GEORGE TOWN: UNIMECH GROUP BHD expects Indonesia, its biggest overseas market, to contribute significantly to the group’s revenue this year despite the Covid-19 threat still looming large in the republic.
According to executive director Y F Sim, the revenue contribution from Indonesia will likely sustain at about 26% this year, compared with a year earlier.
Unimech is one of Malaysia’s leading value-add engineering business group with a market capitalisation of about RM220.12mil.
Sim told StarBiz that, “Our valve production factory in West Java, which commenced operation late last year, will benefit from the Indonesian government’s plan to expand its national shipping industry ability from 85, 000 deadweight tonnes (DWT) in 2015 to 300, 000 DWT by 2025.
“Indonesia aims to grow its knowledge and improve its national design capability through its domestic ship engineering companies.”
Therefore, the Indonesian maritime players are expected to continue improving their capabilities and build more specific class of ships, including the Korvet, Frigate, cruise ships, liquefied petroleum gas carriers and liquefied natural gas carriers.
Another important factor is that Indonesia is expected to produce 44.5 million tonnes of palm oil in 2021-2022, up from 43.5 million tonnes in 2020-2021.
The country’s palm oil exports are also targeted to rise by 1.5 million tonnes year-on-year to 29.5 million tonnes during the 2021-2022 marketing year, as higher production and lower prices are expected to encourage demand in China and the European Union, explained Sim.
“All these developments in Indonesia, including the increase in palm oil production and exports, will certainly drive up the demand for our industrial valves, ” added Sim. Unimech currently has a total of 45 distribution centres and warehouses in Indonesia.
Last year, the Indonesian market contributed RM67.637mil to the group’s revenue, stimulated by the republic’s growing domestic economy.
Meanwhile, Sim said the group expects to deliver about RM286mil worth of valves, fittings, pumps and industrial instruments to its overseas and domestic customers this year, increasing nearly 10% over 2020.
“So far this year, we have delivered over RM100mil worth of products, ” he added.
To date, Unimech’s main markets include Indonesia, Thailand, Australia, Singapore, Vietnam, China and the United States.
Overall, the overseas market contributes over 45% to the group’s total revenue.
On the local front, Sim pointed out that the domestic market still remained as the group’s primary market.
“As we advance, the domestic demand will continue to drive Malaysia’s growth with some support from the net exports.
“The investment activities in Malaysia are also projected to remain resilient, and its overall export growth is likely to stay positive, ” opined Sim.
Therefore, Unimech’s business plan is to focus on expanding its valves, instruments and fittings market in the region, widening its product range as well as increasing the group’s penetration into the oil and gas (O&G) industries, he added.
In Malaysia, Unimech group manufactures valves, instruments and fittings products at its facility in Penang, Kedah and Perak while in China, it has three plants in Tianjin, Dongguan and Huangshan.
According to the Data Bridge Market Research report, the industrial valves market will exhibit a 3.66% compounded annual growth rate for the forecast period of 2021-2028.
This translates to the current market value rising to about US$100.30bil (RM419.9bil) by 2028.
The report noted that the increasing demand for O&G, wastewater and power activities has led to the rise in demand for industrial valves.
“Increasing demand for industrial valves by pharmaceutical companies recently due to the spread of the coronavirus has further bolstered the growth.
“Rapid urbanisation and construction of smart cities coupled with the need and demand to have a broad connected network for the transportation of industrial equipment have further created lucrative growth opportunities for the industrial valves market, ” added the report.