C.S. Tan talks to IJM Corp managing director Datuk Krishnan Tan on plans for newly-acquired ICP.
StarBiz: What accounted for ICP's strong earnings in recent quarters?
Krishnan: There was substitution for ICP's small diameter piles from square piles that use more steel. (ICP does not make square piles.) It was fortuitous there was a significant rise in steel prices.
ICP has also exported a lot of large diameter piles. Since last year, the company starte d emphasising export businesses.
We cannot claim full credit for the overall results.
StarBiz: Did IJM direct ICP to go for overseas projects?
Krishnan: We gave them more leeway to look into international markets. After we took over, we gave ICP the go-ahead for the China plant. We told management to take a more international outlook.
IJM group as a whole looks at markets with a regional outlook. ICP should also do so in this regard.
StarBiz: ICP's earnings will improve further this year with the inclusion of Malaysian Rock Products Sdn Bhd's (MRP) profits. How is MRP doing?
Krishnan: MRP's main business is in quarries. The offtake of its stones is good. Most of its quarries are supplying the Klang Valley. The other quarry is in Johor.
StarBiz: What's your view of ICP's share price?
Krishnan: It's a single product company in a single market. We're giving the company a more international flavour.
The stock does not have liquidity. So, we decided to do a bonus issue and a split stock.
The company gives a 15% dividend. That's a 4% yield. This company is under-researched and under-exposed. We've to create the liquidity, create value and then tell the story.
StarBiz: Are there synergies in IJM's takeover of ICP?
Krishnan: There's integration to be put in place. It has gone on well. The combined ICP and MRP, for instance, has a stronger capacity when they go out to buy cement. Marketing and operations can be integrated, and there's also credit knowledge of customers.
StarBiz: I noticed that ICP has reduced its debts.
Krishnan: Its depreciation is RM15mil a year. That's free cashflow. With the net earnings and depreciation (a non-cash item), you can ungear.
You can take a harvesting approach. You can just run the plant, and take the depreciation and earnings, and distribute all of that.
The other way is to keep putting money back. You plan reinvestments for a higher efficiency.
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