Friday 16 December 2011

Full production for EngTek’s Thai units in 3Q12

KUALA LUMPUR: Full production level for the two subsidiaries of Eng Teknologi Holdings Bhd (EngTek) affected by the floods in Ayutthaya, Thailand will only return to normal in 3Q12.

Its manufacturing facilities — Thailand Engtek (Thailand) Co Ltd (ETCL) and Altum Precision Co Ltd (Altum) — are expected to restore its full production capacity by the second quarter (2Q) of 2012, noted the company’s statement to Bursa Malaysia yesterday.

It added that production levels are only expected to return to normal by 3Q as the output is meant for major customers, which have also been affected by the floods.

“The floods have caused a substantial disruption to the supply chain of key hard disk drive components and the whole hard disk drive industry in Thailand. It is estimated that the supply chain situation will only be normalised in the next three to six months,” said EngTek.

The company noted that the flood waters have receded at both the manufacturing facilities.

“Decontamination and cleaning work are currently underway at the facilities and is expected to be completed by next week. After which, restoration work will commence,” it said.

“The insurance loss adjustors have conducted a preliminary assessment of the damage caused by the floods. Initial assessment indicates that the machinery damage is widespread due to rust, corrosion and contamination after being submerged in flood waters above two metres since October 2011,” said the hard disc drive (HDD) manufacturer.

The company said that it is currently working on the detailed documentation for the insurance claims, which is expected to be finalised and submitted to insurers by end of

December. The insurance claims process is expected to be completed within three to six months.

EngTek’s Thai operations contribute 40% to the group’s revenue for FY10 ended Dec 31. The flooding has also delayed EngTek’s plan to privatise.

In a report in The Edge Financial Daily on Oct 14, the company said the floods would have a negative impact on its FY11 ending Dec 31.

EngTek announced in a note to Bursa on Oct 18 that its subsidiaries in China and the Philippines have also experienced disruptions to their production as a certain portion of their output was meant for their major customer in Thailand situated the flood affected areas.

Its counter closed unchanged at RM1.52 with stocks traded at a thin volume of 84,000 shares.


This article appeared in The Edge Financial Daily, December 16, 2011.



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