GUAN CHONG SAVOURS SWEET SUCCESS
Asia’s biggest cocoa bean processor riding wave of improved margins and higher sales
DEMAND for chocolate and cocoa in Asia is on the rise and one Malaysian company sits at the epicentre of the boom.
The shares of Guan Chong Bhd have soared more than 150 per cent in the past year as profits doubled, making the producer of chocolate ingredients a top performer on the Bursa Malaysia Consumer Product Index.
The MSCI All Country World Index of stocks was broadly flat in the past year.
For chief executive officer Brandon Tay Hoe Lian, Asia’s biggest cocoa bean processor has been riding a wave of improved margins and higher sales.
Net income doubled to RM189.3 million last year, and this year “is looking as good as last year” because of increased capacity and sustained margins, he said in an interview recently.
“We’ve been experiencing strong demand since last year,” said Tay, which has helped the company increase the amount of forward sales.
People are munching more dark chocolate, seen as an healthier alternative to ordinary snacks, and that’s boosting demand for cocoa, and exacerbating market tightness because of the limited supply of beans in Asia.
Shares of Guan Chong jumped almost 10.3 per cent to RM4.08 yesterday.
Going forward, Tay wants to move his processing plants closer to the beangrowing regions as he seeks to double grinding capacity over the next decade.
That could mean venturing thousands of kilometres away to Africa or South America as bean production was declining in Malaysia and Indonesia, he said.
“I can have additional expansion either in the bean-supply area or the customer area,” Tay added.
“For us, the tendency is to go where the beans are. It’s a bit adventurous and some are reluctant to go, but then you’ll miss the chance.”
The world’s top producers are Ivory Coast and Ghana, and Tay said African countries were “quite encouraging in terms of tax incentives. We’ve been studying here and there but it’s not concrete”.
The business was driven by demand for powder, and that would determine whether the company expands or not, said Tay.
“If there’s a chance for us, if the customer base growing and the so-called margins are sustained, we will grow.”
Guan Chong began as a family business in the early 1980s in Johor. The company has expanded processing facilities over the years and has a capacity now of 250,000 tonnes, making the company one of the world’s top grinders after Barry Callebaut AG, Cargill Inc and Olam International Ltd.
Cocoa bean processing in Asia jumped almost 10 per cent in the first quarter from a year earlier, data from the Cocoa Association of Asia showed last week.
“Demand in the region remains robust for cocoa ingredients,” said the association.