Thong Guan to increase capital expenditure by a third,sees foreign demand

GEORGE TOWN: Packaging firm Thong Guan Industries Bhd is increasing its capital expenditure (capex) by about a third next year to boost output from its plants on expectation of higher demand from overseas.

Group managing director Datuk Ang Poon Chuan said the investment will raise the group’s production capacity to about 150,000 tonnes per annum next year from 132,000 tonnes this year.

“The rise in demand is also expected to come from new markets in Africa and South America,” he said.

Thong Guan’s strongest growing markets are in Japan, Australia, New Zealand, South Africa, the Philippines, Vietnam and South Korea.

In the second half of 2017, the group still has a backlogged order for RM20mil worth of packaging products to deliver.

“After we have installed the new nano-layer stretch film and polyvinyl chloride (PVC) food-wrap production lines in September, we can expect to fullfil the current backlogged orders and get in new sales.

The company, he said, has allocated RM45mil next year to expand its production capacity for stretch film, industrial blown-film, and PVC food-wrap. The amount s about 30% more than the RM35mil allocated for 2017.

“The investment is in line with the global projection for the demand of stretch and shrink film market, which is expected to hit US$18.4bil by 2024,” he added.

According to a Research and Market report, the increased is expected to be driven by orders for light-weight material for industrial packaging.

“The group expects a double-digit percentage sales growth for 2017 over 2016,” Ang said.

He added that the rising orders were due to the group’s effort to sell higher value-added products and the weaker ringgit, which had enhanced the competitive edge of Malaysia-made products.

“This year the targeted output for the PVC food wrap segment is 11,000 tonnes, which is expected to rise to 14,000 by 2018,” Ang said. The business, which generates about 8% of group revenue now, is expected to contribute about 15% by 2019.

On its new restaurant business, Ang said the group planned to set up three more Marché Mövenpick outlets in Kuala Lumpur and Johor Baru over the next three years.

“About RM10mil to RM12mil will spent for the new outlets,” he added.

The group had recently opened up its first Marché Mövenpick restaurant in Pavilion Mall in Kuala Lumpur.

According to its recent annual report, its new Men No Sato organic baby noodle product has attracted many interested buyers from China, the Middle East and Europe.

The report says that for 2017, the management is optimistic that most of these enquiries will turn into firm orders and the organic noodle products should contribute positively to the food and business division’s revenue as well as to the profit before tax.

The group expects the greenback to continue its stable position and continue contributing positively to its profit margin.

“Barring any unforeseen circumstances, it is foreseeable that all of the group’s business divisions will be able to continue their growing trend,” the report says.