UMW expects aerospace unit to turn around in 2020

23 May 2019 / 20:45 H.

SHAH ALAM: UMW Holdings Bhd expects its nascent aerospace business under the manufacturing and engineering division to turn around next year as it ramps up production capacity.

The division is undertaken through UMW Aerospace, which had, in 2015, entered into an agreement with Rolls Royce Plc to manufacture and assemble fan cases for Rolls-Royce Trent 1000 and Trent 7000 aero engines used in Boeing and Airbus aircraft.

Speaking to the media after the group’s AGM yesterday, UMW group CEO and president Badrul Feisal Abdul Rahim did not reveal the exact figures of its fan cases production due to a confidentiality clause.

However, he said the unit delivered over 50 fan cases in 2018 and is expected to more than double that this year.

“We expect (aerospace business) to improve significantly due to the successful production ramp up.”

In 2018, the aerospace business’s losses narrowed significantly to RM29.4 million from RM60.4 million in 2017.

UMW also revealed it is in negotiations with a number of parties for the manufacturing of aerospace components as well as high-value manufacturing for other business sectors.

“To be sure, we are not leaving any stone unturned, we are looking to optimise our manufacturing capabilities. In the current fan case manufacturing it is all about precision engineering and the same skill set can be used for other industries, such as health, medical devices, manufacturing turbine for the energy industries and many more.”

Meanwhile, UMW has allocated capital expenditure (capex) of RM93 million for its aerospace business out of the RM118 million set aside for manufacturing and engineering division, along with RM1.6 million for the land development for High Value Manufacturing Park in Serendah, Selangor.

The group has also earmarked RM174 million for the automotive division to upgrade and automate the group’s Shah Alam plant and RM262 million has been allocated to its equipment division to be invested in the group’s equipment rental business.

Another RM52 million will be used for other capex, bringing the group’s total capex for the year to RM607 million.

For the automotive sector, UMW is maintaining its sales forecasts of 75,000 units for Toyota and 231,000 units for Perodua following Bank Negara Malaysia’s decision to cut the Overnight Policy Rate by 0.25%.

With regards to foreign exchange pressure, UMW said it has been utilising a hedging strategy to deal with the forex factor aside from the localisation efforts for it automotive division.

In January this year, the group began completely knocked down (CKD) production for Toyota Vios with 80% local input, followed by Toyota Yaris in April.

Badrul said the group is planning to have more CKD models going forward.

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