Thong Guan Industries Bhd, a KLSE main board-listed specialist in stretch film and plastic packaging manufacturing, plans to allocate about RM19mil (US$5mil) to set up 2 new production lines this year to expand its output of stretch film.
Its group managing director Ang Poon Chuan told StarBiz that since last December, the groups main facility in Sungai Petani had been operating at full capacity, generating some 2,000 tonnes of stretch film per 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 view of the war in the Middle East, which is expected to result in an increase in the price of plastic products. Prices of plastic products are already rising and are expected to shoot up further. We also expect orders to come from our customers in new markets as India, the Middle East and Africa, he said.
The company hoped to install new machinery by the 3rd quarter and begin commercial production in the 4th quarter. The new machinery should increase monthly output to 3,000 tonnes, making Thong Guan one of the largest stretch film manufacturers in the Asia Pacific region.
Ang said that on an average, stretch film contributed approximately 35% to 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.
The plastic bag division, which contributed on an average 25% annual earnings, has been exporting 1,000 tonnes of garbage bags per month to Japan since January.
This was an increase of about 30% from the corresponding quarter of 2002, Ang said, adding that the growth could be attributed to orders from new customers in Japan.
The groups RM10mil facility in Suzhou manufactured 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 RM5mil to set up another plant next to the present one in middle of this year to increase our production capacity of garbage bags and stretch film in China to about 1,500 tonnes per month, he said
He 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 the co-extrusion film manufacturing facility is about 80% utilised.
According to Ang, the groups co-extrusion films, which contributed about 25% to group earnings, were exported mainly to Australia, New Zealand and Singapore.
Ang also said the group would soon launch a new packaging outlook for its tea products under the brand called 888.
For the year ending Dec 31, 2002, the group posted RM177.137mil in revenue, an increase of 25.9% from the RM140.7mil achieved in 2001. Pre-tax profit was RM12.5mil, up by 44.8% over the RM8.7mil registered in 2001.