Friday 29 Mar 2024
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KUALA LUMPUR (Dec 10): Pasdec Holdings Bhd, a 51.65%-owned subsidiary of the Pahang state government, has warned it will slip into its first full-year net loss this financial year ending Dec 31, 2015 (FY15), after three years of profits, mainly due to higher expenses incurred from the relocation of its automotive manufacturing operations from South Africa to Botswana.

For the nine months period ended Sept 30, 2015 (9MFY15), the group reported a net loss of RM18.13 million, compared with a net profit of RM981,000 a year ago, dragged by relocation, training and retrenchment costs, following the relocation of its auto manufacturing activities. Revenue fell 4% to RM145.86 million, from RM151.96 million.

Pasdec's senior vice-president of corporate resources Goh Song Han said it would likely take another year for the business to turn around in FY17.

"Based on current turn of events, Pasdec will incur losses this year on higher operating expenses that include input costs such as labour and energy.

"But we expect to narrow our losses next year, as we expect the new auto manufacturing plant in Botswana to commence operations and start generating income. FY17 seems like a good year for us," he told reporters, after a signing ceremony between Pasdec and  Bostwana Development Corp (BDC) today.

Goh said the group is also looking to balance its business portfolio between property development and auto manufacturing in the next two to three years.

"This will take time. For now, the property segment will remain the main contributor to the group’s turnover, as we wait for the auto manufacturing business in Botswana to stabilise," he added. The property segment accounted for 47% of Pasdec’s revenue in 9MFY15.

Meanwhile, Goh said the group hopes to capitalise on Botswana's economic growth, as the country seeks to diversify and liberalise its economy from mining of diamonds, to manufacturing and services sectors.

"We have received multiple commercial incentives from the Botswana government and that seems palatable for our business. Once the plant is up and running, we expect to improve the capacity in the short and medium term as we eye growth, to ensure that we heed the call for our customers for many years to come.

"Our projection indicates that the Botswana plant will break-even by FY16," he added.

Earlier at the event, Pasdec signed a share subcription agreement with BDC to formalise the group's commitment to invest in Botswana, which was witnessed by its chairman and Pahang Menteri Besar Datuk Seri Adnan Yaakob.

Under the joint venture (JV), Pasdec will hold a 70% stake in the JV company Pasdec Automotive Technologies Proprietary Botswana Ltd (PAT BW), while BDC will own the remaining 30% shares.

"The total investment to construct the Botswana plant is around US$15 million, which will cater the auto market in the northern and central African regions," said PAT BW's chief executive officer Datuk Kevin Pather.

To date, PAT BW has secured long-term contracts to supply auto components and parts to four of the seven car manufacturers in Africa, namely BMW, Ford, Volkswagen (VW) and Nissan/Renault.

In the next 18 to 24 months, Pather said PAT BW will invest around US$10 million in the Botswana plant, that will cater to its two major customers — VW and Nissan/Renault — in the immediate term.

As at 3.29pm, Pasdec shares were traded unchanged at 32 sen, with 41,000 shares done. Its market capitalisation stood at RM65.91 million.

(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.)

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