Business as usual for Guan Chong despite MCO
22 Apr 2020
For cocoa manufacturer Guan Chong Bhd (GCB), business is running as usual with only minor disruptions to its operations, despite the Movement Control Order (MCO) following the COVID-19 pandemic that is affecting the broad economy.
In a note today, RHB Investment Bank Bhd said that high automation helped GCB to run its production at almost full capacity during the MCO, although its operating workforce was reduced to 50 per cent.
“GCB said it will benefit from disruptions faced by other players due to COVID-19, as it will be able to cannibalise some orders from regional competitors.
“Some of the regional grinders have not been able to run their plants at optimal levels due to employee shortages and logistics issues caused by the lockdowns,” the research house said.
It added that GCB’s Schokinag plant is currently running as per normal, as Germany considers chocolate manufacturing an essential business.
RHB Investment said GCB expects overall global chocolate demand to contract between two and three per cent year-on-year, dragged down by the premium segment which relies heavily on tourism spending.
“However, demand for mass market chocolates, which accounts for 70-80 per cent of market demand, remains robust during the lockdown.
“Also, the disruption in cocoa supply will help to maintain the supply-demand equilibrium without major pressure on the combined ratio,” it said.
As for the commissioning of GCB’s new plant in Ivory Coast, Africa, RHB Investment said it would be likely delayed to the second half of next year rather than the initial expectation of the first quarter of 2021.
“This is because the Ivory Coast government is limiting the number of workers allowed on-site to 50 people, due to the pandemic,” it added.
RHB Investment has maintained its ‘buy’ recommendation on cocoa manufacturer Guan Chong Bhd (GCB), with a lower target price of RM3.35 against RM3.45 previously.