GEORGE TOWN: After two years of belt-tightening measures, Texchem Resources Bhd plans to undertake an expansion drive across its diversified operations in 2022.
The multinational group is involved in five divisions namely industrial, polymer engineering, restaurant, food and venture business in Malaysia and Asean.
“We have operated with a restrained budget in 2020 and 2021.
“However, we believe the business environment should be conducive for an expansion next year,” executive chairman Tan Sri Fumihiko Konishi told StarBiz.
He noted that the group is planning to allocate a sizeable budget to expand its core divisions.
“The capital expenditure for expansion in 2022 should be finalised by next month,” he added.
Despite the challenges brought about by the Covid-19 pandemic, Texchem was able to remain profitable for the financial year ended Dec 31, 2020 (FY20).
The group’s cash and cash equivalent as at Dec 31, 2020 is a healthy RM79mil, an increase from RM73.6mil as at Dec 31, 2019.
For the main expansion plan next year, Konishi said the focus will be on the group’s polymer engineering and industrial businesses. This is given that the two divisions are expected to contribute 70% to Texchem’s revenue in FY21.
“We also expect this trend to continue in 2022.
“The polymer engineering segment manufactures packaging materials and mechanical components for hard-disk drives (HDD).
“Furthermore, the global demand for HDD is experiencing exponential growth,” explained Konishi.
“As the world recovers from the global pandemic, we expect to see the work-from-home culture fuel the demand for desktops and mobile personal computers,” he added.
According to market data from TrendFocus, manufacturers shipped 67.6 million HDDs in the second quarter of this year, which is a 5% increase compared to the previous quarter.
A recent International Data Corp report showed that the worldwide HDD industry petabyte shipments are expected to see a compounded annual growth rate (CAGR) of 18.5% over the 2020 to 2025 period while the average capacity per drive is forecast to increase at a five-year 25.5% CAGR.
Given the positive outlook, Konishi said the group’s polymer engineering division will continue to grow its HDD and medical life sciences businesses as “the demand for products under these segments are encouraging.
“In addition, it has and will continue to explore and commercialise new products in its other business segments,” he added.
On the group’s new chemical used for rubber glove production, Konishi noted that the product has garnered strong demand from both the local and global markets.
“This new formulation, which is under our industrial business division, helps to improve the productivity rate and enable the production of thinner and stronger rubber gloves,” he said.
According to the Research and Markets report, the medical glove market is expected to reach US$18.56bil (RM77.2bil) by 2026, growing at a CAGR of 11.64%.
“During the Covid-19 pandemic, global demand for single-use gloves skyrocketed, exceeding the existing production capacity of manufacturers by an estimated 215 billion units, or about 37%.
“Although manufacturers are working hard to increase production, industry experts are predicting possible shortages in 2021,” the report added.
On its restaurant division, Konishi said Texchem planned to invest RM7.5mil to open 10 Sushi King outlets in the country.
“Back in 2020, we closed 21 outlets and now we have 117. However, we foresee this business to surge next year,” he added.
Konishi said while the food and beverage industry remained challenging due to the rising costs of raw materials, the gradual reopening of the Malaysian economy, with the dine-in allowed since August, was an encouraging development for the restaurant division.
“The restaurant division will continue to undertake key strategies such as refreshing its brand, cost management and leveraging on the adaptation to the new norm such as sales through deliveries, kiosks and satellites to drive its sales,” he added.
On its food division, he said despite the challenges of the political situation and logistics disruptions in Myanmar, the division remains vigilant in managing its operational costs.
At the same time, it is improving the sourcing and procurement of raw materials for its production requirements.
For the three quarters ended Sept 30, 2021, Texchem posted a net profit of RM8.2mil on the back of RM763.6mil turnover.
This is compared with RM12mil after tax loss and a revenue of RM747mil in the same period in 2020.
“We are set to return to the black in this financial year 2021,” said Konishi.
Moving forward, the group expects things to be different in the way it operate its businesses.
But Texchem will retain the principles that have always guided the group and remains confident in its fundamentals.
The group’s diversity will remain its strength to seize the opportunities to strengthen and grow its businesses to deliver long-term value for stakeholders.
On Friday, Texchem share price closed two sen higher at RM1.01. This gave the group a market capitalisation of RM125.34mil.