KUALA LUMPUR (Jan 16): Kawan Food Bhd said the group may face a margin squeeze this year, due mainly to a yearly depreciation of some RM20 million on its newly-commissioned Pulau Indah facility.

Managing director Timothy Tan said the group is launching innovative products and ramping up sales to mitigate the slight dip expected in its profitability this year.

"We moved in [to our Pulau Indah facility] in July last year, and we have shut down our two factories in Shah Alam by end-December. We are still trying to increase our output. The utilisation rate is not at an optimum yet.

"Our earnings before interest, taxes, depreciation, and amortisation might remain the same, but profit after tax will go down, because of depreciation of the new factory. The cost (of the factory) is about RM200 million. We have to ramp up our sales," he said.

Tan was speaking to reporters today after the group announced its partnership with Australia Securities Exchange-listed biotechnology research firm Holista CollTech Ltd. Both parties are teaming up to develop a range of low glycemic index (GI) flatbreads with research and product trials commencing this month.

Tan said the group will start selling low GI roti canai in Malaysia by April, with sales to its main export market, the US, commencing in June.

He targets overall sales for its low GI products to reach 200 containers, or 4,000 tonnes, in three years' time. The group has a total production capacity of 30,000 tonnes per annum.

Shares in Kawan Food were not traded this morning. The stock was last done at RM1.92 on Tuesday, valuing the group at RM690.28 million.