Luxchem targets 10% revenue growth this year, sets lower capex

PETALING JAYA: A cautiously optimistic Luxchem Corp Bhd, which is eyeing 10% growth in terms of exports sales for its manufacturing division, is banking on the regional market for potential growth due to the saturated domestic market.
Luxchem via its units Luxchem Polymer Industries Sdn Bhd(LPI) and Transform Master Sdn Bhd manufactures and trades unsaturated polyester resin, latex chemical dispersions, latex processing chemicals and specialty chemicals for the latex industry.
Speaking to reporters after its AGM today, managing director Tang Ying See said the group sees its overseas market particularly Vietnam and Indonesia as the main drivers for growth.

“We always target about 10% for exports. We have potential but there are also other variables such as competition and market scenario, at least we have capacity to achieve that,” he said.
“We are working very hard for Vietnam and expect to see some growth from there,” he added.
While acknowledging that its margins came under pressure last year due to competition, Tang said the group is looking to build a sales team in Vietnam to boost its margins.
As for the “stable” Indonesia where its subsidiary PT Luxchem Indonesia operates, he said the headwinds to weather may be in the form of the upcoming presidential elections and foreign currency exchange.
Last year, Luxchem derived 76% of its revenue for its manufacturing segment from export sales. It exports to countries such as Vietnam, Thailand, Bangladesh, Australia and Singapore.
Meanwhile, Tang said the group will be spending around RM2 million to RM2.5 million in capital expenditure (capex) this year, which will be used to upgrade software and purchase machinery for its subsidiary Transform Master. Last year, it spent about RM10 million in capex.
The capex spend for 2019 is expected to be to the tune of RM8 million due to the construction of a new warehouse in Pulau Indah, which is expected to be at least 20-30% bigger than the current 60,000 sq ft facility.
As for earnings, Tang said barring any unforeseen circumstances with the support from increased capacity in its manufacturing division and better market conditions, the group is targeting at least a 10% revenue growth.
However, it foresees possible headwinds from fluctuation of the ringgit against the greenback as “a lot of” its transactions are denominated in US dollar, which in turn may impact its revenue. About 70% of its purchases are also transacted in US dollar.
This may be further exacerbated by the rising crude oil prices as raw material for its petrochemical products are linked to this, which may translate into higher raw material cost.
Last year, Luxchem recorded higher revenue of RM806.71 million against the RM701.55 million reported in the previous year.