hong Guan continues expansion

RM25mil-RM30mil to add production lines and R&D equipment in Sg Petani

GEORGE TOWN: Thong Guan Industries Bhd is spending RM25mil-RM30mil in 2016 to add new production lines and equipment for its research and development (R&D) centre at the present site in Sungai Petani.

Group managing director Datuk Ang Poon Chuan toldStarBiz that this year would see the conclusion of the group’s RM100mil expansion exercise for a three-year period.

“Over the last two years, we have spent over RM60mil for the expansion exercise.

“Next year we will come out with a new budget for a fresh business plan after the K Exhibition in Germany in September-October,” he said.

Ang said the new production line would raise the group’s total output of packaging products by over 20% from about 110,000 tonnes last year.

“The first quarter of 2016 has been slow so far due to the festive periods, but we still expect to get better orders compared to last year.

“Based on customers’ feedback, we are also projecting an improved second quarter over last year’s same period,” he said.

According to Ang, the key drivers of growth would come from the recently introduced packaging materials such as the nano-layered stretch film materials, stretch hood materials, and films for automatic-packing machines.

“The demand is coming from customers in South Korea, South Africa, Australia, Vietnam, and Malaysia.

“The Malaysian market, which consumes about 15% of the stretch film products, is expected to grow in the next two years,” Ang said.

On the group’s polyvinyl chloride (PVC) food wrap business, the group is looking to expand the PVC food wrap production floor, which is over 85% utilised.

“We plan to spend US$4mil to acquire new production lines before mid-2016.

“The market for the PVC food wraps comes mainly from Asean and Middle-East countries.

“We are also getting orders from countries such as Azerbaijan and Kazakhstan.

“The PVC segment will be increased to about 1,000 tonnes per month with the installation of the new production lines,” he said.

The PVC division, which was recently awarded the coveted eTrade award from Matrade (Malaysia External Trade Development Corp), contributes about 8% to the group’s revenue.

On its garbage bag business, the group, which experienced a decline in the sales of garbage bags in the first half of 2015, expects to see full recovery this year for the division.

“We are acquiring a site in Gurun to expand the garbage bag business.

“About RM4mil would be injected into the land and facility, which is being planned for operation next year.

“The garbage bag business generates about 20% of the group’s revenue,” he said.

On its R&D centre, Ang said the centre would be ready in April. “But we have already started work to bring the group’s products to a higher value proposition, optimise resource utilisation and generate cost savings for our customers,” he said.

According to a recent Technavio research report, the global stretch and shrink film market is expected to reach over US$15bil by 2020. It said the global stretch and shrink film market was expected to grow at a compounded annual growth rate of more than 5% between 2016 and 2020.