Box-Pak boosts capex to RM200m

BATU CAVES: Box-Pak (Malaysia) Bhd, which slipped into the red last year, is bumping up its capital expenditure (capex) this year to RM200 million for new machinery and expansion of facilities.
Group CFO Ooi Teik Huat said RM60 million has been allocated for Malaysia, RM130 million for Myanmar and RM10 million for Vietnam.
“We will be spending some RM60 million in Malaysia for new plants and new buildings. This is for expanding our facilities and buying new machinery. The RM60 million does not include land acquisition but definitely we are looking at new buildings as well, here in Kuala Lumpur. In Johor, the plant only occupies 3.5 acres of a 6-acre land. The plan is for the Johor plant to take over that entire 6 acres of land,” he told SunBiz at its AGM yesterday.
Out of the RM60 million capex, RM24 million will come from the RM113 million proceeds raised via a rights issue last year. The RM24 million has been allocated for new machinery, for which it has already started to place orders.
“With the rights issue, we can look at increasing the capex spend on new and better machinery to address some of the issues that we are facing. If you look at Box-Pak Malaysia for example, this is where we need to improve a lot on our performance. The machines are very old.
“For example this plant, the corrugators that we have are almost 30 years old and we cannot settle the issues that we face in the production floor without a big overhaul of this corrugator. We also face some space issues as well. This plant’s utilisation is already maximised,” he added.
Ooi said the fabrication of machinery will take nine months to a year and while some improvements can be seen by the second half of this year, the full impact of the overhaul exercise would only be seen next year onwards.
He said the RM200 million capex this year is a big sum compared with previous years. The group’s capex was RM53 million in 2013, RM20 million in 2014, RM25 million in 2015 and RM77 million last year.
“Usually it is much smaller, that’s why we are having the problems we have now because we have not been replacing the machines at the pace that we were supposed to. So there have been a lot of issues but that stems from the fact that our shareholders’ funds are very small. This year will be the year for overhauling, consolidating, reviewing our performance and getting ourselves prepared for 2018 to be meaningful,” Ooi said.
On its overseas operations, he said Vietnam will continue to contribute good profits while Myanmar, as a greenfield project, will take five years before it begins to contribute meaningfully to the group’s results.
“We are now concentrating on Myanmar. We already have a handful of customers or potential customers who are opening up their plants there. So we are timing our expansion plan with those of our customers,” he said.
The group is constructing its factory in Myanmar, which is expected to be completed in the second quarter of 2018.
Commenting on the rising cost of doing business in Malaysia, Ooi said it is also looking at how to automate and reduce dependence on workers.
For the financial year ended Dec 31, 2016, the group slipped into the red with a net loss of RM853,000 due to the increase in raw material and labour costs, as well as production overheads and higher borrowing cost.
Ooi expects the group to be profitable this year, with its overhaul and expansion plans in place.