Kuala Lumpur, 21 February 2020 – Chemical Company of Malaysia Berhad (CCM) posted a revenue of RM386.1 million for the financial year ended 31 December 2019, a slight decrease of 2.5 per cent from RM395.9 million recorded in the corresponding period last year. Both revenue and profit before tax were impacted by the lower average selling prices of its chlor-alkali products on the back of softer prices of the chemical commodity during the period under review.
The Group’s recurring profit before tax (PBT) decreased from RM35.5 million (excluded non- recurring gains of RM16.1 million) in 2018 to RM24.1 million for the year 2019. The decrease in recurring profit was attributed to margin squeeze resulting from the fall in the average chlor- alkali product selling prices, which saw the average selling prices of key products decreased by up to 28 per cent compared to the corresponding period in 2018 negating the impact of increased sales volume in the year.
The decline in average selling prices was mainly due to overall trade flow dynamics that occurred in the region as well as the softening of the global economy growth. CCM also made impairments on certain doubtful trade receivables and under-utilised assets totalling RM4.7 million during the period. The impact of the margin squeeze and impairment made during the period was cushioned by lower finance cost of RM13.7 million due to the completion of the Group’s de-gearing exercise.
According to Nik Fazila Nik Mohamed Shihabuddin, CCM’s Group Managing Director, the divestment of the Group’s non-core assets was fully completed in March 2019 and all the proceeds were fully utilised to pare down its existing borrowings. “The paring down of our existing borrowings resulted in a stronger financial position in 2019 which enabled the Group to pursue our expansion and growth strategies by focusing our efforts on building our two core businesses.
“The reactivation of its Pasir Gudang Plant 1 (PGW1) has been fully completed by the end of 2019 which will increase the total chlor-alkali production capacity by 50 per cent annually in the coming year. This will allow the Chemicals Division to seize existing market opportunities for its chlor-alkali products. Additionally, the Chemicals Division will continue to implement various improvement programmes to gain operational savings while growing its core capabilities domestically and regionally, in order to strengthen its market share,” she said. “We remain cautious of the fluctuation in chemical commodity prices that may invariably impact our financial performance, but we believe that our efforts will help us achieve sustainable growth in the long run,”
-Nik Fazila Nik Mohamed Shihabuddin, CCM’s Group Managing Director
Meanwhile, revenue for the Polymers Division increased 1.7 per cent for the financial year ended 31 December 2019 to RM96.3 million from RM94.7 million last year. The Division’s PBT eased 8 per cent to RM17.7 million for the period under review from RM19.2 million in 2018. This was due to additional depreciation pursuant to the commencement of operations from the Polymers Division’s new building in Bangi, together with impairments on certain receivables identified as doubtful.
According to a report by the Malaysian Rubber Glove Manufacturers Association (MARGMA), the rubber gloves industry will continue to soar in 2020 as the global demand for gloves is expected to experience an annual growth rate of 12 per cent. The forecast is poised to fuel glove manufacturers’ demand for polymer coatings for glove production especially powder-free gloves.
“Despite the robust growth in the gloves sector, the Polymers Division expects a challenging business environment in 2020, in view of intense competition and cost increases. Hence, we are committed to strengthening the Division’s product development capabilities and undertaking capacity expansion in order to stay ahead of the competition. “We also reaffirm our ongoing efforts towards improving the production process including leveraging on automation to boost cost efficiency and quality improvement in order to facilitate CCM’s business growth,” said Nik Fazila.
For the current quarter ended 31 December 2019, CCM recorded a slight decline of 1.2 per cent in revenue to RM99.3 million from RM100.5 million in the corresponding quarter last year. The Group’s PBT decreased 48.4 per cent to RM5.1 million in the quarter under review from RM9.8 million in the same period in 2018 was mainly attributed by margin squeeze in the Chemicals business and impairment made of trade receivables and under-utilised assets totaling RM 2.9 million.
Commenting on CCM’s prospects in the upcoming year, Nik Fazila said the Group is now focused on strengthening its Chemicals and Polymers businesses by pursuing its expansion and growth strategies to seek new opportunities for a sustainable growth.
“Amidst the headwinds, we are committed to exploring new growth opportunities and optimising our potential to gain the competitive edge and create additional value for our customers and shareholders. We remain cautious for the rest of the year amidst the expected slowdown in economic growth but steadfast and focus on executing our strategies to achieve long-term sustainability and investment returns,” she added.
The Board of Directors has proposed a final dividend of 2.00 sen per share in respect of financial year ended 31 December 2019, based on issued share capital of 167.7 million shares amounting to approximately RM3.4 million. The final dividend is subject to shareholders’ approval at the forthcoming 58 th Annual General Meeting (AGM) of the company. The book closure and payment date in respect of the final dividend will be on 5 June 2020.
Read More: Top 8 Reasons Why You Aren’t Rich Yet