KUALA LUMPUR: Concrete Engineering Products Bhd (CEPCO), which expects 2019 to be another challenging year for the group, is shifting its focus to overseas market in order to reduce its losses in financial year ending Aug 31, 2019 (FY19).
The group is principally engaged in manufacturing and distribution of pre-stressed spun concrete piles and poles.
In FY18, CEPCO’s net loss widened to RM5.57 million, compared with RM5.23 million in FY17. Its revenue declined 9.7% to RM161.95 million, from RM179.4 million previously.
Speaking to reporters after its AGM and EGM today, managing director Leong Kway Wah (pix) said last year, the group was impacted by lack of sales orders and cancellation or suspension of several key infrastructure projects, coupled with the increase in steel bar prices of about 20%.
Therefore, Leong said the group is exploring new markets like Papua New Guinea, Vietnam, Bangladesh and Myanmar to mitigate the shortfall in its local orders in anticipation of a slowdown in the construction industry moving forward.
Currently, he said the group exports a substantial quantity of products to the overseas markets covering Indonesia, Brunei, Singapore, Maldives as well as Nigeria.
For FY19, Leong said he expects the revenue derived from overseas will continue to contribute substantially to the group’s total revenue, increasing to about 45%, from 39% in FY18.
To note, the group’s export sales had increased to 39% of total revenue during FY18 from only 7% in FY17.
To date, CEPCO’s outstanding order book stands at RM62 million with export sales making up 30% of the total. It is also tendering for RM300,000 to RM400,000 worth of jobs, of which 90% are overseas projects.
Nevertheless, Leong said the group expects its ongoing infrastructure projects in East Malaysia will not be adversely affected by the government expenditure cutback and remains an area where the group could secure a fair share of new orders.
Meanwhile, he said the group’s measures to address margin compression include shifting and concentrating production within its cluster of factories in the central region to optimise and lower production costs; negotiating for lower shipping costs for overseas and local markets; cutting outsourced labour costs; and exploring the feasibility of acquiring own quarry to reduce raw material costs.
Leong said the group is also negotiating with key raw material suppliers to fix pricing during the low delivery period to prevent costs escalation.
“We expect steel raw material prices to stabilise this year and hopefully this will help to arrest further deterioration on our margin,” he added.
At its EGM earlier, the group obtained its shareholders’ approval for its proposed two-for-three bonus issue of 29.85 million shares held by entitled shareholders.
