Pecca sees min­i­mal im­pact from weak ringgit

> Group will ad­just prod­uct prices ev­ery three months and its ex­ports will act as a par­tial hedge, says ex­ec­u­tive di­rec­tor

The Sun (Malaysia) - - SUNBIZ - BY EE ANN NEE

KUALA LUMPUR: Pecca Group Bhd ex­pects the weak­en­ing ringgit to have min­i­mal im­pact on the group’s busi­ness as it will be ad­just­ing prod­uct prices ev­ery three months, as its ex­ports will act as a par­tial hedge, said ex­ec­u­tive di­rec­tor Michael Tan Jin Sun.

Pecca’s prin­ci­pal busi­ness ac­tiv­i­ties are in the styling, man­u­fac­tur­ing, dis­tri­bu­tion and in­stal­la­tion of leather up­hol­stery for car seat cov­ers as well as the sup­ply of leather cut pieces to the au­to­mo­tive leather up­hol­stery in­dus­try. The group pur­chases leather in US dol­lars.

Tan said cur­rency fluc­tu­a­tions to a cer­tain ex­tent will have some im­pact on its busi­ness but the group will fac­tor in these changes reg­u­larly.

“Ev­ery three months and six months, we will be ad­just­ing the (price based on the) cur­rency fac­tors. It’s com­mon. This cur­rency ad­just­ing is af­fect­ing all ven­dors,” he told Sun­Biz af­ter the group’s AGM here yes­ter­day.

Pecca’s prod­ucts and ser­vices al­though fo­cused in Malaysia are also ex­ported to the US, the Nether­lands, Thai­land, Aus­tralia, Ja­pan, New Zealand, Sin­ga­pore, In­done­sia, the UK and Mau­ri­tius.

For the Malaysian mar­ket, Pecca’s busi­ness is in orig­i­nal equip­ment man­u­fac­tur­ing (OEM), pre-delivery in­spec­tion (PDI) and re­place­ment equip­ment man­u­fac­turer (REM) mar­ket seg­ments. The PDI and REM seg­ments are also ex­port-des­ig­nated.

About 15% of the group’s rev­enue is now de­rived from the ex­port mar­ket, which are de­nom­i­nated in the cur­rency of the pre­vail­ing coun­tries. Tan said im­pact from cur­rency fluc­tu­a­tions also de­pends on tim­ing and the trend of the cur­rency.

“How we cush­ion (the im­pact) is for the OEM busi­ness, we try to re­cover (the costs) from the cus­tomer (via price ad­just­ments). We do par­tial hedg­ing, we have ex­ports. It’s a netoff sit­u­a­tion for us,” ex­plained Tan.

He added that Pecca, which was listed on the stock ex­change in April this year, is pos­i­tive in sus­tain­ing its growth mo­men­tum in the cur­rent fi­nan­cial year end­ing June 30, 2017 (FY17) with projects it has se­cured.

“We’re cau­tiously op­ti­mistic that we should be able to do bet­ter (in FY17) but the ex­ter­nal fac­tor is one that we can­not ig­nore,” said Tan.

Rev­enue from leather up­hol­stery for car seat cov­ers re­main the largest con­trib­u­tor to Pecca, ac­count­ing for 76.9% of the to­tal rev­enue recorded in FY16, fol­lowed by leather cut pieces sup­ply (16.6%). Rev­enue de­rived from the core seg­ment, which is the OEM leather car seat cov­ers (OE Fit) con­tinue to dom­i­nate and was the largest con­trib­u­tor seg­ment, ac­count­ing for 47.3% of to­tal rev­enue.

On the avi­a­tion re­fur­bish­ment busi­ness, Tan ex­pects its 60%-owned Pecca Leather Avi­a­tion Ser­vices Sdn Bhd (PAvi­a­tion) to per­form bet­ter af­ter se­cur­ing nec­es­sary li­cences from the Department of Civil Avi­a­tion (DCA).

The avi­a­tion seg­ment re­ported pre-tax losses of RM210,000 in FY16.

Pecca in Septem­ber ob­tained ap­proval from DCA to in­clude in its li­cense the scope for wrap­ping, cut­ting and sewing leather or fab­ric seat cov­ers and re­fur­bish­ing cabin in­te­rior side­walls and ceil­ing pan­els.

“The com­pany (PAvi­a­tion) will be able to self-sus­tain, if not make mar­ginal con­tri­bu­tion for us. Now our fo­cus will be on pen­e­trat­ing into leather up­hol­stery scope for air­craft seats cov­ers.”

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