GEORGE TOWN: SLP Resources Bhd
expects the domestic segment to contribute about 60% to its financial year 2022 revenue.
Group managing director Kelvin Khaw told StarBiz that since early this year, the strong US dollar might affect the buying momentum from overseas.
“Malaysia’s gross domestic product (GDP) expanded by 8.9% in the second quarter of 2022 (2Q22), aided by a boom in overseas trade with export and import values hitting record highs in June.
“Malaysia’s economic growth is expected to accelerate in 3Q22, continuing the positive momentum in the first half of the year, driven by private consumption following the resumption of economic activities in the country.”
Khaw noted that the GDP forecast this year is between 5.3% and 6.3%.
“Our packaging materials are consumed largely by the food and beverage sector, which will expand in tandem with the projected GDP growth of the country,” he said.
The first half of 2022 saw the group deliver more than RM90mil of packaging materials (11,000 tonnes) to customers, of which about 60% are in Malaysia.
Khaw expects group revenue to rise this year, riding on the recovery of the plastic packaging market.
According to Texas-based flexible plastic packaging manufacturer and distributor Polymerall, the global flexible plastic packaging market is expected to be worth US$200.5bil (RM899bil) by 2025 compared to US$160.8bil (RM721bil) in 2020, which is a compounded annual growth rate of 4.5%.
“Countries including India, China and Brazil offer several opportunities to expand the flexible plastic packaging market.
“Expansion and new product developments will offer lucrative opportunities for market players in the next five years.
“Expansion and new product development will offer lucrative opportunities for market players in the next five years.
“Cost-effectiveness and increased shelf life of the product drive the demand for flexible plastic packaging at a larger scale, globally,” the report said.
Khaw said while the revenue would be high, its operating margins, however, would be compromised.
This is due to the cost hike in almost every aspect of its operations.
The group’s net profit grew to RM8.8mil in the second quarter from RM4.51mil in the first quarter.
“Cost factors and problems related to the labour shortage are still affecting our routine operations.
“But we expect the situation to improve, especially since government agencies are expediting the foreign labour application processes,” said Khaw.
“Weaker sales volumes on lower production will partially offset higher average selling prices,” he added.
Since the beginning of the geopolitical tensions in February 2022, Khaw said commodity prices, especially the polymer price index movement, have been very volatile.
“The group foresees short-term, roller-coaster price movements.
“This is due to the fast-changing macroeconomics, business environment and unstable supply-and-demand factors.
“In addition, a strong greenback, a workforce shortage and a hike in operating costs could temporarily compromise the demand for packaging materials,” he said.
However, Khaw believes that demand will eventually improve towards the year-end festive season.
“Internally, we will continue to explore, invest and transform into automation and digitalisation to resolve issues related to workforce challenges.
“Despite the business environment still being full of uncertainties and remaining unpredictable, we are committed to fulfilling our obligations to steer through these tough times,” he said.
