Guan Chong net profit affected by rising interest rates, strong US dollar

PASIR GUDANG: The world’s fourth largest cocoa grinder Guan Chong Bhd (Guan Chong) faced the impacts of rising interest rates and weakening ringgit in its third quarter ended September 30, 2022 (3Q22), which saw net profit sliding 10.7 per cent to RM30.4 million from RM34.5 million in the previous year’s corresponding quarter.

The higher energy costs at the group’s industrial chocolate plant in Germany, SchokinagSchokolade-Industrie GmbH, also affected the group’s overall profitability as a result of the Ukraine-Russia tensions.

The lower profit was despite the 10.3 per cent increase in the group’s 3Q22 revenue to RM1.1 billion, versus RM998.1 million last year. The higher revenue was attributed to higher average selling prices of cocoa power and increased sales tonnage of 5.2 per cent year-on-year.

Managing director and chief executive officer of Guan Chong, Brandon Tay Hoe Lian, “Our operations face the rapidly changing market dynamics, such as the increasing interest rates and the rising energy costs in Europe.

“Despite that, we maintained profitability so far for the year. We are circumspect of the challenges, and we will continue to focus on operations efficiency to sustain our profit margins.

“In the meantime, we aim to secure more forward sales for our anticipated Ivory Coast facility and other plants in Malaysia and Indonesia.”

For 3Q22, the rising US dollar has resulted in an unrealised foreign exchange loss of RM17.1 million as a result of the group’s borrowings in US dollar being marked to the market.

During 3Q22, the US dollar appreciated from RM4.408 on June 30, 2022 to RM4.634 on 30 September 2022.

On prospects, GCB remains optimistic as the group continued to book in increasing forward sales of its cocoa ingredients for the financial year ending December 31, 2023.

This is an indication of the continued resilient demand for cocoa ingredients, supported by recovery in global air travel and tourism.

For the nine months ended September 30, 2022 (9M22), the group’s revenue grew 16.0 per cent to RM3.3 billion in comparison to RM2.8 billion in the same period last year, while its net profit also increased 22.8 per cent to RM128.6 million from RM104.7 million previously.

The higher revenue was backed by an 11.7 per cent increase in cumulative sales tonnage yearon-year.

GCB remains optimistic as the group continued to book in increasing forward sales of its cocoa ingredients for the financial year ending December 31, 2023.