Thong Guan Industries Bhd, a KLSE main board specialising in stretch film and plastic packaging manufacture, is allocating about RM19mil to set up two new stretch film production lines this year.
Its group managing director Ang Poon Chuan told StarBiz that since December last year, the groups main facility in Sungai Petani, Kedah, had been operating at full capacity, generating some 2,000 tonnes of stretch film per month.
He said the groups order book for stretch film was filled until next month.
We expect more orders to come in April as there are indications from our customers that they want to stockpile their stretch film supply in anticipation of war in the Middle East, which is expected to jack up the prices of plastic products. The prices are already rising and are expected to shoot up further if war breaks out in the Middle-East. We also expect orders to come from our customers in new markets such as India, the Middle East and Africa, he said.
Ang said that the group was now trying to source the machinery from either Europe or the United States.
We hope to install the machinery by the 3rd quarter of 2003 and begin commercial production in the 4th quarter. The new machinery should increase our monthly output to 3,000 tonnes, making Thong Guan one of the largest stretch film manufacturers in the Asia-Pacific region, he said.
Ang said that on an average, stretch film contributed about 35% to the groups yearly revenue.
With the expansion of our manufacturing capabilities, the contribution from stretch film for this current fiscal year ending Dec 31 should increase to about 40%, he said.
According to Ang, the groups plastic bag division, which contributes on average of 25% to the groups annual earnings, has exported 1,000 tonnes of garbage bags per month to Japan since January 2003.
This figure is an increase of about 30% from the 1st quarter of 2002. The growth can be attributed to orders from new customers in Japan, he said.
According to Ang, the groups RM10mil facility in Suzhou, China, manufactures about 30% of the garbage bags exported to Japan, while the remainder is produced at the facility in Sungai Petani.
It is running at almost full capacity, producing about 800 tonnes per month since it started operations in mid-2002. We plan to spend a further RM5mil to set up another plant adjacent to the present one in mid-2003 to increase our production capacity of garbage bags and stretch film in China to about 1,500 tonnes per month, he said.
Ang said the group would look into expanding its production of co-extrusion film division in Sungai Petani at the end of the year.
The production capacity of our co-extrusion film manufacturing facility is about 80% utilised. Co-extrusion films are used mainly for food packaging and courier bags, he said.
Ang said the groups co-extrusion films, contributing about 25% to the groups yearly earnings, were ex- ported mainly to Australia, New Zealand and Singapore.
We are now trying to find markets in India and China for our co-extrusion films, he said.
Ang said the group would soon launch a new packaging for its tea products under the brand 888.
The new packaging will give our tea products a trendy and international image as we plan to export them to new markets such as Singapore, Hong Kong, China, and Japan. Presently, our tea products are exported to Brunei and Thai- land, he said, adding that its tea products contributed on an average of 15% to the groups yearly earnings.
For the year ending December 2002, the group posted RM177.137mil in revenue, an in- crease of 25.9% from the RM140.7mil achieved in 2001.
Its pre-tax profit was RM12.5mil, up by 44.8% over the RM8.7mil registered in 2001.
Thong Guan, transferred to the main board a year ago, operates in Sungai Petani in three different manufacturing facilities.
The main facility, located on an eight-acre site, produces stretch film and garbage bags, while the other two plants manufacture tea products and co-extrusion films.
It also operates a facility on a three-acre site in Sabah producing laminated flexible packaging and plastic bags for the market in east Malaysia and Brunei.
To date Thong Guan, which ex- ports over 60% of its products, has invested more than RM100mil in its operations in Sungai Petani and Sabah since the 1980s.