Analabs looks forward to higher revenue in FY16

SHAH ALAM: Analabs Resources Bhd expects higher revenue in the financial year ending April 30, 2016 (FY16) from RM142 million in FY15, driven by improved sales of resin, chemicals and building materials as well as recycled products.

Executive chairman Kan Yow Kheong said export sales have grown and it expects the higher sales volume in building materials to mitigate the higher raw material costs as a result of the weakening ringgit. The group imports chemicals and paper in US dollars, which has led to a 25% increase in costs.

“We’re fortunate that we sell more (building materials) overseas in US dollars and euros. We’ve also invested in building materials for three years, that’s why the sales are coming up, although the ringgit is weak. The volume is bigger from overseas,” he told SunBiz after the group’s AGM here yesterday.

Analabs derives 90% of its building material sales from the overseas market. It exports building materials and paper impregnation to Korea, Australia, New Zealand and Taiwan. The local market makes up only less than 10%, as Malaysia is considered a matured market with many players.

“FY16 will be better than FY15 and FY14. Even with the Goods and Services Tax implementation, some (businesses) are affected. But if it’s more export, then we’re less (affected), so we must spend more time on export.”

He said building materials are almost like a commodity and the population in Asia is still increasing, hence the reason why volume and demand exist.

“Markets like Taiwan, Korea, Thailand and Vietnam are still growing and they still need building materials. This will pull our company through FY16,” said Kan.

He said Analabs will now focus on improving these existing businesses in view of the challenging global economic climate and will not embark on any merger and acquisition exercises.

“The only serious action that we’re taking is on one of our Singapore subsidiaries,” said Kan.

He said 63%-owned Singapore Analabs Pte Ltd has registered losses amounting to S$2.5 million due to the effect of the bleak economy.

“It’s a lot of money. In ringgit, it’s RM7.5 million, so we’re taking the necessary steps to improve that.”

Kan said the group has cut the sewerage and special engineering unit’s workforce by 60%, from 138 staff previously.

“We reduced the workforce and assets with immediate effect, which is the highest cost. The cost of salary is high in Singapore for a small subsidiary.”

Meanwhile, he said the group has allocated a capital expenditure of RM2 million to RM5 million for FY15 to FY17 to invest in recycling products.

“In the last four years we invested in building materials and in the next two years we’re going to invest in the recycling of waste,” said Kan.