CCM to execute three-pronged strategy to manage COVID-19 impact
15 Jun 2020
Chemical Company of Malaysia Bhd (CCM) has outlined a three-pronged strategy to manage the impact of the COVID-19, encompassing prioritisation of capital expenditures, heightened monitoring of working capital requirements and ensuring cash availability and liquidity at all times.
Group managing director Nik Fazila Nik Mohamed Shihabuddin said the group’s efforts to enhance production capacities can be seen with the additional 50 per cent boost in its chlor-alkali production, following the reactivation of its Pasir Gudang Plant 1 plant late February this year.
Meanwhile, its calcium nitrate plant will be increasing its production capacity progressively from 1,000 metric tonnes (MT) per month to 1,900 MT per month.
“Besides optimising our existing resources, we are expanding our capacity for Kleeners, a cleaning solution for ceramic formers supplied to glove manufacturers.
“Our Kleeners facility in Bangi will be doubling its output from 9,000 MT per year to 18,000 MT per year once it is fully commissioned in the first quarter of 2021 (Q1 2021),” she said in a statement today.
Additionally, CCM will continue to improve operational, financial and cost efficiency, as well as prioritising research and development efforts.
Nik Fazila said one of the key cost efficiency initiatives is the RM27.9 million cogeneration plant, which will enable the simultaneous production of electricity and usable thermal energy from a single fuel source, supporting the national agenda of achieving eight per cent savings from energy efficiency by 2025.
“Additionally, we will relentlessly pursue growth opportunities via the diversification of portfolios, including derivatives and other non-glove applications to deepen and widen our footprint regionally,” she added.
According to Nik Fazila, CCM will resume supplying caustic soda to Petroliam Nasional Bhd (Petronas) when the latter resumes operations towards the end of 2020 following its operational disruption due to a fire at the Petronas’ Refinery and Petrochemical Integrated Development (RAPID) site in April 2019.
In May 2019, CCM was awarded a three-year contract with a one year extension option by Petronas to supply caustic soda to Petronas Refinery and Petrochemicals Corporation Sdn Bhd.
Overall, she said CCM is cautiously optimistic amidst the uncertainties of a post-COVID-19 economic environment on the domestic and global front.
The group expects the heightened disposition towards personal hygiene and use of personal protective equipment such as gloves to continue to fuel demand for its chemicals and polymers products during the pandemic.
“Demand for key chemicals used to manufacture personal hygiene products, disinfectants and those for water treatment, as well as polymers used to manufacture gloves is expected to be maintained beyond the easing of restrictions in Malaysia and globally.
“This is expected to benefit CCM while offsetting the impact of softer prices for its key chlor alkali products,” she added.
During its Q1 2020 ended March 31, 2020, CCM recorded a slightly lower revenue at RM96.6 million versus RM96.9 million in Q1 2019 due to a dip in contributions from the chemicals division.
However, the decline was cushioned by a 14.9 per cent increase in revenue by the polymers division.
Meanwhile, the group’s profit before tax fell to RM3.7 million from RM9.5 million previously.
Nik Fazila said despite the improved performance from the polymers division arising from the surge in demand for gloves, the group’s Q1 2020 results were weighed down by its share of losses of its associate company, Orica-CCM Energy Sdn Bhd.
The company’s performance was also impacted by the margin squeeze following the lower average selling price of its chlor-alkali products and lower volume sold by the chemicals division during the Movement Control Order as its customers were closed as they were deemed as non-essential.
Revenue from its chemicals division declined 4.9 per cent year-on-year (y-o-y) to RM70.7 million from RM74.3 million previously.
Meanwhile, its polymers division recorded a 14.9 per cent y-o-y increase in revenue at RM27.4 million from RM23.8 million previously, due to a surge in demand from the glove industry amidst heightened hygiene concerns over the COVID-19 pandemic.
During CCM’s virtual media briefing on its 58th annual general meeting today, she said no dividend will be paid for the current quarter under review, but added that the company has never failed to pay its yearly dividends despite experiencing losses previously.
She said CCM’s dividend payout policy is 50 per cent-75 per cent of group profit after tax and minority interests (PATAMI).
On capital expenditure, Nik Fazila said the company had set aside about RM50 million to be utilised until Q1 2021 — RM27.9 million for the construction of its cogeneration plant, RM14 million for its Kleeners facility and RM8 million for annual capital expenditures.