News & Events

    Challenging outlook for building materials suppliers

    07 Jan 2019
    KUALA LUMPUR: Concrete Engineering Products Bhd (Cepco), a major supplier spun piles and poles, sees continued challenging times ahead as the government suspend and delay construction projects.

    "Following the change of government after the 14th General Elections, we've seen suspension of mega-projects such as the Kuala Lumpur-Singapore high speed rail, the East Coast Rail Link (ECRL) and the Mass Rapid Transit Line 3 (MRT 3)," said Cepco managing director Nelson Leong Kway Wah.

    "So, this has affected the construction sector a fair bit and we're one of the major suppliers of spun piles for such infrastructural projects," he told repoerters after the company's shareholders' meeting here today.

    "Cepco's orderbook currently amounts to RM62 million. Out of Cepco's five factories throughout Malaysia, we're redeploying our staff strength to the three in Selangor and Negeri Sembilan to optimise our resources.

    "We've also started to export our concrete spun piles to Vietnam, Bangladesh and Myanmar in addition to our traditional markets of Indonesia, Brunei, Singapore and Maldives.

    "The strengthening of the US dollar against the ringgit favours Cepco because the concrete and aggregate are priced in ringgit while our spun piles are priced in US dollars," he added.

    This morning, Cepco shareholders had approved of the group's proposed two-for-three bonus issue of 29.85 million shares.

    Substantial shareholders of Cepco are Inch Kenneth Kajang Rubber Public Ltd Co and Progressive Metal Works Sdn Bhd, each holding 22.4 per cent and 9.33 per cent stakes, respectively.

    Leong acknowledged that Cepco's gearing amounts to 0.59 times.

    "In view of the current economic slowdown, some of our debtors are not repaying us on time. Cepco still has room to gear up to 0.65 times as we embark on bankers' acceptance with our steel suppliers."

    Bankers' acceptances is commonly used in international trade. It is created through a letter of credit transaction. Leong explained Cepco is using a banker's acceptance to fund steel purchases from suppliers.

    After negotiating prices with the foreign exporter, Cepco creates a time draft and presents it to its bank which, in turn, accepts the draft, discounts it and gives Cepco cash which it uses to pay the steel supplier.

    On outlook, Leong expressed hope that in the current financial year ending August 2019, Cepco would be able to narrow its losses. "We're trying our best to improve on our performance in challenging times."

    In the year ended August 2018, Cepco's RM5.57 million in losses on the back of RM161.95 million revenue widened from the previous year's RM5.23 million losses on the back of RM179.41 million revenue.



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