Management Discussion & Analysis

The Management Discussion and Analysis provides a review of Daibochi’s operations and financial performance spanning the 19-month financial period from 1 January 2018 to 31 July 2019 (“FPE2019”), and outlines growth strategies going forward.

The extended timeline covered by this review follows a change in the Group’s financial year end from 31 December to 31 July, to coincide with the financial year end of our parent company, Scientex Berhad (“Scientex”).

Notably, the Group achieved several major milestones in addition to strengthening our operational performance, successfully navigating numerous challenges in the operating environment, and expanding our scale in our bid for greater accomplishments.

Financial Review

Daibochi achieved revenue of RM699.3 million during the period under review compared to RM388.6 million for the 12-month FY2017. Of total group revenue, exports continued to make up the largest share at RM379.7 million, representing 54.3% of total Group revenue while domestic sales contributed the remaining RM319.6 million, representing 45.7% of total Group revenue.

Group profit before tax (“PBT”) amounted to RM24.9 million for the period under review, as the Group faced volatile key raw material costs, less favourable sales mix and higher operating costs. The Group also recognised a one-off merger and acquisition (“M&A”) related transaction costs amounting to RM6.4 million during the period, and inventories write-down/off of RM11.4 million.

Group profit attributable to shareholders amounted to RM17.3 million for the 19-month FPE2019, compared to RM25.9 million for the 12-month FY2017.

Financial Position

Daibochi’s total assets remained relatively unchanged at RM365.1 million at the end of the 19-month period under review, compared to RM366.1 million at the end of the preceding 12-month FY2017. Notably, inventories declined to RM62.4 million from RM86.5 million in FY2017 due to better inventory management as well as inventories written down in line with efficiency improvements undertaken. Trade and other receivables rose to RM89.3 million versus RM67.8 million in FY2017 mainly due to deposit payment for the acquisition of Mega Printing & Packaging Sdn Bhd (“MPP”) and deposit for new machinery and equipment.

Meanwhile, shareholders’ equity rose slightly to RM206.2 million at the end of the period from RM200.8 million in FY2017 on account of increase in reserves. Net gearing stood at a comfortable 0.2 times as at 31 July 2019, providing the Group with the financial sturdiness for future endeavours.

The Group’s total issued number of shares stood at 327,898,483 shares as at 31 July 2019, of which 550,100 shares were held as treasury shares.

Cash Flows and Capital Management

Daibochi’s capital management seeks to maximise returns to shareholders through optimal allocation of debt and equity, while also ensuring continuity as a going concern.

The Group recorded healthy cash flow with RM61.3 million in net cash from operating activities for the period under review. Net cash used in investing activities amounted to RM18.8 million, incurred mainly for the purchase of new machinery and equipment and deposit payment for the acquisition of MPP.

Net cash used in financing activities amounted to RM28.5 million, with the majority of payments attributed to the repayment of term loans and payment for dividends.


The Group paid a total of four interim single-tier dividends to shareholders for the period under review, amounting to a total of 3.35 sen per share. Total dividend payout amounted to RM11.0 million, representing 63.4% of net profit attributable to shareholders.

On 14 May 2019, Daibochi announced a revision in dividend policy to distribute not less than 30% of the Group’s normalised reported annual net profit attributable to shareholders. This revision caters to future capital requirements as Daibochi embarks on a more aggressive growth path in line with the strategic direction of our parent company.

Corporate Developments

Daibochi marked a new chapter in the Group’s corporate history with two significant events during the period under review: by becoming a subsidiary of global packaging player and reputable property developer Scientex, as well as acquiring a flexible plastic packaging (“FPP”) peer.

  • Becoming a subsidiary of Scientex

    Daibochi became a subsidiary of Scientex following the acquisition of a controlling 42.4% stake through a share exchange with a group of Daibochi shareholders on 19 February 2019. Subsequently, Daibochi became a 61.9%-owned subsidiary following a mandatory general offer for all remaining shares that was completed on 5 April 2019.

    Joining the Scientex growth platform, Daibochi would benefit on multiple fronts, namely increased economies of scale from raw material procurement, centralised corporate services, sharing of technical resources, and collaboration in the research and development (“R&D”) of sustainable packaging solutions.

    The significantly-larger breadth of resources accorded to Daibochi positions it favourably to scale up our operations to tap into the fast-growing regional FPP market.

  • Acquisition of MPP

    Daibochi had, on 5 August 2019, completed the acquisition of 4.5 million shares representing the entire equity of MPP for a total cash consideration of RM125 million. The purchase consideration was funded through internally-generated funds and bank borrowings.

    The acquisition would provide Daibochi with a complementary set of FPP products in the food and beverage (“F&B”) sector, across confectionary, snacks, noodles, and powdered beverages.

    The Group would also see an expansion in clientele in Malaysia to include a diverse range of domestic F&B players, thus complementing our predominantly multinational clientele in the regional markets at present.

    Together, Daibochi and MPP would build upon multi-location production plants supported by a workforce of approximately 1,000 people, derive resource synergies, and collaborate in product development to put in place plans for long-term sustainability.

Operational Highlights

In keeping with our intention to maintain our growth momentum, Daibochi remains committed to meeting the FPP requirements of our food and beverage (F&B) and fast-moving consumer goods (“FMCG”) customers particularly in the Southeast Asia (“SEA”) region and Oceania.

With innovation of our FPP products taking centre stage, we have been working towards developing flexible mono-material laminates that are 100% recyclable, for use by the F&B and FMCG segments. This industry-defining achievement is testament to our R&D prowess, and forms another key differentiating factor for us in the region.

Going forward, we target to commercialise several new sustainable FPP solutions for our multinational consumer brand customers in the coming financial year, with ongoing trials underway. In addition to our multinational customers, we also target to commercialise sustainable and fully recyclable FPP for beverage customers in Malaysia, which is estimated to commence in the first quarter of the coming financial year.

Furthermore, with Daibochi having become a subsidiary of Scientex recently, we are pursuing further enhancements to operating capabilities and increased economies of scale. Other ongoing enhancements include strengthening and increasing focus on our core competency in the converting process, as well as improving process flows and better wastage control. We have also implemented a just-in-time system to improve efficiency in addition to optimising working capital utilisation.

Further enhancements would also be reflected in better synergies and complementary product portfolio of the enlarged Group, as well as accelerated innovation and development of high quality and sustainable FPP solutions. This not only supports the expansion of our market presence and enhances our regional growth prospects, but also ensures we continuously remain at the forefront of providing latest solutions that satisfy the requirements of global brand owners.

Growth Strategies

Daibochi’s key thrusts to achieve stronger growth in the future entail the following: 

  • Continued expansion in domestic and export F&B and FMCG markets

    Daibochi has garnered significant presence in Malaysia through our industry leading innovation, quality, and service standards, and is today recognised as one of the leading and preferred suppliers to multinational corporations’ (“MNC”) FPP requirements for F&B and FMCG segments. We continue to strengthen our footprint in Malaysia by collaborating with MNCs, as well as with prominent and emerging domestic brands in support of their FPP requirements in an increasingly competitive consumer market.

    In the export arena, Daibochi is also making successful inroads regionally, as we increasingly supply MNC requirements for their consumer brands in the high growth SEA region as well as Oceania. With exports making up more than 50% of Group revenue currently, Daibochi would strive for further expansion of market share by serving both MNCs and other home-grown regional brands in the region, where consumer affluence and population are on the rise.

  • Developing more innovative and sustainable forms of FPP

    The shift in consumer preference to favour environmentally-friendly products have driven MNCs to place increasing demands on their suppliers to meet stringent sustainability standards. Daibochi believes that there will be major opportunities available to suppliers that successfully create environmentally-friendly solutions that are also cost-effective.

    Hence, we would continue to uphold our emphasis on R&D to create more innovative and sustainable forms of packaging to support our MNC customers’ long-term sustainability objectives. Our past experience in collaborating with customers to develop FPP solutions that effectively meet their needs would be a key factor in achieving success in this area. Daibochi, together with Scientex, has stepped up our engagement with MNC customers towards exploring opportunities beyond our existing coverage of regional markets into the supply of their global supply chain.

    The Group is committed to playing its role in developing an ecosystem that facilitates the efficient recycling of FPP throughout the product lifespan, thus creating a virtuous cycle for the benefit of all.


The Group’s business is subject to several risks, which we continuously monitor and employ mitigating strategies through effective management.

  • FOREX fluctuations

    As Daibochi conducts a significant amount of business transactions in foreign currencies including the US Dollar, Australian Dollar and Thai Baht, exchange rate differences have an impact on our profitability. We manage foreign exchange exposure by matching revenue and costs in the relevant currency, in addition to employing certain forward contracts to mitigate this risk.

  • Volatile key raw material costs

    Daibochi also faces volatility in key raw material prices such as films and solvents. To mitigate potential cost challenges, we maintain close communication with suppliers and constantly monitor raw materials prices to ensure fast and efficient response to such volatility. Furthermore, we are able to leverage on shared procurement with Scientex, and pursue improvements to our operational efficiency and supply chain management. These efforts would be complemented by technical collaboration with Scientex to achieve greater product innovation and efficiency as well as implementation of key performance indicators for improving waste and cost controls.

  • Increased competition

    Intense competition could negatively impact our performance. To address this risk, Daibochi will focus on R&D to develop higher-value packaging that will more effectively cater to our customers’ needs. The Group has a tried-and-tested reputation of undertaking innovation and delivering according to our clients’ stringent criteria, thus earning our track record and MNC-dominated clientele over the years.

    We will also continue to enhance operating efficiency by reviewing manufacturing processes to identify opportunities for improvement, investing in new machinery and providing training to our workforce to enhance productivity and reduce wastage.

  • Growing global movement to reduce plastic usage

    Governments and their citizens across the world are increasingly concerned about the environmental impact from plastic disposal. This could result in Government policies that negatively impact plastics-based industries.

    To address this risk, Daibochi will continue its efforts to collaborate with customers to develop more sustainable forms of FPP, while encouraging the development of a closed-loop ecosystem to recycle plastics-based packaging.

Daibochi remains firmly in a position of strength to capitalise on the vast opportunities in the SEA region and Oceania, particularly in the fast-growing F&B and FMCG sectors. The Group is optimistic of delivering stronger performance in the coming years, as we continue to execute our growth strategies, in addition to benefiting from anticipated growth in orders from our customers.

Registered Office
No. 9, Persiaran Selangor,
Seksyen 15, 40200
Shah Alam, Selangor,


Tel No. : +60355248888/+60355191325
Fax No. : +603 5519 1884

Scientex Packaging (Ayer Keroh) Berhad 197201001354 (12994-W). All Rights Reserved.

Management Discussion & Analysis