19/03/2012 (The Star) - The prospects of industrial product firms are looking bright this year.

For Chin Well Holdings Bhd and Unimech Group Bhd, revenue is expected to receive a boost from the demand for do-it-yourself (DIY) fasteners in Europe and the growing palm oil industry in Indonesia.

Chin Well's DIY fastener manufacturing business in Ho Chih Minh City, Vietnam, which exports to Europe, became profitable early this year; this would be reflected in the fiscal year ending June 30 (FY12).

Chin Well’s DIY fastener manufacturing business in Ho Chih Minh City, Vietnam,
which exports to Eu rope, became profitable early this year. This would be reflected
in the fiscal year ending June 30.

Chin Well group director Tsai Chi-yun told StarBiz: “The DIY fastener operations, which started in Vietnam in 2005, broke even in 2008. Due to the global financial crisis in 2008, the business continued making losses until last year.

“We are now negotiating with new customers from Europe, a process which would take time as the Vietnam operations need to be audited before orders are placed. But once they place an order, one can expect it to be in a large quantity.”

The DIY business is expected to generate 35% to 40% of the group's revenue for FY12.

“We expect overseas sales to start picking up in the second quarter of 2012,” she said, adding that orders had slowed for the fastener business in Penang since last November due to a slowdown in Italy, France and Spain.

“The orders from Germany are still steady, as the government is still undertaking infrastructure works amidst a healthy construction industry,” Tsai said.

Lim: ‘Sales of valves to Indonesia
contributed 21% to last year’s
turnover of RM193.8mil.’

Chin Well's sales to the German market constitute about 50% of total group sales to Europe.

“Our market in Germany is still growing. Therefore, the slowdown in Chin Well's smaller markets in Europe would not affect the group that drastically,” she added.

On the group's galvanised wire business, Tsai said demand from the United States in the coming months would boost orders for Chin Herr Industries Sdn Bhd, a wholly-owned subsidiary of Chin Well.

”We have customers in the United States who had placed orders with us. These orders should help to improve our performance for the 2013 fiscal year,” she added.

Meanwhile, Unimech's industrial valves business is expected to benefit strongly from the rise of palm oil output and exports in Indonesia.

According to Indonesian Palm Oil Producers Association marketing head Susanto, palm oil output could rise 6.4% to 25 million tonnes this year, while exports could increase to 17.5 million to 18 million tonnes from an estimated 16 million tonnes last year.

Demand for palm oil from China and India was still high, he said, adding that demand from Europe would be stagnant this year.

Unimech executive chairman and managing director Datuk Lim Cheah Chooi said the group's sales of industrial valves to Indonesia were expected to grow double-digit this year.

“Sales of valves to Indonesia contributed about 21% to last year's turnover of RM193.8mil. This fiscal year ending December 2012 (FY12) is likely to see contribution from Indonesia exceeding 25%.

“Presently, we have 31 warehouses and marketing networks in various parts of Indonesia, serving the palm oil mill, water works and marine industries,” he said.

For FY11, Unimech generated a pre-tax profit of RM29.6mil on turnover of RM193.8mil, compared with RM24.2mil and RM158mil respectively in FY10.

Unimech's ARITA valve brand name had recently obtained the American Petroleum Institute certification, which qualifies it for use in the oil and gas industries.

“We are now applying for the Bureau Veritas certification that will qualify our valves for use in the marine and ship-building industries,” he added.

According to Freedonia, an international business research company based in Cleveland, the global demand for industrial valves would rise 5.4% annually through 2015.

“Growth will be driven by continuing robust gains in the Asia-Pacific region, as well as strong recovery in the United States and West European markets.

“Automatic valves will outpace conventional types and the oil and gas industry will see strong growth in valve demand,” the report added.