KUCHING: Ceramic tile manufacturer Kim Hin Industry Bhd ’s sales in Australia will be bolstered as the company has secured a contract to be the sole supplier of tiles for the Melbourne Square project.
The Melbourne Square project, undertaken by OSK Property Holdings Bhd in partnership with the Employees Provident Fund (EPF), has an expected gross development value (GDV) of A$2.8bil (RM9.4bil). Stage one of the project, Melbourne’s single largest integrated development, will feature two eliptical residential towers comprising over 1,000 apartments with a GDV of over A$900mil.
Executive chairman Chua Seng Huat said Kim Hin secured the order for the supply of ceramic tiles to Melbourne Square’s first apartment tower project.
“We will supply Johnson tiles to the entire apartment project in the next five years. The supply value is estimated to be more than RM10mil,” he told StarBiz.
Kim Hin, which ranks among Malaysia’s top three ceramic tile makers, will also be expected to supply Johnson tiles, a premium product, to Melbourne Square project’s other development components. However, the tiles requirements for these proposed developments have not been worked out.
Kim Hin’s plants in Malaysia and China took over the manufacturing of Johnson tiles for both the domestic and export markets after the company acquired UK-based Norcros Industry Pty Ltd, a major importer and distributor of Johnson tiles in Australia, and properties owned by Johnson Tiles Pty Ltd for a total of RM22.65mil in 2014.
Chua sees Australia, a key export market for Kim Hin, driving growth for the company especially after its acquisition of Outset Holdings Pty Ltd, a distributor of premium building products in New South Wales for RM19.4mil last September.
Outset operates a network of 24 franchise Amber stores and three company-owned stores. Outset controls Amber Group Australia, which also operates a wholesale business h comprising a distribution centre located in Sydney.
“Kim Hin now has its own distribution network for products via 23 franchised outlets,and we have control of the retail market in Australia. The Amber group has started to buy our products and the profit margins are good,” he said.
In the first half of 2017 (H1’17), the total sales of Kim Hin’s Australian operations soared to RM75.3mil from RM31.2mil in H1’16 and contributed some 38% to the company’s total sales of RM198.7mil during the period under review.
Domestic sales in Malaysia, however, fell about 20% to RM98.7mil from RM125.1mil
The company’s China sales were flat at RM33mil but its Vietnam sales improved to RM2.3mil from RM1.8mil during the same period.
In H1’17, the company’s Australian and Chinese operations contributed RM4.93mil (against a loss of RM527,000 in H1’16) and RM4.91mil (RM3.7mil) respectively to the group’s pretax profit of RM6.4mil. The earnings were, however, impacted by its Malaysian operation as it incurred losses of RM3.46mil, a reversal from a profit of RM5.1mil in H1’-16.
Chua attributed the dismal performance of the Malaysian operation to the slowdown in the property market.
“Due to the delay of their projects, a lot of developers delayed the take up of tiles from us. However, domestic sales are expected to pick up in the second half year,” he said.
According to Chua, the OSK group has also committed to use Kim Hin tile products for all its property projects in Malaysia.
“OSK will become one of our major clients in the years to come. Our current major clients include developers Ecoworld and SP Setia which use both Johnson Tiles and Kim Hin’s other tiles under the Kimgres brand,” he added.
To boost its production in Seremban, Kim Hin will set aside RM10mil from the proceeds of the proposed disposal of its property in Australia for a major upgrading project of the plant acquired from Johan Ceramic Bhd.
Wholly-owned subsidiary Kim Hin Investments Pty Ltd entered into a sales contract with Ouson Pty Ltd on Sept 4 for the disposal of a two-level building at 362 Wellington Road, Mulgrave Business Park, Victoria for A$8.8mil (RM29.9mil).
The sale is expected to be completed by March.
Kim Hin will utilise RM9.8mil from the sales proceeds to purchase one penthouse at Melbourne Square project. Another RM3.5mil will be used as capital expenditure for property, plant and equipment in Malaysia and RM5.5mil for short-term working capital.
Chua said old machineries at the former Johan Ceramic plant would be replaced and other facilities upgraded to boost production capacity.