SCGM Q3 2019

• SCGM reported a loss making quarter for the first time since 2009 even though its revenue grow by 6%.
• Profit margin reduced from 11.5% in 2018 to 3.9% in 2019 due to higher depreciation, higher raw material prices, increased finance costs, and higher operating expenditure incurred in both the old and new plants in the transition period. (expect to see the operating expenditure to reduce in next 2 quarters after the new factory is in full operation)
• Finance cost continue to rise to 4 million in 3 quarters which accounted 56% of its operating profit.

• Inventories increased by 27% (signify that the business is in line with its growth plan)
• Gearing ratio increased from 0.47 in 2018 to 0.69 in 2019 (borrowing increased from RM84 million to RM123 million). 

• Depreciation and finance cost accounted for RM14.8 million vs profit before tax of RM3.1 million (that is almost 4 times of its profit)
• Cash flow of SCGM worsen as the company sort of survive based on borrowings. 
• Money spend in investing reduced meaning they can now focus on their operations. 

• Export sales remain flat while local sales grow by 5.5%. 

Future Prospect

• Demand for environmentally-friendly packaging solutions is on the rise both locally and globally due to higher social awareness. 
• The Group is also in the midst of moving operations to its new Kulai plant, with the factory expected to be fully commissioned in the fourth quarter ending 30 April 2019. 

Comments

• Although the company is making a loss of 0.36 sen per share for the quarter, it is still declaring 0.25 sen of dividend per share. (the company is basically paying the dividend with bank borrowings)
• Wait for sign of recovery in their operation before enter.