SLP expanding production capacity to meet rising demand
18 Mar 2024
SLP Resources Bhd will spend RM20mil to upgrade and expand its production capacity in 2024 to meet rising domestic demand for its flexible plastic packaging products.
Group managing director Kelvin Khaw told StarBiz that in 2023, the domestic market contributed about 60% to the group’s revenue.
“We expect the trend to continue this year as Malaysia’s gross domestic product (GDP) is forecast to grow between 4% and 5%.
“Bank Negara is expected to maintain its rates at 3% throughout 2024 to provide liquidity in the market,” he said.
According to the Mordor Intelligence report, the Malaysian retail market size – estimated at US$89.66bil in 2024 – is expected to reach US$119.64bil by 2029, growing at a compounded annual growth rate (CAGR) of 5.94%.
“The Malaysian retail industry, a substantial consumer of flexible plastic packaging materials, has been one of the largest contributing sectors to the country’s GDP for decades,” Khaw said.
To stay relevant in the market, SLP will produce more premium products such as non-commoditised kangaroo pouches, mono films and machine-direction-oriented (MDO) PE packaging products in 2024.
“Our MDO-PE films, which have enhanced durability and performance, have generated solid enquiries and have seen improved sales,” he said.
Khaw said the group will acquire a workers’ dormitory to house 200 employees.
He said Japan, the group’s key export market, will experience gradual growth thanks to its robust tourism sector.
“Japan’s economy is expected to grow at 1% in 2024, and its retail sector at 1.4% per annum till 2032, according to an IMARC research report.
“The growth is slow, but it is growth nevertheless.
“The yen remains weak and continues to stimulate tourism, which has, in turn, boosted our sales of kitchen and rubbish bags to Japan,” he said.
Khaw said the GDP of the group’s other important markets, such as Australia and New Zealand, is expected to grow by 2.25% and 2%, respectively, this year.
According to a recent Allied Market Research report, the global flexible packaging market, valued at US$197.4bil in 2022, is projected to reach US$325.8bil by 2032, growing at a CAGR of 5.1%.
The price of crude oil and resin have stabilised to around US$83 a barrel and US$1,000 a tonne, compared to US$970 per tonne and US$86 per barrel in January 2023, respectively, enabling the group to produce premium-quality products cost-effectively, he said.
According to Khaw, the upcoming US presidential election has prompted the consumer goods industries, in particular, to keep inventories low, resulting in snail pace demand across the globe.
“Another concern is the US interest rates.
“The inability of the last rate hike to force US inflation down to 2.9% has prompted analysts and investors to caution that a rate cut may not happen in May 2024 as anticipated.
“Currently, the interest rates in the United States hover around 5.25% to 5.5%. The last rate hike was in July 2023,” he said.
Khaw said the recurring Panama Canal drought and the Red Sea conflict have substantially increased logistics costs and delayed shipments of essential raw ingredients.
“About 20 vessels are currently allowed to cross the canal compared to 36 in the first half of 2023.
“Shipping companies, opting to avoid the delays, are now taking longer routes around the Cape of Good Hope, Cape Horn and the Suez Canal to reach their destinations.
“For example, the restriction of vessels crossing the Panama Canal has delayed SLP’s import of raw materials from the United States.”
He said these concerns and challenges have prompted the management team to adopt a circumspect business approach to growth for 2024.
In 2023, the group posted RM162.33mil in revenue compared with RM185.74mil in 2022, a 12.6% drop due to the weak demand from overseas and local markets.
Its pre-tax profit decreased to RM14.24mil from RM25.54mil in 2022.
Source: The Star
