BUKIT TENGAH: Chin Well Holdings Bhd is diversifying into the warehousing business as the company makes plans for its new RM12mil automated warehouse in Shah Alam to start operations this year.
Group executive director Tsai Chia-ling told StarBiz that the warehouse, with a built-up area of 25,479 sq ft and 12,920 storage areas, will generate long-term recurring rental income for the group.
“The facility, which costs RM12mil to build, provides one-stop warehousing services.
“Customers in the central region, for example, can use it to store their steel hardware products.
“If the opportunity arises, we could explore setting up similar warehousing facilities in the future,” she added.
Tsai said with a net cash of RM44.58mil, the group would acquire suitable business opportunities in the near future.
According to Tsai, the group is working to raise revenue from its do-it-yourself (DIY) fasteners to contribute 20% to group’s revenue in 2020 from the current 10%.
She added that the on-going China-US trade war provided opportunities for the group to expand in the US.
The move by the US to impose tariff on Chinese steel products gave Chin Well opportunities to further strengthen its position in the US market.
“Currently, we send 30 containers of DIY fasteners to the US every month.
“We believe the figure will gradually increase in the 2020 financial year starting in July.
“We have also contacted potential customers in Germany, France, Australia, and New Zealand for our DIY products.
“Specifically, we are aiming for higher sales to existing DIY retailers in Europe and USA, while also broadening our customer base in other regions.
“Internally, we will focus on enhancing our production efficiency, widen our product range by developing more high value added products and further improving cost efficiency in order to remain competitive,” she said.
Tsai added that China had started dumping its fasteners in South-East Asia, as a result of the trade war with the US, and this had created competition for Chin Well.
“In Indonesia, the government, in order to protect itself against China-made products, is now requiring its importers to get a permit before buying imported products.
“This has affected our exports to Indonesia,” she said.
On its wire division, Tsai said the upgrading of its galvanised wire was in progress and would be completed in the 2019 financial year. “The upgrading aims to enhance the production efficiency and reduce the product cost,” she said.
On Europe, Tsai said the demand had slowed down recently due to uncertainties related to Brexit and the recent strikes in France.
“Despite these challenges, we still expect Europe to contribute 40% to the group’s revenue for the 2019 financial year ending June 30, 2019,” she added.
Chin Well’s trade receivables increased by 10.72% to RM123.95mil in 2018 due to higher sales and selling prices of fasteners and wire products. “The outstanding balance as at June 30 2018 is in line with the higher revenue of 2018,” she added. Its bank borrowings increased by 51.88% to RM73.07mil in 2018 compared to 2017.