Pecca sees minimal impact from weak ringgit

KUALA LUMPUR: Pecca Group Bhd expects the weakening ringgit to have minimal impact on the group’s business as it will be adjusting product prices every three months, as its exports will act as a partial hedge, said executive director Michael Tan Jin Sun.

Pecca’s principal business activities are in the styling, manufacturing, distribution and installation of leather upholstery for car seat covers as well as the supply of leather cut pieces to the automotive leather upholstery industry. The group purchases leather in US dollars.

Tan said currency fluctuations to a certain extent will have some impact on its business but the group will factor in these changes regularly.

“Every three months and six months, we will be adjusting the (price based on the) currency factors. It’s common. This currency adjusting is affecting all vendors,” he told SunBiz after the group’s AGM here yesterday.

Pecca’s products and services although focused in Malaysia are also exported to the US, the Netherlands, Thailand, Australia, Japan, New Zealand, Singapore, Indonesia, the UK and Mauritius.

For the Malaysian market, Pecca’s business is in original equipment manufacturing (OEM), pre-delivery inspection (PDI) and replacement equipment manufacturer (REM) market segments. The PDI and REM segments are also export-designated.

About 15% of the group’s revenue is now derived from the export market, which are denominated in the currency of the prevailing countries. Tan said impact from currency fluctuations also depends on timing and the trend of the currency.

“How we cushion (the impact) is for the OEM business, we try to recover (the costs) from the customer (via price adjustments). We do partial hedging, we have exports. It’s a net-off situation for us,” explained Tan.

He added that Pecca, which was listed on the stock exchange in April this year, is positive in sustaining its growth momentum in the current financial year ending June 30, 2017 (FY17) with projects it has secured.

“We’re cautiously optimistic that we should be able to do better (in FY17) but the external factor is one that we cannot ignore,” said Tan.

Revenue from leather upholstery for car seat covers remain the largest contributor to Pecca, accounting for 76.9% of the total revenue recorded in FY16, followed by leather cut pieces supply (16.6%). Revenue derived from the core segment, which is the OEM leather car seat covers (OE Fit) continue to dominate and was the largest contributor segment, accounting for 47.3% of total revenue.

On the aviation refurbishment business, Tan expects its 60%-owned Pecca Leather Aviation Services Sdn Bhd (PAviation) to perform better after securing necessary licences from the Department of Civil Aviation (DCA).

The aviation segment reported pre-tax losses of RM210,000 in FY16.

Pecca in September obtained approval from DCA to include in its license the scope for wrapping, cutting and sewing leather or fabric seat covers and refurbishing cabin interior sidewalls and ceiling panels.

“The company (PAviation) will be able to self-sustain, if not make marginal contribution for us. Now our focus will be on penetrating into leather upholstery scope for aircraft seats covers.”