KUCHING: Ceramic tiles manufacturer Kim Hin Industry Bhd has completed the upgrading project for the former Johan ceramic plant in Seremban, Negeri Sembilan which it acquired more than three years ago.
The upgrading is part of the company’s plans to rationalise its manufacturing facilities in Malaysia, according to Kim Hin.
To recap, Kim Hin paid about RM28 million to buy Johan Ceramics’ manufacturing facilities and assets in 2016.
Johan Ceramics owned two factories involved in the manufacturing and sale of glazed ceramic wall and floor tiles and had annual production capacity of three million sq m before it stopped operations in 2015.
Kim Hin has its own manufacturing facilities in Seremban, with installed capacity of four million sq m per annum. The company also owns and operates manufacturing plants in Kuching and Shanghai, China.
In recent years, Kim Hin’s efforts to expand the group’s operations in traditional stronghold market Australia and Vietnam has helped to reduce the company’s reliance on the Malaysian operations.
Kim Hin has ventured into retail activities in Australia, via wholly-owned subsidiary Outset Holdings, which it acquired in 2016. Outset Holdings operates a renowned retail chain that enhances the group’s distribution channels in Australia.
“The combined revenue of its overseas operations (China, Australia and Vietnam) has surpassed the segment revenue of the group’s Malaysia operation for the second year in a row as a result of Kim Hin’s efforts in strengthening and achieving revenue growth for its overseas operations.
“Whilst its Australian operation has not performed well, the group’s operations in Vietnam and China continue to register commendable performance during the financial year under review,” Kim Hin said in its 2018 annual
report.
Kim Hin said the increased contributions from its overseas operations had acted as the shield for the group in facing the continual soft market conditions of its Malaysian operation.
The group’s Malaysianoperation has been adversely affected by the weak property market which has resulted in lower sales of ceramic tiles and under-utilisation of the plants’ production capacity.
In financial year ended Dec 31, 2018 (FY2018), the Malaysian operation contributed RM183.1 million to Kim Hin group revenue against the combined RM219.7 million generated by the group’s overseas operations.
The Malaysian operation recorded pre-tax loss of RM56.9 million in FY2018 while the Australian operation posted losses of RM612,000. The China and Vietnam operation registered pre-tax profit of RM4 million and RM458,000 respectively.
Kim Hin executive chairman Chua Seng Huat said the group’s gross margin deteriorated to 27 percent in FY2018 from 33 percent in FY2017 due to competitive pricing and higher average production costs.
“In addition, the weak financial performance and under-utilisation of production capacity of its manufacturing subsidiaries in Malaysia has led to the provision of impairment on its intangibles (goodwill) of RM9.2 million and the property, plant and equipment of RM19.2 million.
“The group registered a substantial loss before tax of RM55.1 million for FY2018,” he added in his statement in the annual report.
Chua said 2018 was a tough and challenging year as the group grappled with the impacts arising from rising prices of raw materials and energy costs, unfavourable foreign currency exchange movement and the prevalence of sluggish and stagnant property market domestically in Malaysia and also slowdown of property market in Australia, the group’s main export market.
The group exports about 25 percent of its production from Malaysia plants to mainly Australia, the Middle East, Taiwan and Pakistan while its Shanghai plant exports about 44 percent of its production to the Australian and North American markets.
On the outlook for 2019, Kim Hin said the Malaysian property and real estate market would remain challenging across all property segments.
“Factors such as affordability, excess stock, economic and political concerns continue to influence what was once a vibrant sector,” it added.
The company noted that National Property Information Centre (Napic) data has revealed that unsold completed residential units in Malaysia rose from 20,304 units to 30,115 units valued at a whopping RM19.54 billion from RM12.5 billion year-on-year as at Sept 30, 2018 or an increase of about 48.4 percent.
“It foresees the year 2019 to be a period of further stagnation with continued hope and anticipation of improvements, with the introduction of new policies and incentives aimed at the property market, such as the National Housing Policy 2.0 and property crowdfunding platform.
“The National Housing Policy 2018-2025 launched in January 2019 unveiled the government’s target of offering one million units of affordable homes to Malaysians over a period of ten years to enable more people, particularly the low income earners, to be house
owners.
“Collectively, the continuation of the wait-and-see sentiment and the persisting struggle of buyers in securing housing loans contributed to the market’s stagnation and the rising of inventory level,” it added.
Kim Hin predicts the Malaysian property market to go through another year of further stagnation before a more meaningful recovery could be seen in one to two years from now.
“The group is continually rationalising its manufacturing facilities in Malaysia, looking at increasing the productivity of its factories, improving operating efficiency and prudent cost saving measures to counter the impact of rising operating
costs.
“The group remains focussed in consolidating and strengthening its Australian operations following the acquisition of Johnson and Amber,” it added.
Kim Hin acquired UK-based Norcros Industry Pty Ltd, one of the major importers and distributors of Johnson Tiles in Australia and properties owned by Johnson Tiles Pty Ltd for about RM22.7 million in 2014.
Outset is the holding company of Amber Group Australia Pty Ltd which operates a network of some 30 retail stores under the Amber brand.
