Luxchem eyes regional market for growth
> Group targets 10% rise in export sales, sees Vietnam and Indonesia as main drivers
PETALING JAYA: A cautiously optimistic Luxchem Corp Bhd, which is eyeing 10% growth in terms of export sales for its manufacturing division, is banking on the regional market for potential growth due to the saturated domestic market.
Luxchem via its units Luxchem Polymer Industries Sdn Bhd(LPI) and Transform Master Sdn Bhd manufactures and trades unsaturated polyester resin, latex chemical dispersions, latex processing chemicals and specialty chemicals for the latex industry.
Speaking to reporters after its AGM yesterday, managing director Tang Ying See said the group sees its overseas market particularly Vietnam and Indonesia as the main drivers for growth
“We always target about 10% for exports. We have potential but there are also other variables such as competition and market scenario, at least we have capacity to achieve that,” he said.
“We are working very hard for Vietnam and expect to see some growth from there.”
While acknowledging that its margins came under pressure last year due to competition, Tang said the group is looking to build up a sales team in Vietnam to boost its margins.
As for the “stable” Indonesia where its subsidiary PT Luxchem Indonesia operates, he said the headwinds to weather may be in the form of the upcoming presidential election and foreign currency exchange.
Last year, Luxchem derived 76% of its revenue for its manufacturing segment from export sales. It exports to countries such as Vietnam, Thailand, Bangladesh, Australia and Singapore.
Meanwhile, Tang said the group will be spending RM2 million to RM2.5 million in capital expenditure (capex) this year, which will be used to upgrade software and purchase machinery for its subsidiary Transform Master. Last year, it spent about RM10 million in capex.
Capex for 2019 is forecast to come up to the tune of RM8 million due to the building of a new warehouse in Pulau Indah, which is expected to be at least 20-30% bigger than the current 60,000 sq ft facility.
As for earnings, Tang said, barring any unforeseen circumstances, with the support from increased capacity in its manufacturing division and better market conditions, the group is targeting at least 10% revenue growth.
However, it foresees possible headwinds from fluctuations in the ringgit against the greenback as “a lot of” its transactions are denominated in US dollars, which in turn may impact its revenue. About 70% of its purchases are also transacted in US dollars.
This may be exacerbated by the rising crude oil prices as raw material for its petrochemical products are linked to this.
Last year, Luxchem posted revenue of RM806.71 million against RM701.55 million in the previous year.