Agricore’s chief financial officer Lim Swee Chuan said the group only managed to pass on 50% of the cost increase to customers, but it expects better times ahead once the ringgit strengthens. (Photo by Sam Fong/The Edge)

KUALA LUMPUR (May 30): Food ingredient supplier Agricore CS Holdings Bhd (KL:AGRICOR) — which is slated to be listed on the ACE Market on June 21 — expects better margins ahead, amid wide anticipation that the ringgit will strengthen against the greenback.

According to the group, its profit margin declined to 5% for the financial year ended December 31, 2023 (FY2023), from 5.8% in FY2022, due to the increase of material costs, as a result of the unfavourable Malaysian ringgit against the US dollar.

Agricore’s chief financial officer Lim Swee Chuan said the group only managed to pass on 50% of the cost increase to customers, but it expects better times ahead once the ringgit strengthens.

“In the food industry, when the price increases because of the commodity, it is very hard to drop. The ringgit depreciated around 3% against the USD last year. We suffer a little bit now, but if the ringgit strengthens in future, we will be very happy,” he told reporters after the prospectus launch on Thursday.

According to its prospectus, Agricore's major suppliers hail from other countries such as Canada, Thailand, India, and Myanmar. Meanwhile, its customers are mainly Malaysians.

Lim further added that the company would focus on boosting sales to offset volatility in the currency exchange.

“By having more sales, we can improve our bottomline. This [listing exercise] is a very good platform for us to gain brand awareness, tap into the market and raise money for expansion,” he said.

“We have also received enquiries from big food manufacturers, such as Mamee,” he continued. “In the past, we could not cater to their requests due to limited working capacity, but with the expansion, we can increase our topline.”

He said the consumer sentiment has been improving and the business would remain resilient against uncertainties in the economic environment.

“Food ingredients are used in daily consumption. We are not worried about inflation and the business is resilient to economic downturns. Even during the MCO (movement control order), we did much better,” he said.

Meanwhile, the removal of the diesel subsidy and the increase in the sales and service tax (SST) would not pose a significant impact on the group, according to Lim.

According to the prospectus, Agricore reported double-digit revenue growth over the past three years, with a three-year compound annual growth rate (CAGR) of 14.9%. Meanwhile, its net profit exhibited a compound annual growth rate of 31.4% over the same period.

For FY2023, the group reported a revenue of RM135 million, up 10% from RM122.7 million in FY2022. Net profit declined 4% to RM6.8 million in FY2023, from RM7.1 million in FY2022.