24 July 2014

MALACCA-BASED Daibochi Plastic and Packaging Industry Bhd said its second-quarter profit ended June 2014 improved by a slight 3.3 per cent to RM6.22 million despite having to contend with higher production costs.

Its top line grew at an impressive 25.2 per cent to RM86.98 million from RM69.46 million previously.

In explaining the group’s somewhat muted profit growth, Daibochi managing director Thomas Lim said the plastic industry has been facing rising costs, mainly through higher raw material prices of polyethylene and polypropylene resins and films since the second half of last year.

“Operating expenses had also expanded from higher electricity tariff and wages since early 2014,” he said.

In passing on higher raw material costs to its clients, Lim said there is a time lag in the pricing mechanism, which could translate into moderated margins before the pricing is readjusted.

To mitigate these effects, he said Daibochi has upgraded its machinery to be more energy-efficient and is focusing on commercialising in-house innovations to fetch better margins.

“We have obtained favourable feedback on trial runs. We look forward to commencing supply of our new products by year-end,” he said.

Through the years, Daibochi has built a strong multi-national corporation-focused clientele, which includes Nestle, Mondelez International (formerly known as Kraft) and PepsiCo.

The company also exports its products overseas, including Southeast Asia and Australia.

On outlook, Lim said Daibochi is cautious of the adverse impact from any further increases in prices of major raw materials,
but is optimistic of achieving another record year in turnover this year.