GUAN Chong Bhd, the world’s fourth largest cocoa grinder, is seeing encouraging recovery of chocolate demand in Europe and the US as borders gradually reopen amid he rising global inoculation rate.
Currently, GCB recorded enough commitment of forward sales from customers for 2022 which already matched close to 40% of the group’s annual total production capacity in Johor Bahru and Batam which stands at 250,000 metric tonnes (MT) grinding tonnage, excluding German-based chocolate producer Schokinag Holding GmbH.
Riding on the success of having a diversified clientele, Guan Chong saw only a marginal drop in revenue of RM876.2 mil in its 2Q FY2021 ended June 30, 2021 from RM910.8 mil a year ago although the COVID-19 pandemic has partly led to a decline in global chocolate demand and diminished margins as a result of both demand- and supply-side pressures.
The group’s net profit dipped 36.1% to RM36.4 mil in 2Q FY2021 from RM57 mil previously partially due to higher freight costs and competitive margins resulting from a decrease in combined ratio (selling prices over costs) of cocoa ingredients.
“The current depressed profitability in the cocoa industry is just temporary amid the closure of international borders, and will improve once travel restrictions are eased,” commented Guan Chong’s managing director and CEO Brandon Tay Hoe Lian.
“Countries with controlled number of COVID-19 cases and high vaccination numbers are already mulling for the total reopening of borders as they look to recover lost ground.”
Evidently, Guan Chong has started to see early indicators of improving demand from its 2022 forward sales to-date which have met close to 40% of its annual total production capacity.
“Hence, we are optimistic on the long-term prospects of the chocolate industry and will continue to put focus on exploring new markets, especially in Europe as we strengthen our foothold within the industry,” opined Tay.
Guan Chong’ current prospect slightly contrasts that of 2019 when the company bucked the trend of languishing stock markets and commodity prices, thanks to a surge in demand for cocoa as dry weather hurt production in some top producing countries such as Ivory Coast.
This has left Guan Chong Bhd with a “happy problem” – they were unable to cope with demand. Not surprisingly, Guan Chong’s share price skyrocketed from just RM2.05 on Jan 30, 2018 to an intra-day high of RM5.03 in October 2019 prior to its 1-for-1 bonus issue exercise.
“So we are facing a good problem right now and everything seems too good to be true. The last quarter and this quarter have been a blessing to us. This year, all we need to do is catch up with delivery because last year we had difficulties fulfilling everything,” Tay told FocusM in an interview in February 2019.
Back then, the Pasir Gudang (Johor)-based company posted robust financials for its 3Q FY2018 ended quarter ended Sept 30, 2018, registering a 47.7% jump in net profit to RM43.87 mil from RM29.7 mil in the previous corresponding period.
Quarterly revenue also ticked up 10.3% to RM598 mil from RM542.86 mil on the back of higher cocoa sales volume, increased bean grinding and lower input costs. – Aug 27, 2021
