Kian Joo's 1Q net profit drops 58.1% on forex losses, higher costs

by **Cals** Thu 19 May 2016, 00:04

Kian Joo's 1Q net profit drops 58.1% on forex losses, higher costs

By Supriya Surendran / theedgemarkets.com | May 18, 2016 : 9:46 PM MYT

KUALA LUMPUR (May 18): Kian Joo Can Factory Bhd saw its net profit for the first quarter ended March 31, 2016 (1QFY16) drop 58.1% to RM11.87 million from RM28.3 million a year ago due to foreign exchange losses and higher operating costs.

In a filing with Bursa Malaysia today, Kian Joo said its 1QFY16 revenue had increased by 23.7% to RM428.07 million from RM345.93 million in 1QFY15, due to an increase in customer demand for its cans division and production capacity for aluminium cans.

The group's cartons division also saw an increase in revenue contributed by its cartons division, which was attributed to the Vietnam plants as a result of the appreciation of the Vietnamese Dong against the ringgit, and an increase in demand from customers.

On its prospects, Kian Joo said the volatility in foreign currency exchange rate poses a challenge for the group as some of the materials bought are denominated in US dollars (USD).

In addition, the group maintains a high balance of monetary assets in USD in conjunction with its expansion plan, where it is exposed to foreign currency fluctuation.

"The potential rise in interest rate and the hike in minimum wages in Malaysia will also increase the cost burden of the group.

"Competition in the packaging industry in Malaysia and Vietnam has remained stiff and in order to maintain its market share, the group will need to constantly review its price structure," read Kian Joo's announcement.

However, despite these challenges, the group will constantly review its market position, explore new market potential and improve operational efficiency to remain resilient and profitable in 2016, Kian Joo added.

Kian Joo shares closed one sen or 0.32% higher at RM3.14 today, bringing a market capitalisation of RM1.4 billion.