GEORGETOWN: Industrial fastener maker Chin Well Holdings expects higher gross profit for the 2021 financial year (FY) ended June 30 2021, due to the surge in the price of wire rods.

       “The gross profits should be higher because the price of wire rods, a key ingredient of fasteners, has shot up since last November due to the Australia-China trade war.

       “We stocked up wire rods when the price was low. Now that the price of wire rods has increased, we have adjusted our selling price according to current market price to improve our margins,” group executive director Tsai Chia-ling (pic below) told StarBiz.

       Chin Well Tsai Chia-ling

       However, the group’s revenue would be lower than the RM535mil achieved a year ago, Tsai added.

       The current free on board (FOB) fastener price, depending on the grade, plating and packaging requirements, is between US$1,350 (RM5,724) per tonne and US$2,800 (RM11,872) per tonne, up 50% from last November.

       According to Tsai, Europe is recovering and will contribute about around 30% to the group’s turnover in FY 2021 compared to 18% a year ago.

       “We also expect the contribution from the United States to increase to more than 30% this year compared to 23% in 2020.

       “A lot of orders from Europe have come to us since November 2020.

       “Our fastener order book is filled up till the end of the 2021 calendar year.

       “The recovery trend should extend beyond FY 2021 barring unforeseen circumstances,” she said.

       Tsai said according to a recent Fortune Business Insight analyst report, the global industrial fasteners market is projected to grow from US$79.54bil (RM337bil) in 2021 to US$106.05bil (RM449.6bil) in 2028 at a 4.2% compounded annual growth rate (CAGR) for the 2021-2028 period.

       The global industrial fastener market size in 2020 was US$76.70bil (RM325bil), the report says. According to the Fortune Business report, Europe will account for the second-largest industrial fastener market share due to the widespread demand for small tractors and lawnmowers in the region, which is likely to grow in the commercial and residential sectors.

       “Production of lawnmowers and garden equipment shall fuel the market in this region,” the report says.

       Tsai said that the global industrial fastener demand was gradually returning to pre-pandemic levels.

       “Government spending on infrastructure projects for the post-pandemic period in Europe and the Asia Pacific will drive the industrial fastener demand in the construction sector,” she said.

       According to Tsai, the group’s operations in Vietnam has outperformed in FY 2021.

       “The DIY (do-it-yourself) screws production was fully utilised for the 2021 financial year.

       “With Europe’s recovery, the Vietnam operations’ order book is filled up until the end of the 2021 calendar year.

       “The contribution from Vietnam is expected to increase significantly in FY 2021.

       “In FY 2021, our domestic business was affected by the lockdown.

       “However, the government spending on micro-projects has negated the impact and benefitted our wire segment.

       “Our wire, mesh, and fencing products would generate a nice turnover and profit for the group in FY 2021,” she said.

       For FY 2021, the group expects its fastener production output to hit about 100,000 tons compared to 80,346 tonnes in FY 2020.

       “Our production for the nine months of FY 2021 has already reached 78,000,” she added.

       For the nine months of FY 2021, the group posted RM18.2mil in after-tax profit on the back of an RM361mil turnover compared to RM19mil and RM453.5mil achieved in the previous year corresponding period.