Thong Guan 1Q net profit down 35% due to margin compression

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KUALA LUMPUR (May 24): Thong Guan Industries Bhd’s net profit for the first quarter ended March 31, 2018 fell 35% to RM8.5 million, from RM13.08 million a year earlier, mainly due to a compression in the profit margin for its plastic products.

Earnings per share dropped to 6.24 sen from 10.91 sen previously, the plastic packaging manufacturer said in a filing with Bursa Malaysia.

The compressed profit margin, Thong Guan said, was due to the lower selling prices of US dollar sales when translated to ringgit, as a result of the depreciation of the dollar against the ringgit during the quarter.

Higher operating expenses such as freight charges, depreciation expenses and staff cost also contributed to the lower margin, it added.  

Thong Guan’s revenue for the quarter rose 8% to RM215.21 million from RM199.19 million previously, bolstered by higher sales volume of its plastic products mainly contributed by the increase in export sales of its stretch film, industrial bags and PVC food wrap.

The sales of the group's other segment — food, beverages and other consumable products — increased by 10.7% mainly due to higher sales of organic products and other consumables and from the group’s restaurant operations.

Moving forward, Thong Guan said the group will commission additional PVC food wrap lines in 2018. On top of that, an additional stretch film production line is expected to be commissioned by this year.

"With the additional capacity coming on stream, the group is optimistic of continuing its upward trend in sales volume and profitability," it said.  

Thong Guan’s share price closed down one sen or 0.38% to RM2.60 for a market capitalisation of RM358.20 million.