SCGM’s Q3 net profit dips on high production cost

PETALING JAYA: Higher production cost amongst others, drove SCGM Bhd’s third quarter ended Jan 31, 2017 net profit marginally lower to RM6.9 million from RM7 million in the preceding year’s corresponding quarter.

Depreciation of property, plant and equipment, higher consumption of electricity power and packing materials, were amongst the other reasons for the slight recede in profits, SCGM’s board of directors said in a filing with Bursa Malaysia.

This was despite the thermoform food packaging manufacturer recording its highest quarterly revenue of RM45.9 million for the quarter, compared with RM37.2 million in the third quarter of the previous year, on higher local sales demand of plastic packaging products.

“We foresee greater demand going forward, as more states in Malaysia and countries in the region enforce regulations on traders and retailers to use pro-environment packaging in the interest of public health and cleanliness,” its managing director, Datuk Seri Lee Hock Chai said in a statement.

“Despite our temporary blip in profitability, we believe this will be mitigated by the future growth of the company when the new capacity in the new factory comes on-stream by end-2018 to meet the rising demand in our products. The new factory will accord us increased efficiency, which should help improve our cost structure,” he said.

Lee said the company’s 7.8ha factory in Kulai would increase the extrusion capabilities to 62.6 million kg per year from the current 36 million.

SCGM will also be a silver sponsor for the upcoming 2017 Southeast Asian Games and Asean Para Games to be hosted in Kuala Lumpur in August and September, which it believes will boost demand for disposable lunch boxes and cups.

Besides that, demand for its bakery, sushi, fruits and vegetables products will see an increase in demand due to the awareness of the spill over effect from the ban of polystyrene trays such as single layer trays to wrap fruits and vegetables. Its board believes that the lifestyle changes for more hygiene packaging will spur demand.

Net profit for the first nine months of FY17, showed a 7% increase to RM17.91 million compared with RM16.73 million for the same period in the corresponding quarter.

Revenue also was up 24.6% to RM125. 8 million for the period from RM101 million for the same period in 2016.