Guan Chong to ramp up production post acquisition


  • Corporate News
  • Wednesday, 25 Dec 2019

Schokinag’s production, which is limited by restrictive working capital and high raw material prices, should also be resolved through synergising with Guan Chong.

KUALA LUMPUR: GUAN CHONG BHD’s acquisition of German firm Schokinag Holding GmbH will help the group tap into the EU market as well as minimise the risk of underutilisation at the upcoming Ivory Coast cocoa processing plant, says RHB research.

Following a meeting with Guan Chong’s management, RHB said the group plans to ramp up production by improving the utilisation rate and prioritising market share.

“The plant is currently running at only 67% utilisation rate, and if the transition goes smoothly, it intends to increase the industrial chocolate production capacity to 120,000 tonnes pa (from 90,000 tonnes pa), ” it said.

Schokinag’s production, which is limited by restrictive working capital and high raw material prices, should also be resolved through synergising with Guan Chong.

Schokinag’s key management will be retained post-acquisition to ensure the continuity of the business operations.

The company also has a low customer concentration risk with its Top 10 customers contributing only about 8% of total sales.

Meanwhile, Guan Chong will likely tap into a new pool of clientele through Schokinag to expand its distribution network.

While details on Schokinag’s financials are still pending, the company is understood to be profitable and operating in a net cash position.“Based on the information from the vendor, Schokinag had an annual turnover of EUR175m.

“Management will disclose further details once the acquisition is completed in 1Q20, ” said RHB.

The research house has a “buy” call on Guan Chong with a target price of RM3.45.


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