CCM expects increased demand for PPEs
KUALA LUMPUR: Chemical Company of Malaysia Bhd (CCM) expects heightened disposition towards personal hygiene and use of personal protective equipments (PPEs) such as gloves to continue to fuel demand for its chemicals and polymers products during the current Coronavirus Disease 2019 (Covid19) pandemic.
In a statement for its 58th Annual General Meeting (AGM), CCM said demand for key chemical products used in the manufacture of personal hygiene products and disinfectants and those for water treatment along with polymers for the manufacture of gloves is expected to be maintained beyond the easing of restrictions in Malaysia and globally.
This is expected to benefit CCM while offsetting the impact of softer prices for its key chlor alkali products
CCM Group managing director, Nik Fazila Nik Mohamed Shihabuddin said the group was cautiously optimistic amidst the uncertainties of a post-Covid-19 economic environment on the domestic and global front.
Speaking at a virtual media briefing following its 58th Annual General Meeting Nik Fazila said the group would be executing a three-prong strategy encompassing the prioritisation of capex; heightened monitoring of its working capital requirements and ensuring availability of cash and liquidity at all times to manage the impact of the Covid-19 pandemic.
“Our efforts to enhance our production capacities has started paying dividends and can be seen with the availability of an additional 50 per cent capacity of our chlor-alkali production with the reactivation of our Pasir Gudang Plant 1 ( PGW1) plant in late February 2020, while the Calcium Nitrate plant will progressively be increasing its production capacity from 1,000 MT per month to 1,900MT per month. “Besides optimising our existing resources, we are expanding our capacity for Kleeners, a cleaning solution for ceramic formers supplied to glove manufacturers which will see our Kleeners facility at a new site in Bangi doubling output from 9,000MT per pa to 18,000 MT per pa when it is completed fully commissioned in the first quarter of 2021. “We will continue to improve operational, financial and cost efficiency and prioritise research and development (R&D). “Among the key cost efficiency initiatives are a RM27.9 million COGEN or cogeneration plant which will enable the simultaneous production of electricity and usable thermal energy from a single fuel source, supporting the national agenda of achieving eight per cent savings from energy efficiency by 2025 and the introduction of solar energy solutions. “Additionally, we will relentlessly pursue growth opportunities via the diversification of portfolios including derivatives and other non-glove applications and deepen and widen our footprint regionally,” she added. According to Nik Fazila, CCMwouldl resume supply of caustic soda to Petroliam Nasional Bhd (Petronas) when the latter resumes operations towards the end of 2020, following the disruption due to a fire at Petronas’ RAPID site in April 2019. In May, 2019, CCM was awarded a three-year contract with one year extension option by Petronas to supply caustic soda to Petronas Refinery and Petrochemicals Corporation Sdn Bhd (PRP). Meanwhile, for the first quarter ended March 31, 2020, the group recorded a revenue of RM96.6 million, 0.4 per cent marginally lower from RM96.9 million in the corresponding period in 2019 due to a 4.9 per dip in contributions from the chemicals division. The decline was cushioned by a 14.9 per cent increase in revenue by the polymers division. Group profit before tax was RM3.7 million from RM9.5 million in the corresponding period last year. The deficit in comparison would have been lower if not for the addition of a RM1.1 million one-off non-recurring gain on disposal of land in 1Q19. In spite of the improved performance from the polymers division arising from the surge in demand for gloves, the group’s first quarter results were weighed down by its share of losses of its associate company, Orica-CCM Energy Sdn Bhd (OCES), and continued margin squeeze arising from lower average selling price of its chloralkali products and lower volume sold by the chemicals division during the MCO as its customers were closed as they were deemed non-essential. On a segmental basis, the chemicals division recorded a 4.9 per cent decline in revenue to RM70.7 million from RM74.3 million in the preceding period last year. The division incurred a loss of RM227,000 from a PBT of RM7.8 million in the same period last year due its share of loss from its associated company OCES of RM1.1 million from a profit RM139,000 in the preceding quarter last year; continued margin squeeze in the average selling prices of chlor-alkali products, lower volume sold due to of some of its clients pausing operations due to the MCO and depreciation incurred on the newly activated Pasir Gudang Plant ( PW1) and provision for doubtful trade receivables, all accounting for RM1.2 million. The polymers division saw revenue increase 14.9 per cent to RM27.4 million from RM23.8 million for the quarter compared to the similar period in 2019 due to a surge in demand from the glove industry amidst heightened hygiene concerns over the outbreak of the Covid19 pandemic. Profit before tax similarly rose to RM6.1 million from RM5.1 million on the back of higher revenue from both its polymer coatings and cleaner products. No dividend will be paid for the current quarter under review. To recap, in the financial year ended Dec 31, 2019, CCM posted a revenue of RM385.2 million, a slight dip of 2.7 per cent from RM395.9 million recorded in the corresponding period in 2018. Revenue and PBT were impacted by lower average selling prices of its chlor-alkali products as a result of softer prices of the chemical commodity in the period under review. The group’s recurring profit before tax was RM30 million, from RM35.5 million (excluding non-recurring gains of RM16.1 million). The fall in recurring profit was attributed to a margin squeeze resulting from the fall in average chlor-alkali product selling prices, which saw the average selling prices of its products compressed up to 28 per cent compared to the corresponding period in 2018 and negating the impact of the increased sales volume in the year.