Food packaging manufacturer SCGM Bhd plans to spend RM20 million to expand its food packaging capacity, as its food and beverage (F&B) packaging sales continue to benefit from the new norm of increased food delivery and takeaway amidst the Covid-19 environment.
The capital expenditure that it allocated for the next financial year ending April 30, 2022 would be used to buy extrusion machines and forming machines.
In a press statement, its managing director Datuk Seri Lee Hock Chai said this capacity expansion is timely to capture rising demand from its customers, and allows them additional capacity to serve even more customers in the domestic and international markets.
“We are seeing encouraging uptake for our F&B packaging such as bento boxes, bakery trays and other products in the last few quarters, as we meet increasing demand from food and beverage (F&B) businesses, in line with higher takeaways amidst Covid-19,” Lee noted.
As the largest thermoform F&B packaging provider in Malaysia, Lee believes SCGM has a competitive edge in sourcing for new clients, particularly in the domestic arena, alongside overseas markets such as New Zealand, Australia, Singapore, Philippines and Indonesia.
“Hence, by leveraging on our expanded operating capacity, as well as our extensive distribution network and in-house design capabilities to manufacture innovative products, we are set to continue expanding our clientele, going forward,” he added.
In conjunction with the expansion announcement, SCGM reported that its net profit nearly doubled to RM8.1 million in the third quarter ended Jan 31, 2021 (3QFY21) compared to RM4.18 million a year ago, on higher revenue.
The better bottom-line was further supported by lower operating costs as the group consolidated its Telok Panglima Garang factory to its larger Kulai plant since March 2020.
It also attributed the better earnings to lower finance expenses of RM700,000 in 3QFY21, versus RM1.2 million in 3QFY20, on low interest rates and reduced bank borrowings.
Revenue for the quarter jumped 21.09% to RM62.53 million from RM51.64 million a year before, underpinned by its strong F&B packaging segment.
The group declared a third interim dividend of 2.2 sen per share for the financial year ending April 30, 2021 (FY21), with an ex-date on April 12. Meanwhile, the payment date for the dividend falls on April 28, 2021.
Including the first and second interim dividend of 1.7 sen and 1.5 sen paid by the group previously, this brings the group’s total dividend for 9MFY21 to 5.4 sen per share, compared with 1.75 sen per share last year.
SCGM’s total dividend payout for 9MFY21 translates to RM10.4 million or 40.0% of net profit in 9M21.
On a quarter-on-quarter basis, the group’s revenue increased by 2.48% from RM61.01 million in 2QFY21, despite posting a lower net profit compared with RM9.61 million.
For the cumulative nine-month period (9MFY21), its net profit jumped 150% to RM25.98 million from RM10.41 million a year ago, on the back of favourable sales mix, lower raw material costs and reduced operating and interest expenses incurred during the period.
Cumulative revenue for 9MFY21 grew by 12.4% to RM180.76 million from RM160.82 million, as a result of higher deliveries of F&B packaging and contributions from the new personal protective equipment segment comprising face masks and face shields, which was established since February 2020.
Acknowledging the current uptrend in resin prices, Lee said even as they continue to trend upwards, the group’s position as the largest thermoform F&B packaging provider and price leader allows it to benefit from economies of scale and adjust prices accordingly.
Share price of SCGM closed up two sen or 1.09% to RM1.86 today, giving it a market capitalisation of RM360 million. There were 563,900 shares traded.
The stock’s price has been on a declining trend from August last year, having halved compared to its recent peak of RM3.74 on Aug 3, 2020.
Source: The Edge Markets
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