Thong Guan plans 3-fold expansion

Packaging firm’s capacity and revenue growth to be in two phases

GEORGE TOWN: The 75-year old packaging firm, Thong Guan Industries Bhd, plans to grow its revenue and production capacity by more than three fold in the next 10 years.

The group has budgeted a capital expenditure of RM650mil to increase its production capacity to 400,000 tonnes and hopes that annual turnover would gradually rise to RM3bil.

Thong Guan which can count itself as one of the oldest companies producing stretch plastic for packaging, plans a two-phase development to reach its next target.

Group managing director Datuk Ang Poon Chuan told StarBiz that the first part of the plan was to raise actual production output to 200,000 tonnes from 132,000 tonnes currently, with a RM150mil investment.

“The group’s annual turnover should hit RM1.5bil in 2020, should the market price of industrial packaging products stay at around US$1,600 to US$1,800 per tonne.

“The production capacity of the group in 2020 would be 220,000 tonnes.

“The actual production is around 80% of the capacity, which means if the demand grows the revenue could go even higher,” he said.

The second part of Thong Guan’s plan involves investing about RM500mil in a new production plant in Sungai Petani.

The group, which recently celebrated its 75th anniversary, had acquired a 16-acre site in

Sungai Petani to build a new plant. The plant will be equipped with 28 production lines, comprising stretch and blown film production lines and a capacity to produce 200,000 tonnes of packaging materials.

“We are planning to generate at least another RM1.5bil annual revenue in 10 years. The funds for the expansion for both projects would be generated internally,” he said.

As at Dec 31 2016, Thong Guan’s cash reserve amounted to RM150mil. The group expected to start construction of the new plant in the next six months and operations to commence by end-2018.

Ang said the group is now 75 years old and it is time to take it to new heights.

“Global demand for stretch and shrink film is increasing, so we want to be in the position to tap the market,” he added.

Thong Guan’s strongest growing markets are in Japan, Australia, New Zealand, South Africa, the Philippines, Vietnam and South Korea. “Europe is also a growing market for the group,” Ang said.

On its new restaurant and food business, Ang said they would spend RM12mil over the next three years to open new outlets in Kuala Lumpur and Johor Baru.

The group opened its first Marché Mövenpick restaurant in Pavilion KL in August.

“We are seeing good response to our organic baby noodle products from buyers even from China, the Middle East and Europe,” he said.

According to the Technavio global stretch and shrink film 2016-2020 market report, the global market is expected to reach US$14.88bil by 2020, growing at a compounded annual growth rate (CAGR) of over 5%.

“In terms of revenue, the Asia Pacific holds the largest share of the global stretch and shrink film market. The region accounted for close to 37% of 2015’s market share. This is expected to increase to over 39% by 2020, growing at a CAGR of almost 7%,” the report said.