The new management team has implemented multiple operational improvement initiatives this year, with significant positive impact to the effectiveness and efficiency of our operations.
Our main supplier contract has been renegotiated from a high fixed monthly commitment to a lower flexible one. This reduces our risk of inventory build-up during potential seasonal or cyclical slowdowns in the market.
In fact, our profitability in this fiscal year was materially adversely affected by such inventory build-up, which was caused by a major equipment malfunction in the beginning of the year. TWI’s furnace was down for almost a month, during which coincidentally the market price of copper dropped from $7,000/tonne to less than $6,000/tonne due to the emergence of the US-China trade war.
As a result, our average inventory cost increased dramatically compared to the market price, and we were forced to sell our products below cost. At that time, we quickly flew in an expert from our equipment supplier’s headquarters in Finland to fix the issue, provide updated operating procedures, and train our staff on best practices to avoid any future malfunctions. Since then, we have not had any such equipment breakdowns, nor do we expect any in the future.
Furthermore, we have implemented commodity hedging practices using forward contracts and swaps from local banks to ensure that even when we do not have sufficient sales contracts to cover our incoming raw materials, we can lock-in a future selling price based on the prevailing market price at the time. In general, we follow a back-to-back arrangement with both our customers and our suppliers to lock-in the same price to avoid commodity price risk. Our back-to-back arrangement, together with our hedging facilities and our renegotiated supply contract, effectively secures us from any material commodity price risk.
Another major important undertaking this year has been the sale of our old drawing equipment (used to “pull” the rods and wires to reduce their diameter) to make way for brand-new Industry 4.0 equipment to replace it. The new equipment will be much more energy and labour efficient, and will take up a smaller footprint in our factory, making room for future expansion. We have also redesigned and re-arranged the factory to a much better organised layout, providing a better work environment for our staff
correct me if I am wrong. Tawin reported loss this quarter mainly due to "the expenses off the corporate exercise cost". Excluding this, it actually reported profit.
Not sure why the revenue dropped. However, the profit margin further improved from 2% last quarter to 3.2%. This was why the gross profit was roughly the same as in the same period lat year despite the drop in revenue. Also gross profit was the 2nd highest despite the revenue was the lowest of the last 5 quarters!
Gross profit (RM '000) Quarter ended September 2018: 2181 (revenue: 109,094) Quarter ended December 2018: -811 (revenue: 94,003) Quarter ended March 2019: 591 (revenue: 81,204) Quarter ended June 2019: 1895 (revenue: 104,150) Quarter ended September 2019: 2152 (revenue: 66,917)
looks back to the QR report.. gross profit at 2m despite the revenue drop. increase of expenses for administrative and finance Costa and cause the lost..
Tawin has been in loss making position over the past 18 months (4 loss making quarters over last 6 quarters but already turned profitable with 8.1mil net profit in the latest quarter result released on 30 August). The reasons of loss making are due to the following reasons:
Existing old machines (more than 20 years) which incur higher costs associated with equipment downtime and maintenance.
Higher administrative expenses (one-off) incurred as a result of the fair value loss on derivative liability and the Group's on-going corporate exercise (completed this exercise in August 2019).
Thin profit margin due to their high cost of their copper raw material (cathode). If they can use recycled copper raw material in their production process, then their profit margin could be higher (due to lower raw material cost).
2.1 New Machines could contribute higher margin (no 1)
One of their strategies to turnaround from loss to profitability is by changing the old machines to newer and more efficient machines, which can accept recycled raw materials (or lower purity copper raw material). For this purpose, Tawin has proposed right issue and ICPS (irredeemable convertible preference shares) to raise RM35.8 mil (mainly to buy raw materials). This corporate exercise has been completed in August 2019. Let see the details of the right issue fund utilization as below (circular 2.1.6):
From the above circular, 2 new additional manufacturing lines with a total capacity of approximately 1200 metric tons per month has been setup. The total costs of these 2 manufacturing lines (including installation costs) is approximately USD1.7 million (or RM6.9 million based on exchange rate of 4.07). Personally I expect these two new productions lines will have higher efficiency and profit margin and the best thing is the has secured an off-take agreement to sell all the copper rod and wire products of this new production lines.
Remember their existing production lines total capacity is approximately 1000 tons (per month) with revenue per quarter of about 90mil. With the contribution of the new production lines, capacity could increase to 2000 tons per month with possible double up of revenue (higher margin from new production lines).
Cyprium JV was announced in April 2019 marks Tawin first foray into the cable industry, a downstream venture in the value chain which normally command a double digit net profit margin. It will use innovative electron beam irradiation technology (patented) and it is part of the Company’s strategy to capitalise on new and viable opportunities complementing its existing business to drive growth. This joint venture is expected to be operational as of in 3rd quarter in July – August 2019 (Q3 could contribute)
With 80% ownership of the newly set up Cyprium Wire Technology SB, TaWin is the first and only Malaysian company to commercialize this technology. The competitive pricing and lead time as compared to foreign competitors are some key advantages of this downstream product.
Tawin has increased their local and export market ratio from 80:20 to 60:40 level in 2019. Their target is further increase this ratio to level of 50:50 to ensure that the company continues to grow and can have a more natural hedge of their currency risk.
2.4 Internal Operations Improvement (no 4)
Tawin has designed a capex plan to replace old machinery in order to improve efficiencies on electricity cost, labour cost, and maintenance cost.
Current price of Tawin is trading at near 52 weeks low (12 sen) and if they can turnaround in 2H of 2019, then downside is limited due to I expect is it likely to turnaround based on their new JVs (international and local) and internal efficiency improvement.

The new management taken over the company since end of year 2017 when tawin was still trading at 1.00 (after adjusted price still about 35-38 sen now).
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limyauc
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Posted by limyauc > 2019-11-08 11:06 | Report Abuse
OPERATIONAL REVIEW
The new management team has implemented multiple operational improvement initiatives this year, with significant positive impact to the effectiveness and efficiency of our operations.
Our main supplier contract has been renegotiated from a high fixed monthly commitment to a lower flexible one. This reduces our risk of inventory build-up during potential seasonal or cyclical slowdowns in the market.
In fact, our profitability in this fiscal year was materially adversely affected by such inventory build-up, which was caused by a major equipment malfunction in the beginning of the year. TWI’s furnace was down for almost a month, during which coincidentally the market price of copper dropped from $7,000/tonne to less than $6,000/tonne due to the emergence of the US-China trade war.
As a result, our average inventory cost increased dramatically compared to the market price, and we were forced to sell our products below cost. At that time, we quickly flew in an expert from our equipment supplier’s headquarters in Finland to fix the issue, provide updated operating procedures, and train our staff on best practices to avoid any future malfunctions. Since then, we have not had any such equipment breakdowns, nor do we expect any in the future.
Furthermore, we have implemented commodity hedging practices using forward contracts and swaps from local banks to ensure that even when we do not have sufficient sales contracts to cover our incoming raw materials, we can lock-in a future selling price based on the prevailing market price at the time. In general, we follow a back-to-back arrangement with both our customers and our suppliers to lock-in the same price to avoid commodity price risk. Our back-to-back arrangement, together with our hedging facilities and our renegotiated supply contract, effectively secures us from any material commodity price risk.
Another major important undertaking this year has been the sale of our old drawing equipment (used to “pull” the rods and wires to reduce their diameter) to make way for brand-new Industry 4.0 equipment to replace it. The new equipment will be much more energy and labour efficient, and will take up a smaller footprint in our factory, making room for future expansion. We have also redesigned and re-arranged the factory to a much better organised layout, providing a better work environment for our staff