Retailers producers see strong Q1 growth

GEORGE TOWN: Consumer product retailers and manufacturers in the country are expecting a strong first quarter but are, however, cautious about the second quarter.

Pensonic Holdings Bhd managing director Dixon Chew told StarBiz that the group’s domestic sales grew about 5% in the second half of 2009 versus a year earlier.

“Sales of consumer electrical and electronics products did well during the festive holidays because of the year-end bonuses. Consumers were more willing to spend due to their perception of an improving economic environment,” he said.

Pensonic’s domestic sales division was expected to perform better in the first quarter of 2010 compared with the year-ago period, he said.

However, due to the prevailing uncertainties in the global economy, the company was cautious on the second quarter, he said.

“In the US, unemployment still stands at double digit, which means the consumption power is still weak, and our manufacturing sector will be affected eventually,” Chew said. “We are cautious about undertaking expansion plans in the second half.”

On the implementation of the Asean Free Trade Area (Afta) Plus China on Jan 1, Chew said the group could now increase imports of China-made finished and semi-finished raw materials without duties for the group to do manufacturing and assembly work in Penang.

Ban Hin Bee Sdn Bhd general manager Wilson Yeoh said the company had been enjoying double-digit growth for the past two months.

“Manufacturers of our brand-name products all over Asia did not anticipate such high volume of orders during the Christmas, New Year and Chinese New Year holidays.

“The manufacturers in the Asia-Pacific were cautious when they forecast the demand for consumer household items in Malaysia for the last quarter of 2009 and the first quarter of 2010, as they were sceptical about domestic spending power.

“For the first quarter, we expect strong growth over the previous year’s corresponding quarter.

“The second quarter is expected to be slower than the first, and we anticipate sales to pick up again in the third quarter,” he said.

Ban Hin Bee is setting up two more outlets in the northern region in the second half of 2010. The leading retailer in the north has nine outlets in the country – eight in Penang and one in Kuala Lumpur.

Penang-based Star Electronics Sales & Services expects about 10% growth in sales year-on-year in the first quarter of 2010, while viewing the second quarter with caution.

“For the last two consecutive quarters of 2009, our sales had been growing at about 10% per quarter, compared with the respective quarters of 2008,” said managing director Joseph Hon. “However, there is little visibility for the second quarter.”

“We do have plans to establish seven more outlets in the Klang Valley and Selangor, as part of our strategy to tap the market in the central region.

“But this expansion exercise will be implemented only if the domestic economy continued to remain stable,” he said.

The company currently has 18 outlets in Penang and Kedah.

Meanwhile, Courts country director Chris Yong told StarBiz that the company was planning store expansion at eight locations nationwide this year after it increased its market share of consumer and digital electronics by about 8% in 2009, even as the market shrunk by 4%, due to the weak consumer sentiment during the recession.

“We have also identified 10 stores for major refurbishment, while three other stores are being planned for relocation,” he said.

Yong said that based on Courts steady market share, the company was optimistic retail consumer confidence would continue to recover.

Meanwhile, OCBC Bank (Malaysia) Bhd retail commercial banking head Wong Chee Seng said that compared with the sluggish January 2009, loan applications were higher last month.

“As the economic strength gathers momentum, we foresee greater demand for loans in the first quarter of this year.

“Aligned to the gradual improvement in domestic demand, we are also seeing improvements in loan drawdowns, by as much as 50% due to higher approval volume and larger deal sizes,” he said.

Penang MNCs

GEORGE TOWN: The improvement in orders seen in the electronics sector in Penang in the second quarter is expected to expand into the third and fourth quarters. This is a departure from four months ago when the state’s electronics companies had been mixed in their forecasts for the second half outlook when they were interviewed. The increased orders seen in the second quarter came largely from South Korea, Japan, the US, and European multinational corporations (MNCs).

This trend is expected to improve in the third and fourth quarters, as distributors and wholesalers are now stocking up to prepare for the festive season sales in the fourth quarter, according to industry players.

P.I.E. Industrial Bhd managing director Alvin Mui said the third and fourth quarters were traditionally the best quarters of the year.

“We anticipate that demand will continue to increase for the rest of the year, although it will not be able to match the result of last year’s corresponding period,” he said.

For the second quarter, P.I.E. Industrial posted RM8.5mil in pretax profit on the back of RM52mil in revenue, compared to RM6.9mil and RM46mil achieved respectively in the first quarter.

“The increase in demand is due to the higher orders from most of our existing customers in the US and Europe,” Mui said. “The electronic manufacturing services business has become more competitive during this economic downturn.”

Eng Teknologi Holdings Bhd chief executive officer Datuk Y.K. Teh said the global demand for hard disk drives was expected to grow by about 6.6% to 140 million units in the third quarter compared to the second quarter, according to US-based research firm TrendFocus.

“In the fourth quarter, the global demand is expected to increase by 3.8% to 145 million units over the third quarter,” he said. “The group is spending RM15mil to expand its hard disk drive operations in the country and overseas this year.”

GUH Holdings Bhd managing director Datuk Kenneth H’ng said the company’s month-to-month sales for the third quarter so far were as good as the corresponding period last year, just before the crisis started in October 2008.

“For such challenging economic times, we are not disappointed at all,” he said. “In fact, due to the growth in the second quarter, we are going to spend RM15mil to expand the production capacity of our plants in Penang and Suzhou for the second half of 2009.”

In the second quarter, the group posted RM20mil in pretax profit on the back of RM74mil in revenue, compared to RM4.7mil in pretax profit and RM53mil in revenue achieved in the first quarter of 2009.

For the first six months of 2009, the group generated RM25mil in pretax profit on the back of RM127mil in revenue, compared to RM2mil in pretax profit and RM133mil in revenue a year earlier.

“The orders for our printed circuit boards (PCBs) products in the second quarter, secured by the group’s operations in Suzhou, came largely from Korean and Japanese MNCs operating in China,” H’ng noted.

Globetronics Technology Bhd chief financial officer Ng Kok Choon said the group’s business for the third quarter was expected to improve compared to the second quarter.

“We have increased monthly production by 10% to about 30 million units of integrated circuits and light emitting diode dies for the third quarter,” he said. “The group also expects to receive more orders from customers in Japan, the US and China.”

Ng said Globetronics’ overseas sales “should comprise about 35% of the group’s revenue for 2009, representing a 10% to 15% increase from last year’s overseas contribution” with the MNCs and local factories in the country contributing the remainder.

For the second quarter ended June 30, Globetronics’ sales revenue improved by 38% to RM52mil from RM38mil, while its profit after tax improved 18-fold from RM200,000 to RM3.6mil.

“The improvement has to do with the customers’ replenishment programme to stock up the inventory,” he said.

Retrenchments in Penang

PENANG, Aug 7 (Bernama) — The increase in business orders in the state’s manufacturing industry has helped to reduce the number of retrenchments, state Labour Department Director Hoe Lean Fatt said Friday.

He said the number of retrenchments so far this year had dropped to 2,663 from 3,011 for the corresponding period last year due to more business orders and the need for more employees in the manufacturing industry.

The number of job replacements was higher than retrenchments, meaning that most employees who were laid off had managed to find new jobs, he told reporters after launching the state-level Job Replacement Programme here.

Hoe also said that the job-matching Programme which would be held at Dewan Millennium, Kepala Batas, on Aug 15, would offer 3,000 vacancies from 60 companies in the manufacturing and service sectors.