KUALA LUMPUR (May 21): JCY International Bhd plans to reduce its labour workforce for its Malaysian operations from 14,000 workers to 9,000 workers in an effort to improve its gross profit margin.

JCY International (fundamental: 2.1; valuation: 1.8) executive director Datuk James Wong said the company is planning to implement a reduction in its Malaysian workforce over three to five years.

"This will result in an improvement of 5% in gross profit margin, which translates to RM100 million in savings every year," he told reporters after a presentation on the company's results for the second quarter ended Mar 31, 2015 (2QFY15).

He said the reduction in labour workforce will be supplanted by the company's plan to increase automation across its manufacturing facilities in Malaysia, Thailand and China.

Wong said the company is allocating RM200 million to RM300 million over the period of three to five years in capital expenditure (capex) towards its plan to increase automation.

"That is about RM50 million to RM60 million in capex a year," he said, adding the capex will be allocated from internally generated funds.

In a filing with Bursa Malaysia yesterday, JCY International reported an increase of 34.25% in net profit to RM51.15 million or 2.52 sen per share in the 2QFY15 compared to RM38.1 million or 1.88 sen per share in the previous corresponding quarter due to a weaker ringgit against the US dollar and better average selling prices (ASP).

The company recorded a 7.04% increase in revenue to RM508.8 million in 2QFY15 compared to RM475.32 million in the second quarter of financial year 2014 (2QFY14).

Year to date (YTD) net profit rose 48.24% to RM101.34 million or 4.99 sen per share compared to RM68.36 million or 3.37 sen per share last year while revenue rose 4.68% to RM996.67 million compared to RM952.13 million last year.

The company had declared dividend of 1.25 sen per share.

The company said although original design manufacturer (ODM) shipment numbers released recently for the March 31, 2015 quarter revealed continued softness in personal computer (PC) builds, enterprise shipments are expected to recover in the second half of the year on increased demand from traditional storage or server vendors as well as hyperscale companies, the company said.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)