Daibochi expects a better second half with new plant’s contribution

KUALA LUMPUR: Daibochi Plastic and Packaging Industry Bhd, which on Wednesday reported a 14% dip in first half-year net profit, expects a stronger performance in the second half of the year as it banks on its newly-operational first overseas plant in Yangon, Myanmar.

The flexible packaging manufacturer said in a statement that the consumer packaging plant operated by 60%-owned Daibochi Packaging (Myanmar) Co Ltd (DPM) began operations on July 1.

“With DPM contributing to the group, we are confident of recording high growth in financial performance from hereon, leveraging on the low cost base (human resources) in Myanmar, and potential new revenues in the future,” said Daibochi Plastic and Packaging managing director Thomas Lim.

“DPM is off to a good start, having delivered first exports of flexible packaging in early August, adding on to its existing domestic business.”

He said the group, which has a first mover advantage in Myanmar, was actively pursuing new contracts from the country’s burgeoning food & beverage (F&B) and fast moving consumer goods (FMCG) sectors.

“With its technical capabilities and product quality, backed by our track record in serving leading multinational brands, we are confident of fast-tracking DPM’s growth to contribute 20% of group revenue by end-2018.

“Furthermore, Daibochi is expecting to commence packaging supply to two multinational customers for their F&B and FMCG brands in Indonesia in the fourth quarter of 2017, which would add on positively to our prospects.”

Daibochi Plastic and Packaging said it had invested US$6.8mil (RM29.2mil) in the joint venture in Myanmar (its partner with the remaining 40% stake is Myanmar Smart Pack Industrial Co Ltd). It has transferred its existing business, production assets, and workforce into DPM.

In a filing with Bursa Malaysia on Wednesday, Daibochi announced that net profit dropped by 17% to RM5.045mil for the second quarter ended June 30, as revenue fell 11% to RM86.84mil.

The company attributed the lower revenue, and hence the lower profit, mainly to reduction in exports due to temporary disruptions of a key customer’s manufacturing line in the Philippines, which has since resumed operations in July.

The group also saw a double-digit jump in raw material costs compared to the same quarter in the previous year, Daibochi said.

Its net profit for the first six months of the year slipped to RM10.81mil from RM12.58mil in 2016’s corresponding period.

The Malaysian operation contributed 80% of the group’s first half-year revenue of RM180.95mil, with Australia and New Zealand accounting for the rest.

Daibochi said it was confident of achieving growth in the current financial year ending Dec 31, 2017 (FY17), driven by the start of our Myanmar operations, expanded clientele, delivery of new export contracts, and better operating efficiency.

The board has declared a second interim dividend of 1 sen per share for FY17 (FY16: 1.33 sen).

Source: The Star Online

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