LSK to bank on domestic sales

PETALING JAYA: Lee Swee Kiat Bhd’s (LSK) robust domestic sales for bedding goods are expected to continue to offset weakness in export sales, while margin expansions could be seen on the back of lower raw material costs.

CGS-CIMB Research noted that LSK, which operates in the mattress and bedspring sector, saw higher local sales amounting to 71.5% of its total bedding goods for the first half of this year (1H22) and the group expects domestic sales to make up for the weakness in its export sales.

“LSK said it has benefited from more marketing activities (participation in furniture fairs) as well as full reopening of its stores in 1H22,” the research house said in a report after an analyst briefing with the company’s management.

LSK’s export sales of bedding goods in 1H22 made up only 28.5% of total sales.

This was due to the weaker demand from foreign customers as a result of higher selling as well as input costs.

“LSK is of the view that the weaker ringgit and lower freight rates could increase competitiveness of its export sales. It is planning to increase marketing activities by participating in more overseas trade fairs to promote exports,” CGS-CIMB Research added.

On a positive note, the research house said LSK expects margins to expand in the third quarter of its financial year 2022 (3Q22) due to lower raw material costs.

According to CGS-CIMB Research, LSK has raised selling prices in 1H22 mainly to pass on the higher operating costs and input costs.

“We gather from LSK that it did not raise its selling prices in 3Q22 as raw material prices, mainly natural latex which makes up an estimated 40% of its total cost of production, have declined and are estimated to be lower by 10% to 15% on a quarter-on-quarter basis,” CGS-CIMB Research said.