotech's and 60% of Hovid's business.

Ho said the group has no immediate plans for further acquisitions, but would not rule out the possibility should a suitable entity surface in future.