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Guan Chong cautiously optimistic over near-term prospects

28/04/2022 03:38 PM

KUALA LUMPUR, April 28 (Bernama) -- Guan Chong Bhd (GCB) is cautiously optimistic with the company’s near-term prospects as beyond short-term shocks, the year 2022 has shown signs of being an international year of recovery, spurred by loosening pandemic restrictions and newly reopened borders.

Chairman Tan Ah Lai said the group faced another challenging year in financial year 2021 (FY2021) as the protracted COVID-19 pandemic and geopolitical tensions contributed to global inflation and supply chain disruptions.

“We are operating within an undeniably turbulent macroeconomic environment where existing imbalances caused by the COVID-19 pandemic have been exacerbated by the ongoing Russia-Ukraine conflict, creating a knock-on effect on consumer demand, business confidence and the global supply chain.

“Despite the sluggish global economy and logistical challenges, customers’ demand for cocoa-derived ingredients remained strong in 2021, resulting in a good increase in our production capacity and turnover compared to 2020. However, due to the fall in cocoa butter prices, we have recorded lower profitability in 2021,” he said in the FY2021 annual report.

He shared that numerous major events have impacted the cocoa grinding industry since its inception in the 1980s, however, the company had surmounted its previous challenges to rise to the ranks of becoming a leading global cocoa grinder.

Moving forward, Tan said that with chocolate consumption already on an upward trend, the resumption of global travel is likely to drive increased chocolate consumption.

To seize the opportunity of the economic recovery, the group had strengthened its position as a prominent global player in the cocoa supply chain, which saw many of its ongoing initiatives now reaching fruition.

Among them, he said the group’s Ivory Coast phase one factory is approaching completion while the planned construction of a new chocolate producing facility in the United Kingdom is set to conclude in FY2022, and GCB had also successfully enhanced the profitability, operational efficiency and improved utilisation of capacity for its German subsidiary SCHOKINAG.

“Our recent expansion into Europe, known for its high levels of chocolate consumption has placed us in a prime position to capitalise on the strong demand. At the same time, the commencement of cocoa grinding operations at our facility in Ivory Coast will also see us begin to reap the fruits of our ‘close to source’ and ‘close to market’ expansion policies.

“Our newfound ability to source cocoa beans directly will provide us with a shorter bean-to-ingredient cycle compared to our other facilities, mitigate future supply chain risks, and provide us greater control over our production and logistic operations,” he said.

To boost efforts in widening our European footprint, he said the group planned to allocate RM50 million in capital expenditure to upgrade SCHOKINAG’s existing chocolate production lines and set up additional machineries to increase production capacity at the SCHOKINAG plant during 2022.

“With these expansion plans coinciding fortuitously with the expected uptick in global economic growth during FY2022, we remained optimistic in significantly furthering the GCB brand as a key multinational player in the global cocoa and chocolate supply chain in the coming year,” he noted.

Tan said the group's past progressive expansion had now put GCB as the world’s fourth-largest cocoa grinding company, with a total of 277,000 tonnes in annual bean grinding capacity which provides them with both the scale to mitigate against any supply-side shocks and the financial clout to overcome any dips in global demand.

On Europe as a hub for growth in the mid-to-long term, he said the group will continue to expand its presence in Germany and the United Kingdom, while constantly monitoring its investment to adapt to the market trends.

He said that with the planned RM50 million to be invested in upgrading SCHOKINAG’s existing chocolate production lines, its annual industrial chocolate production capacity will increase by 10,000 tonnes.

“Our global expansion strategy, which was planned in the years prior to the pandemic and is coming to fruition, set the stage for a resurgent performance as the world enters the ‘new normal’, securing our place as a key multinational player in the global chocolate supply chain.

“These expansion plans are targeted to be completed by the end of 2022, with the benefits expected to be realised from 2023,” he added.




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