Able Global looking to stamp its mark on the Americas
21 Dec 2021
ABLE Global Bhd is seeing a surge in enquiries for its products from the Americas, particularly from the Caribbean islands and the surrounding areas such as Haiti, Jamaica, Venezuela and even Port Louis in Mauritius, which is off the eastern coast of Africa.
These countries are not the typical customer base for the majority of Malaysian companies, but they are part of Able Global’s customer portfolio, which is set to grow further with its recently commissioned production plant in Mexico.
If the name “Able Global” sounds unfamiliar, it is probably because investors would have known it as Johore Tin Bhd previously. The group recently underwent a name change to better reflect the change in its main business — from tin can packaging to food and beverage (F&B).
The name change was also to show the continuing investment it is putting into expanding the F&B segment, says CEO Edward Goh in an email reply to The Edge.
The group’s investment in Mexico, under Able Dairies Mexico, is a result of a joint venture between Able Global’s wholly-owned subsidiary Able Dairies Sdn Bhd and three Mexican shareholders. Able Dairies holds 43.13% equity interest in the venture.
“We are targeting 30% to 40% of our production capacity to be sold in Mexico while the remainder can be sold to the US, South America, Central America and the Caribbean. If the freight rate is advantageous, we may even ship to South Africa,” says Goh.
It targets to break even with a 30% utilisation rate by the first year of operations.
At present, the group is selling its products from Malaysia to smaller chain stores in the US, while in Mexico and Venezuela, Able Global’s products are retailed in Walmart through its partner Calkins, Burke and Zannie de México (CBZ).
“We could not sell in larger quantities [to the US] due to the freight rate being more than US$10,000 (RM42,167) (per container) now. Shipping from Mexico is nearer, we can send to the border via train and that will reduce the cost significantly.
“Right now, we have a lot of enquiries coming from the Caribbean islands and the surrounding area such as Haiti, Jamaica, Port Louis, Venezuela, as well as the US, but we are not selling to them on a big scale [yet].
“We have existing customers in the Caribbean islands and [our products] will be exported from Mexico in the future. We are also trying to develop new markets in Haiti, Jamaica, Peru, Venezuela and other countries around this region,” adds Goh.
This is where the commissioning of the production plant in Mexico comes into play for the group’s ambition to stamp its mark on the Americas, despite several setbacks in getting it up and running due to the Covid-19 pandemic.
With the plant operating since July, Able Global will expand into markets in the Americas and Caribbean.
Goh says the group is in the midst of finalising the audit and paperwork with the Mexican authorities and that Able Global’s marketing team has been working hard at contacting customers to take orders for the export market.
Able Global has already obtained the Safe Quality Food (SQF) certification for Able Dairies Mexico in order for the group to list its items in Walmart and other big supermarket chains in the US.
“This [SQF] opens a new revenue stream for our group, and we believe this will also strengthen our foothold in the North American market,” says Goh.
The next step is for the said supermarkets, such as Walmart, to conduct an audit on the factory. Goh says Walmart is scheduling an audit with Able Dairies Mexico.
Able Global is also awaiting the issuance of the health certificate from the Ministry of Health in Mexico following the completion of its audit, in order for Able Dairies Mexico to export products from its facilities. The health certificate is a prerequisite by importing countries before a product can be sold on their shores.
Another important piece of the puzzle for Able Global’s aspirations in the Americas is its partners. The group has the advantage of having CBZ — a wholesale distributor of brands as well as food producer — as its partner.
CBZ is an authorised supplier to Walmart and other American chains, says Goh, so this means Able Global has a ready channel to the big supermarkets as soon as the necessary certifications are obtained.
Aside from successfully commissioning its production plant in Mexico, Able Global is also working on expanding its product portfolio currently, to move beyond sweetened condensed milk, evaporated milk and milk powders.
Soon, the group will be adding UHT milk to its portfolio. The equipment is currently being installed and is set for commissioning in a few months. The group is also looking at the popular plant-based milk alternatives.
“One of the products that we are looking to add is plant-based milk alternatives. They are gaining tremendous interest globally and sales are forecast to grow at a 9.4% compound rate annually from 2020 to 2030.
“Six of the top 10 global markets are situated in Asia-Pacific. Notably, the plant-based beverage category has one of the fastest growth in the post-pandemic era due to changes in customer perception. We see it as a perfect fit for our product portfolio and are looking into this,” notes Goh.
The outlook for Able Global’s F&B segment seems bright, with demand being consistently strong despite the volatility in raw material prices, shares Goh.
Selling prices are adjusted monthly to better reflect costs, he adds.
Notably, Able Global’s dairy business makes up about 75% of group revenue, with the remainder coming from its tin can manufacturing business, which was once the group’s bread and butter. Able Global saw its revenue fall 13% to RM502.26 million in the financial year ended Dec 31, 2020 (FY2020) from RM579.79 million in FY2019, while net profit was down 17% year on year (y-o-y) to RM39.49 million from RM47.48 million.
The huge increase in steel prices, opines Goh, will only decrease demand for tin cans slightly in the near term. The group has managed to pass on the raw material cost for its tin cans to customers, similar to its competitors, given how rapidly steel prices have increased.
“In the past, when the price went up 2% to 3%, we would just absorb it. But this time around, it has increased by 50% to 55% from a year ago. There is no company that can absorb this kind of increase,” he says.
In the long term, it is likely that customers will look for alternative packaging materials if steel prices remain elevated, adds Goh.
While it has pivoted its main business, Goh says the group’s tin manufacturing segment will remain and there are no plans to hive off this operation.
“However, our F&B segment will be one of the important core businesses. We have invested a lot in it, and we also have a lot of technical and supporting teams in our F&B segment,” he says.
Interestingly, the group is also planning to diversify into industrial property development given its belief that demand for warehousing and manufacturing is on the upswing in selected sectors. It sees continued demand for industrial land and properties moving into 2022 and beyond.
For 3QFY2021, Able Global’s net profit dropped 44.2% to RM8.77 million from a year ago, while revenue shrank 16.2% y-o-y to RM117.83 million.
The results were dragged down by lower manufacturing output from its F&B segment owing to the Full Movement Control Order, which restricted the workforce to 60%. The company also had to be closed for almost three weeks in July owing to the Enhanced Movement Control Order.
Able Global’s share price has shed 19.71% year to date to close at RM1.58 last Thursday, valuing the group at RM482.9 million.
Source: The Edge Markets