Spritzer to ride on improved bottled water demand

PETALING JAYA: Spritzer Bhd is poised to benefit from the recovery in demand for bottled water although profit margins may come under pressure from the elevated resin prices and the strengthening of the US dollar.

PublicInvest Research said Spritzer is poised to benefit from the recovery in demand for bottled water, given its positioning as the largest integrated bottled water producer in Malaysia.

“We expect the demand for bottled water to continue to grow, on the back of the reopening of the economy and the revival of the tourism industry, which should further boost sales in the hotel, restaurant and cafe segment.

“In addition, the growing health awareness among consumers should continue to spur Spritzer’s long-term growth,” it added.

Nevertheless, profit margins could be affected by cost pressures. While resin prices have tapered off from its peak recently, it said resin prices continue to remain elevated.

Furthermore, the strengthening of the US dollar (resin is usually quoted in the greenback) would likely have a negative impact on the bottler’s profit margins.

However, the research house opines that the increase in production efficiency from the stronger demand for bottled water and average selling price (ASP) hikes previously would help to cushion the impact from rising raw material costs.

Meanwhile, Spritzer’s operations in China would remain a drag, mainly affected by the strict lockdown measures implemented, intensive competition from the local brands as well as high logistical costs.

For its expansion plans, the company has earmarked RM45mil as capital expenditure for machine upgrades, new water treatment plant as well as a new production line.

The new production line for Spritzer’s Shah Alam plant would increase its current capacity from 850 million litres per annum to one billion litres per annum.

Additionally, the group is looking to build a new warehouse at its Shah Alam plant.

Spritzer has also allocated RM10mil to construct a new water treatment plant for its Taiping facility, which is expected to improve production efficiency by increasing its yield.

For the second quarter ended June 30, 2022, revenue grew by 42% year-on-year (y-o-y) to RM106.2mil, mainly due to an increase in bottled water sales and ASP hikes.

Spritzer’s net profit jumped by 86.6% y-o-y to RM7.62mil, driven by greater economies of scale, which helped to offset the rising raw material costs.