ES Ceramics targets Main Market in 3 years

PETALING JAYA: Glove former manufacturer ES Ceramics Technology Bhd, which saw its earnings double last fiscal term, is confident of moving from the ACE Market to the Main Market of Bursa Malaysia within three years.

“It is a natural process. Within three years we should be able to do it if we continue to grow like this,” executive director and CEO Wong Fook Lin (pix) told reporters at its AGM yesterday.

The group’s net profit for the financial year ended May 31, 2015 (FY15) more than doubled to RM5.59 million from RM2.62 million a year ago, while revenue grew 1.13% to RM24.95 million from RM24.67 million a year ago.

For the first quarter ended Aug 31, 2015, net profit grew 30.85% to RM1.51 million from RM1.15 million a year ago, while revenue grew 8.64% to RM6.65 million from RM6.13 million a year ago.

Wong said the group’s growth is in tandem with the glove industry, which is performing well and demand for glove formers is very strong. He said ES Ceramics’ market share is 10-20% and it serves most of the big glove makers.

“Barring unforeseen circumstances, it (FY16 results) should be quite promising. The environment is fertile for the glove industry, with low commodity prices and weak currencies, which is favourable for glove makers,” he added.

On its operations, Wong said it is looking at further automating its processes and strengthening research and development (R&D). It is also looking to increase output in order to meet customer expectations in terms of quality and price.

He said some processes are already automated or semi-automated while some processes such as quality control and finishings cannot be automated.

“We are still studying our automation plans. There are no ready machineries for our industry as it is a very niche industry. Thus we have to discuss and do R&D with our suppliers. It is time consuming,” he said.

He said the cost of its automation plans have not been finalised yet. The group expects to fund its automation plans with internal funds. The group has RM17 million cash and RM300,000 to RM400,000 in borrowings.

ES Ceramics has two plants. Its plant in Ipoh, Perak has a capacity of 85,000 units with utilisation rate at 75% while the plant in Hat Yai, Thailand has a capacity of 120,000 units with utilisation rate at 60%.

Wong said the maximum capacity for the Hat Yai plant is 200,000 units if it expands its workforce there while maximum capacity for the Ipoh plant, which is limited by space, is 120,000 units.

On the minimum wage announced by the government in Budget 2016, he said there will be an increase in the cost of doing business but the initiative is in the right direction, which would raise the quality of life for workers. The group has 80 employees in Ipoh and 180 employees in Thailand.

On the weak ringgit, he said there is no disadvantage because its exports are transacted in US dollars, including some of its exports from the Hat Yai plant to the Malaysian market.

“Our materials are fully imported from Europe in US dollars. Our sales is also in US dollars, so it is a natural hedge,” he added.
On dividends, Wong said it will not declare dividends for FY16 due to the capital expenditure (capex) needed for its automation plans, which he said will take up quite a lot of cash.

“We will look at it next financial year (FY17). Hopefully by then we will have an idea as to the capex for the automation initiative; how much is needed.

“We are mindful of the importance of rewarding shareholders for their loyalty and we will consider it after taking into consideration our cash flow as well as future needs,” he said.