KUALA LUMPUR: With major headwinds out of the way, Wellcall Holdings Bhd, the country’s largest exporter of industrial rubber hoses, is expecting better growth for its current financial year.
“We should continue to perform better in FY12 [ending Sept 30] than in FY11 as the current year’s operating conditions are much better,” executive director Alex Chew told The Edge Financial Daily in a recent interview.
Chew said the better operating conditions came from lower rubber prices and a better foreign exchange position.
The price of rubber, which accounts for around 70% of Wellcall’s costs, has fallen dramatically since peaking in 2011. The price of standard Malaysian rubber (SMR) 10 fell by 39% from a peak of RM16.75 per kg in February 2011 to average around RM10.27 per kg in January this year.
Chew said although lower rubber prices would also mean lower selling prices, Wellcall’s profit margins will be intact or even improve as not all price changes are passed on to its customers.
The appreciation of the US dollar against the ringgit, he said, is the other favourable factor as close to 98% of Wellcall’s sales are transacted in the greenback. From lows of around RM2.90 in 2011, the US dollar has appreciated to about RM3.12 now.
Despite the headwinds in 2011, Wellcall still managed to grow its revenue and net profit, as opposed to most companies in the rubber sector, in particular rubber glove makers.
For FY11, it posted a 41.7% increase in revenue to RM136.83 million from RM96.56 million in FY10, while its net profit was up 5.3% to RM15.39 million from RM14.62 million.
The increase in net profit was proportionally lower than the increase in revenue mainly due to a one-off deferred tax adjustment, said Chew. Wellcall incurred a total taxation of RM6.98 million in FY11 compared with RM1.43 million in FY10.
Chew said that as long as there are no major economic crises, the company should do better this year.
“The overall world economic health will also affect the demand for Wellcall’s products as they are linked to basic economic activities,” he explained, adding that Wellcall’s products are currently exported to over 60 countries.
For FY11, foreign markets contributed 92% of its revenue — 21.6% came from Asia, followed by the Middle East (17.3%), Europe (16.9%), the US/Canada (13.5%), South America (10.4%), Australia/New Zealand (9.5%), and Africa (2.8%). Malaysia contributed 8% of total sales.
On its short-term plans, Chew said Wellcall is looking to acquire a suitable plot of land close to its current factory in Perak for expansion purposes. Its other short-term plans include installing more automated machines to improve its production efficiency, and to secure better margins for its products by moving up the value chain.
The company currently has a workforce of 400, operating from a 5ha factory plot.
Chew said the long-term plan is for Wellcall to venture into related business activities and expand its product range.
Wellcall’s products cater to various markets such as mining, oil and gas, transport, food and beverage and shipping.
The company has been focusing on high-value products in some of these sectors, and is riding on the upward trend in commodity prices and mining and oil exploration activities.
Despite the ongoing European crisis, Chew said there could be more orders coming from the region. “When our company paid a visit to several countries in Europe recently, there was strong interest and demand for our products, both from new and existing customers.”
In FY11, Wellcall paid net dividends amounting to 12 sen per share, which represented 103% of its net profit in the financial year, while in FY10, it paid net dividends of 11 sen per share, representing 99.18% of its net profit.
As at Sept 30 last year, it had a net cash position of RM33.3 million with no borrowings and net assets per share of 59 sen.
Its stock closed unchanged at RM1.29 yesterday, and has traded between a high of RM1.31 and a low of RM1.01 in the past 52 weeks.
This article appeared in The Edge Financial Daily, January 20, 2012.
“We should continue to perform better in FY12 [ending Sept 30] than in FY11 as the current year’s operating conditions are much better,” executive director Alex Chew told The Edge Financial Daily in a recent interview.
Chew said the better operating conditions came from lower rubber prices and a better foreign exchange position.
The price of rubber, which accounts for around 70% of Wellcall’s costs, has fallen dramatically since peaking in 2011. The price of standard Malaysian rubber (SMR) 10 fell by 39% from a peak of RM16.75 per kg in February 2011 to average around RM10.27 per kg in January this year.
Chew said although lower rubber prices would also mean lower selling prices, Wellcall’s profit margins will be intact or even improve as not all price changes are passed on to its customers.
The appreciation of the US dollar against the ringgit, he said, is the other favourable factor as close to 98% of Wellcall’s sales are transacted in the greenback. From lows of around RM2.90 in 2011, the US dollar has appreciated to about RM3.12 now.
Chew: As long as there are no major economic crises, Wellcall should do better this year.
Despite the headwinds in 2011, Wellcall still managed to grow its revenue and net profit, as opposed to most companies in the rubber sector, in particular rubber glove makers.
For FY11, it posted a 41.7% increase in revenue to RM136.83 million from RM96.56 million in FY10, while its net profit was up 5.3% to RM15.39 million from RM14.62 million.
The increase in net profit was proportionally lower than the increase in revenue mainly due to a one-off deferred tax adjustment, said Chew. Wellcall incurred a total taxation of RM6.98 million in FY11 compared with RM1.43 million in FY10.
Chew said that as long as there are no major economic crises, the company should do better this year.
“The overall world economic health will also affect the demand for Wellcall’s products as they are linked to basic economic activities,” he explained, adding that Wellcall’s products are currently exported to over 60 countries.
For FY11, foreign markets contributed 92% of its revenue — 21.6% came from Asia, followed by the Middle East (17.3%), Europe (16.9%), the US/Canada (13.5%), South America (10.4%), Australia/New Zealand (9.5%), and Africa (2.8%). Malaysia contributed 8% of total sales.
On its short-term plans, Chew said Wellcall is looking to acquire a suitable plot of land close to its current factory in Perak for expansion purposes. Its other short-term plans include installing more automated machines to improve its production efficiency, and to secure better margins for its products by moving up the value chain.
The company currently has a workforce of 400, operating from a 5ha factory plot.
Chew said the long-term plan is for Wellcall to venture into related business activities and expand its product range.
Wellcall’s products cater to various markets such as mining, oil and gas, transport, food and beverage and shipping.
The company has been focusing on high-value products in some of these sectors, and is riding on the upward trend in commodity prices and mining and oil exploration activities.
Despite the ongoing European crisis, Chew said there could be more orders coming from the region. “When our company paid a visit to several countries in Europe recently, there was strong interest and demand for our products, both from new and existing customers.”
In FY11, Wellcall paid net dividends amounting to 12 sen per share, which represented 103% of its net profit in the financial year, while in FY10, it paid net dividends of 11 sen per share, representing 99.18% of its net profit.
As at Sept 30 last year, it had a net cash position of RM33.3 million with no borrowings and net assets per share of 59 sen.
Its stock closed unchanged at RM1.29 yesterday, and has traded between a high of RM1.31 and a low of RM1.01 in the past 52 weeks.
This article appeared in The Edge Financial Daily, January 20, 2012.
