Daibochi’s Fourth-Quarter Net Profit Fell 21% Due To Lower Revenue And Greater Operational Expenditures

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Daibochi Bhd, which is undergoing a takeover by parent Scientex Bhd, reported a 20.8 percent decline in net profit to RM8.89 million in the fourth fiscal quarter ended July 31, 2021 (4QFY21), from RM11.22 million a year before, due to reduced revenue and higher operating costs.

As a result, earnings per share for the flexible packaging solutions supplier decreased to 2.72 sen in 4QFY21 from 3.43 sen in 4QFY20.

Revenue declined 14.2 percent to RM133.73 million in the fourth quarter of FY20, from RM155.77 million in the fourth quarter of FY20.

Daibochi’s net profit plummeted 13.4% quarter on quarter (q-o-q) from RM10.26 million in 3QFY21 to RM10.26 million, while revenue fell 10.9 percent to RM150.12 million.

Daibochi stated in a bourse report on Tuesday that the lower revenue was mostly attributable to lower demand from domestic clients, who had encountered operating difficulties as a result of the Covid-19 outbreak, as well as operational limits imposed by regulatory authorities.

Daibochi stated that restrictions such as a 60% reduction in workforce capacity for the length of the Full Movement Control Order, which took effect on June 1, had a negative impact on the group’s production output and efficiency during the quarter under review.

During the fourth quarter of fiscal year 21 (4QFY21), the group’s Ayer Keroh factory in Melaka got two temporary closure notices from the Ministry of Health owing to Covid-19-related difficulties.

The group’s net profit for the entire financial year ending July 31, 2021 (FY21) decreased 1.3 percent to RM47.03 million from RM47.67 million in FY20. Additionally, revenue decreased by 2.8 percent to RM601.87 million from RM619.28 million.

Separately, Daibochi warned of difficult market conditions in FY22, owing to operational restrictions and increased costs associated with Covid-19 standard operating procedure compliance, which would result in less-than-optimal production efficiencies due to process disruption and increased costs of goods, specifically raw materials and freight.

“While the country is gradually resuming economic activity as part of the National Recovery Plan, the fact remains that the industrial sector’s operating environment remains extremely fragile. We have taken all reasonable measures within our authority to mitigate the impact, including participating in routine Covid-19 testing and immunisation programmes to protect our most valuable asset, our people,” Daibochi executive director Low Jin Wei stated.

“Additionally, we continue to incur additional expenses as a result of Covid-19 compliance, as well as increasing freight costs and raw material pricing volatility. We have mostly avoided supply chain concerns as a result of Scientex’s robust and trustworthy raw material supply,” he noted.

Low stated that despite the reopening of financial markets and port services, the continued political standoff exacerbated the devaluation of the Myanmar Kyat, while mounting raw material costs put additional strain on Daibochi’s Myanmar business.

While maximising operational efficiency was Daibochi’s immediate priority, Low stated that the group’s long-term goal of developing and commercialising sustainable flexible plastic packaging solutions in collaboration with Scientex is to align with customers’ environmental, social, and governance objectives.

“To this end, in FY21, we commercialised sustainable, totally recyclable solutions for the food and beverage categories, focusing on monomaterial polypropylene and polyolefin-based laminates. We are thrilled by the accomplishments thus far and believe that they will further strengthen the group’s sustainability agenda in the future,” he added.

To recall, Daibochi received a buyout offer from Scientex earlier this month for the remainder of Daibochi that Scientex does not already hold, at a cash offer price of RM2.70 per offer share. Scientex also made a cash offer to acquire the remaining 26.1 million warrants, representing 95.75 percent of the existing warrants that it does not currently own, at a price of 32 sen per offer warrant.

At the lunch break, Daibochi’s shares remained constant at RM2.70, with around 471,500 shares traded. This resulted in a market capitalisation of RM885.39 million for the company.

Published by Zack Baharum

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