not vested
Denko expects "promising" results from new Indonesian operation
KUALA LUMPUR: Denko Industrial Corp Bhd, which expanded its precision plastic components manufacturing business to Indonesia in the last quarter of 2014, expects the unit to generate “promising financial results” in this financial year.
Denko said in a statement that Jakarta-based PT Winsheng Plastic and Tooling Industry (PTWSP), which incurred start-up losses of nearly RM500,000 in the financial year ended March 31, 2015, was operating a sophisticated injection moulding and mould fabrication factory,
The group chose to expand to Indonesia in view of the Indonesian government’s intention to increase local content in automotive, electronics and information technology, it said.
“Furthermore, our existing customers in Indonesia have urged Denko to expedite the expansion programme for bigger business volume absorption,” said the company, whose shares have risen 69% since the start of this month.
PTWSP, which is wholly owned by Denko’s unit Winsheng Plastic Industry Sdn Bhd, is using the latest equipment technologies consisting of clean room, twin shots (two-colour moulding) and high efficiency of auto spray painting processes to fulfill the local content requirement.
Denko said it also had plans to diversify into different industries such as plantations and battery manufacturing in order to enhance shareholder’s value.
For the financial year ended March 31, 2015, the company swung to a net profit of RM3.095mil from a net loss of RM3.103mil in the preceding year.
In its quarterly financial report to the stock exchange on May 29, Denko said that its manufacturing division in Malaysia was the primary growth driver led mainly by its plastic parts sub-segment.
“This division still managed to generate a healthy profit even after the absorption of almost RM500,000 in start-up losses incurred by the Indonesian subsidiary,” it said.
The consumer goods trading division, meanwhile, continued to be loss-making “despite the significant effort and resources allocated to the business.”
“Based on the international experience for countries which introduced the goods and services tax, we are bracing ourselves for at least another six months of difficult trading conditions. This could be extended in the event the world fuel price trend upwards from current levels,” it said.
Denko said it was reviewing the trading division’s business model to stem the losses and return it to profitability.
The objectives, it continued, were to lighten the asset base of the division and to streamline its operating structure to make it leaner and more cost effective.
“The board has authorised a plan to dispose the division’s land and buildings and relocate its operations to a shop office,” it said.
Denko said the group had forecast revenue of RM100mil with a pre-tax profit of RM5mil for FY16.
Denko shares closed 3 sen higher at 44 sen on Friday.
Source: The Star