CEO Morning Brief

Samchem in Early M&A Talks With Several Parties

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Publish date: Thu, 01 Jun 2023, 08:40 AM
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TheEdge CEO Morning Brief

SHAH ALAM (May 31): Integrated chemicals and lubricants distributor Samchem Holdings Bhd is in preliminary discussions with several companies to expand its chemical businesses through mergers and acquisitions (M&As), according to chief executive officer Eugene Chong Wee Yip, as a number of small and medium enterprises (SMEs) are looking to leave the industry.

“I think we see a lot of opportunity during this period of time — a lot of SME competitors are exiting the business — so we are looking at some of these companies to complement our product reach,” he told The Edge after the group’s 16th annual general meeting (AGM) here on Wednesday (May 31).

He said some SMEs are exiting for a number of reasons, including no further expansion plans or the owners have reached retirement age. “So either they (SMEs) sell their businesses or create a (bigger) business — such as doing M&A."

Chong said that the group’s performance is driven by supply and demand for chemicals as well as economic conditions. “I have to be very honest that the environment is very challenging nowadays. The business environment is full of uncertainties. But with the company's strong fundamentals and establishment, we are still very positive to weather this.”

Samchem has also expanded distribution of its products to a wider range of industries including automotive, construction, commodities, electronics and oil and gas.

In the first quarter ended March 31, 2023 (1QFY2023), Samchem’s net profit tumbled 66.64% year-on-year (y-o-y) to RM6.54 million from RM19.59 million, weighed down by lower sales volumes and margins.

It also registered a lower revenue of RM255.39 million, down 29.94% y-o-y from RM364.51 million, amid a decrease in average selling prices and sales volume.

However, on a quarter-on-quarter basis, Samchem managed to return to profitability versus a net loss of RM2.13 million in 4QFY2022, driven by an improvement in gross profit margin, gains in disposal of property and equipment, foreign exchange (forex) gains and improvements in operational efficiency.

However revenue slipped 7% from RM273.31 million.

Apart from Malaysia, Samchem also operates in several Southeast Asian countries such as Singapore, Vietnam, Indonesia, Cambodia and Myanmar.

At 2.31pm, shares in Samchem were half a sen or 0.93% higher to 54 sen, giving the group a market capitalisation of RM291.04 million.

Source: TheEdge - 1 Jun 2023

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