Ge-Shen Corp Bhd is eyeing more growth from its medical and life sciences segment. This is despite the company bracing for challenges to persist, given the prolonged Covid-19 pandemic and long lead times in the global supply chain.
The precision components manufacturer for industries such as automotive and consumer electronics hopes to achieve a double digit growth in revenue this year.
“It has been challenging because we can’t travel now – the next step after doing the vaccinations is to ensure that we can continue to secure more new orders. We have been working very hard on business development.
“We are quite excited to see Malaysia moving into the endemic stage and we hope for more normalcy in the next month or two,” Ge-Shen’s executive director Louis Lau tells StarBizWeek.
“We hope to see double-digit growth as we are trying to get more customers in the medical and life sciences and the home and lifestyle segments. Malaysia is a key part of the medical equipment supply chain in the world,” Lau adds.
He says Ge-Shen hopes to secure new customers which would result in higher orders.
“However, in the last 12 to 18 months, the medical segment has not done well as discretionary medical services have seen a drop. Many have opted not to go for elective surgeries,” Lau says.
He hopes that with the pandemic slowing down, the medical segment of the business will catch up.
Meanwhile, the continued labour shortage worldwide which has crippled global supply chains has also affected Ge-Shen.
Explain Lau, “We have experienced some supply side issues. Longer lead times and material shortages have been some of the challenges that we have been working on. Our balance sheets have seen a build up of certain inventories and this is a result of higher sales and the longer lead times. Longer lead times have made us need to purchase and build up more inventories to ensure we can continue to sustain our business”.
The company being an export-oriented manufacturer is heavily reliant on global supply chains. It has three factories in Malaysia and one in Vietnam.
Ge-Shen, in its recent financial results, notes that raw materials such as plastic resins and sheet metal are seeing price increases. There is also less availability and long lead times before delivery of these materials. It also notes that the short supply of semiconductors is impacting its customers’ operations.
“We continue to monitor this vigorously to ensure that we don’t over purchase or we don’t have any slow-moving inventories. I don’t think the issue of raw material shortages would be resolved anytime soon. It could still continue and we need to think of ways to manage this,” Lau says.
Lau points out that hiccups with the supply chain are disrupting its customers and that this is a downside risk to its revenue projections. He says this has been happening since last year.
“It will have an impact on overall production planning and scheduling. We can only do so much to cope with this ongoing challenge for us,” he says.
Despite these challenges, the company saw a year-on-year (y-o-y) jump of more than 600% in its net profit for its second quarter ended June 30 to RM3.7mil on the back of quarterly revenues rising by 115% y-o-y to RM65.6mil.
Lau says Ge-Shen now has spare capacity to fulfil new orders that it hopes to secure. “Our utilisation had been capped at 60% during the recent lockdowns and at certain points it was even less than that. In Vietnam we are at around 60% to 70% as there are no government mandated capacity limits there,” he says.
Commenting on its capital structures, Lau explains that it is aware of the negative cash balance and its gearing level at 0.8 times.
“We manage our balance sheet vigorously. We ensure we are able to meet all our obligations on time. The negative cash balance and higher gearing ratios came about because we have invested quite a lot over the last five to six years,” Lau says.
“We did mergers and acquisitions and we had invested in new factories. We had to do this in order to get in more customers. Despite a lull in 2018 to 2019, we continued to invest,” he adds. With the investments already sunk in, Ge-Shen hopes to tap the growth opportunities that are on the horizon.