NTPM investing RM61mil for Ho Chi Minh City plant

GEORGE TOWN: Tissue paper manufacturer NTPM Holdings Bhd is investing US$20mil (RM61.15mil) this year to set up a manufacturing facility in Ho Chi Minh City, Vietnam, to penetrate the domestic market with its products.

Group managing director Lee See Jin told StarBiz that the group's plant would be located in the Vietnam Singapore Industrial Park on a 100,000-sq-ft site that would also accommodate a warehouse.

“We explored going to Vietnam last year, as the country still does not have a major player in the tissue paper product market.

“We obtained approval from the local authority last November and will start to construct the manufacturing facility soon. The plant is scheduled to start operations next year,” Lee said.

NTPM had earlier ruled out Thailand and Indonesia as investment destinations, as there were already large players in tissue paper products in these two countries.

The Vietnam plant will serve the domestic and Asean markets.

“The Vietnam plant will produce some 30 tonnes of tissue paper products, which is sufficient to supply to 10% of the 80-million population in Vietnam,” he said.

In Penang, the production per day is around 315 tonnes compared with 285 tonnes per day in 2012.

“The tissue paper products produced for the Vietnamese market would be in the medium to high-end range. We have to decode which brand name to market our tissue paper in Vietnam,” he said.

In Malaysia, NTPM tissue paper products are marketed under the Premier, Royale Gold and Cutie brands.

On its personal care product segment, Lee said the group had recently invested RM10mil on a production line to manufacture pull-type baby diapers.

“The pull-type baby diapers will be launched in May. Now, we have three production lines for our baby diapers, which are marketed under the brand Diapex. Presently, personal care contributes about 25% to the group's revenue.

“This fiscal-year fourth quarter ending in April is expected to be stronger than the corresponding period a year ago, as sales of personal care products have improved significantly,” he said.

In Malaysia, the personal care products such as diapers and napkins have about 20% market share, while the tissue paper products have a 50% market share.

On its export business, Lee said the group exported to Brunei, Thailand and the Philippines that generated about 30% of its revenue.

“Moving forward, the contribution from overseas sales would be key to our growth,” he said.

In Malaysia, the group has bought land to set up warehouses in Johor and Sabah to increase its market share in the southern region and in Sabah and Sarawak.

“We have acquired a 2.02-ha site in Sabah where a warehouse will be built to enable us to increase our market share in Sabah, Sarawak and Brunei.

“We have also bought a parcel of land in Johor for another warehouse to be set up in the near future,” Lee added.

On the prices of raw materials, Lee said although the price of paper pulp had dropped, the cost of doing business had increased due to the implementation of minimum wage regulation.

The price of paper pulp has dropped to RM1,900 per tonne to RM2,400 per tonne, depending on the grade, from RM2,640 to RM3,000 per tonne in April 2011, which was on the high side.

“The increase in wages for NTPM is expected to be around RM800,000 per month more for the fiscal year 2014 than the 2013 fiscal year.

“Due to the higher cost of doing business, we may have to increase the price of all products by 5% soon,” he said.

For its nine-month period ended Jan 31, 2013, NTPM posted RM50.3mil in pre-tax profit on the back of RM360.9mil in revenue, compared with RM43.4mil and RM334.2mil, respectively, in the same period in 2012.

“The increase in revenue was mainly due to the increase in sales of baby diapers in the domestic market.

“The rise in pre-tax profit was mainly due to the higher margin for tissue products and improved contribution from sales of baby diapers,” Lee said.

While NTPM expects the final quarter of the 2013 financial year to be full of challenges, its board is highly optimistic of the group achieving satisfactory performance for the financial year ending April 30.