Analysts cut BP Plastics’ net profit by 22 per cent
KUCHING: Analysts have cut BP Plastics Holding Bhd’s (BP Plastics) financial year 2022 (FY22) net profit by 22 per cent largely to reflect the higher input and labour costs.
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), BP Plastics FY23F net profit was also cut by 15 per cent to reflect moderation in utilisation to 60-65 per cent (from 65-70 per cent) and the resulting higher unit cost on the back of weaker export demand on the back of the slowing global economy.
“Meanwhile, its on-going expansion plan, i.e. the commissioning of its tenth cast stretch film line in the fourth quarter of current year 2022 (4QCY22) will raise its total nameplate annual capacity by 18,000 tonnes to 138,000 tonnes,” Kenanga Research said.
“It is also buying two coextrusion (coex) blown film machines for circa RM19 million to expand the production of specific blown PE film products such as shrink film, stretch hood, and lamination film.
“The two machines with a combined rate capacity of 1,200 to 1,400 tonnes per month will boost its annual blown film capacity to circa 46,800 tonnes.
“The machines are expected to come online around end-FY23 with maiden contributions in FY24.”
Overall, Kenanga Research liked BP Plastics for its strong foothold in the South East Asia market that is expected to remain resilient despite the global economic downturn, its strong cash flow and balance sheet (a net cash position) that will enable it to weather a downturn better and its longterm capacity expansion in highmargin premium stretch film and blown film products, which will enable it to capitalise on the next upcycle.
“However, we are concerned over a significant decline in demand in the event of a sharp slowdown or recession in the global economy.”