SKB Shutters eyes capacity expansion

(from left) SKB Shutters Corp Bhd executive director Melissa Sin Tze Yi and managing director Michelle Sin Siew Huey.

SKB Shutters Corp Bhd has been manufacturing roller shutters for decades and its customised products can be found in many key projects globally, including several international airports.

In Malaysia, its roller shutters are used in the development of the Light Rail Transit 3 (LRT3), Mass Rapid Transit (MRT) and the Tun Razak Exchange, among others.

The company estimates that it could be controlling about 50% of the market share in Malaysia currently.

About 60% of its annual turnover is contributed by the sales in Malaysia, with the remaining coming from its over 40 export markets.

Key markets include Australia, the Middle East, Thailand, Indonesia and Bangladesh.

In the financial year ended June 30, 2021 (FY21), SKB’s local shutter sales increased by almost 17% year-on-year, while its other product segment – racking – posted a revenue growth of 44.3%.

However, with Covid-19 disrupting cross-border transactions, the export sales for shutters and racking fell by 40.7% and almost 17%, respectively.

Looking ahead, SKB is eyeing more growth from the export market, driven by pent-up demand.

Run by the third-generation, led by sisters Melissa Sin Tze Yi and Michelle Sin Siew Huey, SKB is planning to expand its production capacity and product range, especially products that command higher margins.

Currently, SKB’s gross margin for each product segment is about 15% to 20%.

“We are developing many new products that not just focus on roller shutters.

“We are working on research and development (R&D) for a couple of products, including floodgates.

“These would require us to expand our operations space-wise and scale-wise,” says executive director Melissa.

Managing director Michelle says SKB makes about 5,000 to 6,000 shutters a year, excluding special shutters and racks.

The company’s plant in Kota Damansara currently runs at about 75% to 80% utilisation rate.

The 50,000-square-metre plant also houses a showroom and a R&D testing centre.

She adds that SKB aims to increase the production capacity by 70% as part of its five-year plan.

“In 2020 and 2021, we have managed to increase our production capacity by automating our unique production processes and now, we are enjoying a much higher production capacity and output,” says Michelle.

Meanwhile, Melissa does not discount the possibility of merger and acquisition activities to grow SKB’s business, although she points out that the focus is to drive organic growth.

“We are considering erecting a new plant,” she says.

Moving forward, a key growth catalyst for SKB is its Insulated Fire Shutters (IFS), which the company says is the result of a six-year R&D work process.

Currently, IFS contributes about 5% to SKB’s turnover.

Over the next five years, the company conservatively anticipates to grow the contribution to 12% to 15%, while at the same time, expand its other products.

Melissa explains that back in the second half of 2018, the government had made it compulsory for all commercial and industrial buildings to adopt the IFS.

“The formalised instruction to all trade parties including the architects, the consultants, the designers, the building owners and the manufacturers, was made in February 2021.

“There was a formalised circular issued in February 2021 to the public informing them that they could no longer get away from the requirement,” she says.

With the government strictly implementing the IFS requirement in Malaysia, SKB hopes to be a key beneficiary of the growing demand.

This is considering SKB’s IFS is the first insulated fire shutter in the region that has achieved 240 minutes of fire resistance and 240 minutes of insulation.

The IFS is a single-layer shutter curtain made of steel face sheets on both sides of the cutain and incorporated and sealed with fire rated heat insulation boards in between.

As its IFS gains traction, Melissa notes that SKB has recently started to export the product into China.

“This is something that we regard as a very proud moment for SKB, considering that China is the world’s factory and usually, they are the ones exporting and not importing.

“(To achieve this), it has to be a very good product and go through their local certification.

“We are the region’s first fully imported roller shutter manufacturer, and not locally assembled, to export into China,” she says.

While the company sees more orders and enquiries from potential buyers, it also continues to face rising raw material and shipping costs.

In dealing with the higher costs, particularly for raw materials, Michelle says SKB is constantly re-strategising its procurement and manages raw materials more effectively.

The bulk of SKB’s raw materials are steel sheets and steel coils, which are mostly procured domestically.

With the orders being contract-based, typically spanning about one to two years, she says the rise in costs would be transferred to the clients for new orders.

However, for the existing orders, SKB would have to absorb the additional costs and in turn, face margin compression.

“Nevertheless, we leverage upon our size, our scale and the good relationships with our suppliers to get a good price for the raw materials, despite price fluctuations,” according to Melissa.

In June 2021, the company completed the listing of new private placement shares, raising about RM4.3mil.

The proceeds would be used to purchase raw materials for inventory purposes and for administrative and operating expenses such as Covid-19-related costs and other expenses required to support the group’s ongoing business operations.

Amid the cost-driven challenges, SKB returned to profitability in FY21 with a net profit of RM5.02mil, as compared to a net loss of RM962,346.

This was possible because of the improved gross profit, lower administrative and selling expenses as well a net gain on impairment of financial instruments in FY21.

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