Margin squeeze slashes Box-Pak's 2Q profit

by **Cals** Wed 20 Aug 2014, 01:05

Business & Markets 2014

Written by Kamarul Anwar of theedgemalaysia.com

Tuesday, 19 August 2014 21:31

KUALA LUMPUR (Aug 19): Box-Pak (Malaysia) Bhd’s second-quarter net profit was slashed by more than half as margins were squeezed by stiff competition, while incurring higher finance costs and also operating loss in its new plants in Hanoi and Johor.

In a filing with Bursa Malaysia today, the corrugated carton box maker reported a net profit of RM1.69 million for its second financial quarter ended Jun 30, 2014 (2QFY14) — a 55.8% decline from RM3.81 million a year ago.

Box-Pak’s 2QFY14 gross margin dropped to 9.3%, which was 3.37-percentage point lower than the previous corresponding quarter’s gross margin of 12.7%.

This was despite revenue for 2QFY14 rising 24.9% to RM87 million, against the previous corresponding quarter’s RM69.65 million.

“The increase in revenue is contributed by increase in revenue from existing plant in Ho Chi Minh and contribution from new plants in Hanoi and Johor,” said Box-Pak, a 54.83%-subsidiary of Kian Joo Can Factory Bhd.

For the six months period (1HFY14), Box-Pak’s net profit fell 70.19% to RM2.19 million or 3.64 sen per share, on revenue of RM166.47 million.

In the previous corresponding period, net profit was RM7.33 million or 12.22 sen per share, while revenue was RM136.61 million.

The company attributed the 1HFY14’s net profit drop to the same reasons for 2QFY14’s.

On its prospects, Box-Pak said that it will continue to put in efforts to ensure it will remain resilient and profitable. However, it will not come without challenges.

“The group continues to face challenges from its competitors in Malaysia and Vietnam, to maintain and increase its market share. The Group is also facing challenges in managing rising cost of materials, electricity cost, interest and other operating cost,” said Box-Pak.

Adding to its profitability risk is the increased volatility in foreign exchange rates, especially the US dollar and Vietnam’s Dong.