ES Ceramics Technology sees challenging environment for FY18

PETALING JAYA: ES Ceramics Technology Bhd, which saw its net profit slide in the financial year ending May 31, 2017 (FY17), expects FY18 to be even more challenging due to the stiff competition in glove prices.
“The glove price competition is so stiff in the marketplace today which makes it hard for us to operate in,” executive director and CEO Wong Fook Lin told reporters at its AGM today.
“Some of our customers have been taking a stand of not participating in that kind of war (price war), hence production has been reduced in tandem. There are also customers who take a wait-and-see approach.”
He said the operating environment will remain challenging until excess capacity in the market has been taken up, as the “big boys” in the glove industry have been expanding aggressively over the years.
For the first quarter ending Aug 31, 2017, the maker of formers for gloves reported a 72.51% drop in net profit to RM555,000 from RM2.02 million a year ago while revenue fell 24.83% to RM6.23 million from RM8.28 million a year ago.
The group told Bursa Malaysia in a filing today that the lower earnings were due to lower revenue, coupled with intense selling price pressures and higher operating cost.
Wong said the group has been doing some groundwork since early this year to have a more diverse portfolio of customers and more ceramics related products, in anticipation of a tougher year.
In terms of customers, he said most of the big players in the glove industry are its customers and it is now looking at smaller outfits and family outfits, both local and overseas.
For the new products, he said some samples have been made for some of its customers. These products are still in the dipping industry but for other products, he said the group will announce them when they are approved by customers or when production plans are more concrete.
He said these measures would definitely help mitigate the challenging environment and enhance its margins in the long run but the impact will only be seen over time.
It would also help with better utilisation of its equipment but dipping for gloves will remain its core business.
On its automation efforts, Wong said it has rolled out some pilot projects in both its factories in Ipoh and Thailand with an aim to have better and more consistent quality in its products.
However, its automation efforts are still in the early stages and their impact is insignificant.
The group, which previously said it aims to transfer to the Main Market in 2018, has aborted plans to do so despite meeting the requirements.
“Although we are already eligible for the migration, we will not go ahead with it because the incidental cost is too much to swallow. We see no benefit … we might as well use the money for capex to do automation,” said Wong.
ES Ceramics’ share price fell 2.82% to close at 34.5 sen with a total of 1.20 million shares traded. Its market capitalisation stood at RM70.90 million.