BUKIT MINYAK: Chin Well Holdings Bhd
is expecting a lower revenue and bottom line for its financial year 2017 ending June 30 (FY17) compared to FY16 due to a labour shortage and higher safeguard duties on wire rods from 40 countries, including China.
Group executive director Tsai Chia-ling told StarBiz that although the markets in Europe and Asia had improved and orders for fasteners were steadily coming in, the group was not able to take in all the orders due to a labour shortage, which would have an impact on its performance for FY17.
“Besides a labour shortage, we have to pay a 13.9% safeguard duty on imported wire rods, an essential raw material for fasteners from China.
“Although the duty is refundable, we will only be able to get the rebate in 2018.
“We have to pay about RM5mil of duty just for this fourth quarter ending June 30.
“This will impact our revenue and bottomline for FY17,” she said.
For FY17, the group is expected to produce about 90,000 tonnes of fasteners, about the same as in FY16.
Tsai said that the price of wire rods had increased by about 20% since January 2017.
“This is because China has curbed the production of steel due to its implementation of the Blue Sky project to cut down on environmental pollution.
“Steel-based product producers worldwide have raised their prices in response to the situation.
“We have to increase the price of fasteners by 10% to 25%, depending on who the customers are,” she said.
On its do-it-yourself (DIY) fastener business, Tsai said the plan was to broaden the range of DIY fasteners in 2017 to tap into new markets in Europe.
“Meanwhile, the group is increasing its production of grill mesh in Bukit Minyak next April to 450 tonnes a month from the current 300 tonnes.
“This is slightly more than a third of its installed capacity of 1,200 tonnes a month.
“The grill mesh orders are for a United States customer based in Malaysia,” she said.
The European market is expected to contribute about 50% of the group’s revenue for 2017, compared to 52% in 2016.
“The concentration will still be on the European market, where we can produce high-value fasteners that can generate better margins.
“In Asia, the market opportunities to sell high-value fasteners are limited.
“This is why the DIY fasteners are targeted at the European and US markets,” she said.
According to the recent Zion Market Research report, the global industrial fasteners market, valued at US$84.9bil in 2016, is expected to reach US$116.5bil in 2022, and is anticipated to grow at a compounded annual growth rate of 5.4% between 2017 and 2022.
“The global industrial fastener market is primarily driven by rapidly increasing demand from the end-use industries such as automotive, aerospace and construction.
“Furthermore, the strong recovery in construction and the automotive segment is sustaining growth in the developed countries,” the report said.
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