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SCGM allocates RM20 million capex to expand food packaging segment’s capacity

SCGM allocates RM20 million capex to expand food packaging segment’s capacity

30 Mar 2021

Food packaging manufacturer SCGM Bhd plans to spend RM20 million in capital expenditure (capex) to expand its food packaging capacity, as its F&B packaging sales continued to benefit from the new norm of increased food delivery and takeaway amid the Covid-19 environment in the third quarter and nine months ended Jan 31, 2021.

The capex, which is allocated for the next financial year ending April 30, 2022, will be used for the purchase of extrusion machines and forming machines.

The group’s F&B packaging segment recorded RM52.0 million revenue in the third quarter ended Jan 31, 2021 (Q3’21), 23.2% increase from RM42.2 million a year ago (Q3’20). The strong F&B segment performance largely led to the 21.1% higher group revenue of RM62.5 million in Q3’21 from RM51.6 million in Q3’20.

SCGM managing director Datuk Seri Lee Hock Chai said it is seeing encouraging uptake for its F&B packaging such as bento boxes, bakery trays and other products in the last few quarters, as it meet increasing demand from F&B businesses in line with higher takeaways amidst Covid-19.

“This capacity expansion proves timely for us to capture the rising demand from our customers, and allows us additional capacity to serve even more customers in the domestic and international markets. As the largest thermoform F&B packaging provider in Malaysia, we believe we have a competitive edge in sourcing for new clients particularly in the domestic arena, alongside overseas markets such as New Zealand, Australia, Singapore, the 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.”

Growth in group revenue and favourable product mix resulted in Q3’21 net profit nearly doubling to RM8.1 million from RM4.2 million a year ago. The higher net profit was further supported by lower operating costs incurred as the group consolidated its Telok Panglima Garang factory to its larger Kulai plant since March 2020. The group also reduced finance expenses to RM700,000 in Q1’21 versus RM1.2 million in Q3’20 on low interest rates and reduced bank borrowings.

For the nine months period, SCGM’s net profit grew nearly three-fold to RM26.0 million in 9M’21 from RM10.4 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. It registered RM180.8 million revenue, 12.4% more than RM160.8 million a year ago (9M’20) 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.

The group declared a third interim dividend of 2.2 sen per share for the financial year ending April 30, 2021. Alongside the previous first and second interim dividend of 1.7 sen and 1.5 sen paid by the group, SCGM’s total dividend payout for 9M’21 translates to RM10.4 million or 40.0% of net profit in 9M21.

While acknowledging the current uptrend in resin prices, Lee said: “Even as resin prices continue to trend upwards, our position as the largest thermoform F&B packaging provider and price leader allows us to benefit from economies of scale and adjust prices accordingly.”

The capex will be used for the purchase of extrusion machines and forming machines.

Source: The Sun Daily