Chemical Company of Malaysia remains in losses for second straight quarter

KUALA LUMPUR (Nov 19): Chemical Company of Malaysia Bhd (CCM), in which Batu Kawan Bhd intends to acquire a 56.32% stake, incurred a net loss of RM1.58 million for the third quarter ended Sept 30 (3QFY20).

This is the second consecutive quarter that it was in the red. Its quarterly loss was wider compared with RM709,000 in 2QFY20.

CCM's quarterly revenue was up marginally by 2.35% to RM106.33 million in 3Q from RM103.88 million in 2Q.

Year-on-year the company achieved a net profit of RM3.71 million in the previous corresponding quarter. Its quarterly revenue was higher compared with RM96.95 million a year ago.

The group’s quarterly performance was mainly dragged down by its chemical division, which incurred a loss before tax of RM100,000 in 3QFY20 versus a profit before tax of RM18.7 million in 3QFY19.

CCM was affected by margin squeeze arising from lower average selling price of its chlor-alkali products, plus depreciation incurred for the newly reactivated plant in Pasir Gudang, which was commissioned in Feb 2020, amounting to RM2.7 million, among others.

However, it was mitigated by improved performance of its polymer business arising from the surge in demand from glove producers and debt recovery amounting to RM1.7 million.

Its polymers business’s profit before tax rose to RM5.5 million from RM3.7 million a year ago on higher revenue from both polymer coatings and cleaner products.

For the nine-month period ended Sept 30 (9MFY20), it recorded a cumulative net loss of RM115,000 versus net profit of RM12.95 million a year ago. However, its revenue increased by 7% to RM306.84 million from RM286.77 million.

On prospects, the group remains cautious of the continued softer regional caustic soda prices amidst uncertainty in the global economy, which will unfavourably impact the overall performance of the chemical business.

Nevertheless, it expects demand for its key products to gradually increase with the anticipated continuous measure to allow the economy to remain open.

Meanwhile, the group expects the upcoming fourth quarter (4QFY20) performance to be affected by lower overall plant utilisation, which will decline to 83%, from 91%.

For its polymer business,  it expects the strong demand for polymer products from gloves manufacturers to continue for the remaining of the year.

Its polymer business will endeavour to maintain its margins amidst the fluctuation in foreign currencies, by embarking on various cost efficiency initiatives, it added.

CCM's share price fell three sen to RM2.96 today, bringing it a market capitalisation of RM493.43 million, after some 5.97 million shares were done.

The stock has been trending upward steeply from its March low of 60 sen. Year to date, the counter has more than doubled from RM1.25 on Jan 2.