SAM Engineering’s RM100mil expansion, including new plant

Goh: ‘We expect the aerospace sector to contribute to 80 of group revenue.’

GEORGE TOWN: Sam Engineering & Equipment (M) Bhd, an aircraft component maker, is spending RM100mil over the next two years for expansion, with the bulk of the investment going into a new plant in Penang.

Group chief executive officer Jeffery Goh Wee Keng said the company’s existing facilities were already running at full capacity and the expansion would cater for new orders.

He said RM70mil had been allocated for a new plant on a four-acre site in Bukit Minyak to produce nacelle beams for the new Airbus A320neo aircraft.

“The other RM30mil would be to equip an existing facility on the island to produce smaller aerospace components,” Goh said.

The company has seven plants on the island, of which three are aerospace facilities. Goh said the company has RM3.5bil of orders in hand to fulfil beyond 2020, compared to RM2bil in 2014.

“This is why we need to expand,” Goh added.

According to Goh, the group would be recruiting 100 engineers and technicians for the two plants, which are scheduled to start operations by the end of 2017.

For the 2016 fiscal year closing March 31, Goh expects the aerospace business to generate 70% of group revenue, while the equipment manufacturing segment for the data storage and semiconductor industries would generate the remaining 30%.

“Moving ahead, we expect the aerospace sector to contribute to 80% of group revenue, as the business prospects for the data storage and semiconductor industries look gloomy,” he said.

Goh said the 2016 fiscal year should close with good results, compared with the 2015 fiscal year.

“The nine months of the 2016 fiscal year ended Dec 31 have already produced results which are better than the full-year results of 2015,” he said.

For the nine months ended Dec 31, SAM Engineering posted RM45mil in net profit on the back of an RM458mil turnover, compared with the RM19mil and RM319mil achieved in the previous period.

On the shareholding structure of SAM Engineering, Goh said the parent company SAM Singapore, which has a 68% stake in SAM Engineering, would have to address the issue soon.

“The irredeemable convertible unsecured loan stocks controlled by SAM Singapore will have to be converted in 2017.

“If that happens, we will have problems in meeting the liquidity spread required by Bursa Malaysia,” he added.

Last August, SAM Engineering secured a long-term contract to supply major machined parts to the A319neo, A320neo and A321neo PW110G engine.

This will add a projected US$130mil (RM520mil) to its current order book.

This aircraft is scheduled to enter into service in 2016.

The A320neo aircraft family is the world’s best, offering a 20% fuel burn improvement per seat over 500 nautical miles.

Meanwhile, according to a RTE News report released online in January, Boeing expects aircraft revenue to fall in 2016 and forecasts profits well below what analysts are expecting after a fourth-quarter slowdown last year.

The report says shares of the aerospace giant fell to US$118.20 after it projected 2016 commercial aircraft deliveries of between 740 and 745, down from 762 in 2015 and the first decline since 2010.

“The Boeing outlook came at an anxious moment for global markets, with stocks in retreat in early 2016 due to worries about slowing Chinese growth and low oil prices,” the report added.

In a global market forecast report from Airbus for the 2015-2034 period, Airbus projects that there would be a demand for 32,585 new passenger and freight aircraft by 2034.

“Of these, 22,927 would be single-aisle aircraft, 8,108 twin-aisle aircraft, and or 1,550 very large aircraft,” the report said.

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