QL Resources: Demand for products may dip

SHAH ALAM: QL Resources Bhd cautioned that demand for its products could slightly weaken due to the moderation in the world and regional economies, according to managing director Chia Song Kun.
Speaking at a press conference after the company’s AGM here yesterday, he said the company’s growth could also be flattish, but stressed that demand for marine food is still doing well because prices have been trending up on a shortage of supply.
Besides that, Chia said, a weaker ringgit has helped QL to be more competitive in the global arena.
He is unfazed by the drop in QL’s profit before tax margin from 9.1% in FY15 to 8.7% in FY16.
“The business has been operating for about 9% margin in the past few years. It will be around 9% for the current year, with the marine products manufacturing activity having a higher margin,” he said.
The biggest contributor for QL is the marine product business, which makes up half of its bottom line. The rest is from the livestock farming and palm oil segments.
For the financial year ended March 31, 2016 (FY16), QL’s net profit was flat at RM192.08 million compared with RM191.4 million a year ago. Its net profit, however, rose 2.9% from RM40.93 million to RM42.13 million for the first quarter ended June 30, 2016 (Q1 FY17).
QL will spend RM300 million in capital expenditure this year for its business expansion, including a RM40 million chilled surimi-based product plant in Hutan Melintang, Perak, and a RM25 million frozen marine product processing plant in Tuaran, Sabah.
Meanwhile, on the convenience store business, Chia is confident that the first Family Mart store will open by year-end in the Klang Valley as scheduled. “We’ll be focusing on the Klang Valley because it is the main market. We’ve identified a few locations,” he said.
While analysts have raised concerns over the intense competition within the convenience store space, Chia is of the view that there is still room for new players.
“Competition means the market is growing, we still see opportunities in this space for new players like Family Mart.”
QL is maintaining its target of having 300 Family Mart convenience stores within the next five years. It has set aside RM100 million for the plan.
Chia noted that the gestation period for the convenience store business is five to seven years.