Hai-O to use renminbi

KUALA LUMPUR: Hai-O Enterprise Bhd, whose first quarter ended July 31, 2015 was affected by the volatile currency, has decided to use the Renminbi as a settlement currency for its imports from China to minimise the impact of the volatility.
“We have worked out the estimated figure and based on our total purchases, about 40% are import purchases. About 80% are in US dollars. As mentioned in our reply letter to MSWG (Minority Shareholder Watchdog Group), we talked to our suppliers to see whether we can use an alternative currency like Renminbi,” its group CFO Hew Von Kin told reporters at its AGM yesterday.
“Most of our major suppliers are in China so majority of them agreed to use Renminbi as a settlement currency. This will help us in our purchase planning. Also, it is part of the Chinese government’s strategy to internationalise the Renminbi as a medium for settlement of international trade,” he said, adding that it has already started using Renminbi for some of its import purchases.
Hew said the company estimated about a 1-2% drop in its gross profit margin as a result of the weak ringgit, which has dropped over 20% year-to-date.
He said trading in Renminbi will mitigate the negative impact of the volatile currency despite the Renminbi being pegged to the US dollar because the fluctuation will not be as great.
In addition to the change in settlement currency, Hew said it is trying to source some of its raw materials from local suppliers in order to reduce the impact of the uncertainty in the exchange rate. He said this will help the company in pricing its products.
He also said that the company will reduce or defer the purchase of products that have no immediate demand and will wait until the exchange rate is more stable before it considers buying these items.
Yesterday, Hai-O shareholders approved all resolutions at its AGM including a final single tier dividend of 11 sen per ordinary share for the financial year ended April 30, 2015. The company also announced its intention to distribute its treasury shares to shareholders.
Hew said it has not decided yet on when it plans to distribute the treasury shares.
Group managing director Tan Kai Hee said the company is keen to work with Chinese investors and has teamed up with China’s Chengdu University and a health food operator to set up a diabetes clinic based on traditional Chinese medicine in Malaysia.
“Our joint venture (JV) partner in China is going to send a team with expertise in diabetes and specialists ... we are in the preparation stage now. We estimate to commence business by end of this year, hopefully,” he said.
The first clinic will be in Bangsar, Kuala Lumpur with an initial estimated cost of RM2 million to RM5 million, which includes the equipment, products and expertise needed for the clinic.
“If the response is good, we may consider opening branches,” he added.
Tan said the JV is in line with China’s One Belt, One Road economic development and cooperation strategy, and the company is exploring opportunities to work with more Chinese investors, including traditional Chinese medicine operators in China. He said this will enable technology transfer to Malaysia, which would help the company build up its product portfolio.
“We will focus on areas related to our existing business such as healthcare, food supplement and branded agency for healthfood products. Hai-O has been in this line for 40 years so we have our existing marketing channels, we have our strength, knowledge about this business and also expertise. When we work with China investors, it will be much easier for Hai-O to expand the business,” he said.
Tan said it has cash reserves of over RM100 million, which is more than enough internal resources to work with Chinese investors and to expand regionally. Regionally, the company is eyeing expansion into Singapore, Brunei and Indonesia.