Business

Saturday May 2, 2009

Wah Seong sees busy year ahead

By ELAINE ANG


Wah Seong Corp Bhd’s industrial services division will be busy this year with new projects and orders it is optimistic of clinching, says a top company official.

The division comprises three main operating units – trading and distribution of building materials, manufacture of steel pipes (piling, structural and water) and supply and fabrication of specialised agricultural equipment.

The company’s head of industrial services division, Chin Yoong Ngok, says his division’s performance in the first quarter of the year had held up well due to its business mix.

“We hope the year’s results will be as good as 2008 or better as we benefit from the stimulus package and better crude palm oil prices leading to continued investments into equipment by oil palm players,” he says.

Chin Yoong Ngok ... We also plan to penetrate the Australian market

Wah Seong’s industrial services division recorded pre-tax profit of RM37.8mil on revenue of RM843.5mil for the year ended Dec 31, 2008. The division contributed 36% to group revenue and 24.7% of pre-tax profit last year.

On the pipe business, Chin estimates the current demand for piling pipes in the country and Singapore to be about 120,000 tonnes, worth RM400mil.

Based on the division’s over 25-year track record in the industry and the success rate it has achieved so far, he is optimistic of securing half of the amount by the third quarter of the year.

The main export market for Wah Seong’s pipe division is Singapore with the division having secured several major orders there.

“We will also stand to benefit from large-scale infrastructure projects that are coming on line as part of stimulus packages now being used extensively to mitigate the impact of the economic slowdown,” he tells StarBizWeek.

The division is upgrading its plant in Seberang Prai, Penang, to increase production capacity to 100,000 tonnes of pipes per annum from the current 60,000 tonnes in anticipation of more orders.

“The structure is completed and equipment landed. Everything should be completed by June. The new line can produce bigger pipes up to three metres in diameter and enable us to supply to larger projects,” Chin says.

To-date, the pipes division has an order book of about RM200mil for projects locally and in Singapore until the fourth quarter.

“We also plan to penetrate the Australian market by the first half of next year as the demand for water pipes there is huge with hundreds of kilometres of pipes required.

“We are in the process of getting certification to supply our products there,” he says, adding that the division is currently supplying piling pipes to Australia.

For the equipment division, Wah Seong aims to broaden its product range, customer base and expand market coverage.

“We are turning the division into an agro-engineering group that focuses on power generation, process engineering and waste management instead of just a palm oil mill parts manufacturer,” Chin says, adding that the division plans to expand to Indochina and Thailand to tap the agriculture sector there.

Service and maintenance of equipment to palm oil mills also provides the division with ongoing and recurring income.

At present, the equipment division has about RM60mil worth of orders in hand.

On average, the equipment division generates revenue of about RM10mil a month.

Chin sees pretty bright prospects for the building materials business, especially if the Government’s stimulus packages take off.

“Demand for raw materials will increase from the spillover effects. We are now adding new products to our portfolio so that we can be a one-stop shop. We are also having joint-marketing efforts with our manufacturers to boost sales,” he said.

One of the top five building material distributors in the market in terms of turnover, Wah Seong has 500 customers, 11 branches and four warehouses.

On listing plans for the division, Chin says its is not an immediate concern.

“It is not the right time to do it if we do it at all. Things are very uncertain now. However, the division is doing well and complementing the business,” he says.

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