KUALA LUMPUR: Pelikan International Corp Bhd could be back in the black by the first quarter next year as the painful provisions it took to scale back the business are at an end, said chief executive officer Loo Hooi Keat.
The stationery-based firm, which derives some 85% of its sales from its struggling European operations, posted a net loss of RM101.3mil in the financial year ended Dec 31, 2011 from a profit of RM130.79mil in 2010.
As at the latest quarter ended Sep 30, Pelikan saw its net loss narrow to RM9.08mil from RM16.54mil in the same period a year ago.
Its revenue, however, has grown at an annual rate of 10% over the past five years, closing last year at nearly RM2bil.
“Restructuring costs weighed down margins for the past two years. It is a costly affair to dismantle infrastructure,” Loo said.
An industry executive told StarBiz that the profitability target was achievable as the worst was over for Pelikan.
“But Europe is still not showing signs of recovery,” he cautioned.
The company yesterday inked a two-year dealership agreement for its new shareholder China Stationery Ltd (CSL) to distribute and sell Pelikan products in China and Hong Kong.
Speaking after the signing ceremony, Loo said the agreement was expected to ring in sales of between US$10mil and US$20mil (RM30.6mil and RM61.2mil) over the next two years.
The deal would leverage on CSL's over 300 distributors throughout China to distribute and sell, on a non-exclusive basis, Pelikan's office and stationery products.
Calling this the first step in their collaboration, Loo said Pelikan could also tap on CSL's plant in Fujian, China, and on areas such as design and manufacturing.
CSL, one of the top four stationery manufacturers in China, will boost production capacity to 44,000 tonnes by next year from 33,000 tonnes currently, said executive chairman Chan Fung @ Kwan Wing Yin.
China, Loo pointed out, held immense potential, but for Pelikan to expand on its own there would involve significant time and expense.
“The China market is almost as big as our European business,” he said, adding that the firm expected to see double-digit growth in the world's second largest economy.
According to Loo, Pelikan is also looking to set up a research and development hub in southern China, possibly in Shenzhen or Shanghai, for testing and product development, which it had previously done in Germany. The facility is targeted to open in the first quarter next year.
Asked whether CSL, which had in October bought a 9.79% interest in Pelikan for RM50mil via a share swap, planned to up its stake, Loo said the current shareholding structure would remain for the time being.
CSL's Chan added that there was a possibility it may nominate a representative to Pelikan's board.
The Fujian-based maker of plastic stationery, which made its debut on the Main Market of Bursa Malaysia in February, has slipped below its initial public offering price of 95 sen, ending yesterday one sen lower to 80.5 sen. Pelikan also shed one sen to 69 sen.