Jadi banks on China demand
PETALING JAYA: Malaysia’s sole toner maker Jadi Imaging Holdings Bhd has set its sights on China, which currently supplies half of the world’s recycled printer cartridges. “We believe the toner consumption in China will grow rapidly. The demand is going to be huge because many Americans and Japanese have outsourced their remanufacturing jobs to China,” executive chairman and group chief executive officer Liew Kim Siong told StarBiz. Given the outsourcing trend, China is expected to supply 80% of the global remanufactured cartridges in the near future. Thus the country’s potential demand for toner, a key component of the cartridge, is great. A few years ago, the black toner demand was expected to surge to 10,000 tonnes in China by 2010. But by 2005, the country’s demand had already soared to 18,000 tonnes and it is still growing. “China is our biggest market,” said Liew. He expects the contribution from China to balloon to 25% of Jadi’s net profit from 5% currently. Jadi makes black toner that it supplies to recycled printer cartridge manufacturers. The group’s rationale for setting up a factory in Suzhou city, central east China, is to be near to the prospective customers. Its subsidiary Jadi Imaging Technologies (Suzhou) Co Ltd started production in China last June. Less than a year later, it is already planning for capacity expansion amid the rising demand. “We intend to acquire a piece of land to add one production line,” said Liew. Jadi (Suzhou)’s current production line is on rented premises. Without much teething problem, it saw income flowing in from Suzhou after the second month in operation. “We expect to have a decent profit from our China operation in the fourth quarter last year,” said Liew, adding that the group’s annual earnings would exceed the forecast target. He added that Jadi was targeting a revenue growth of at least 30% this year. Jadi, which made its debut on Bursa Malaysia second board last April, has forecast a pre-tax profit of RM10.9mil and revenue of RM63.5mil for the financial year ended Dec 31, 2006. Earnings per share is anticipated at 2.42 sen. The China unit generated RM3.68mil or 9% of the group’s revenue of RM41.3mil for the nine months ended Sept 30 last year. It posted a net profit of RM468,000, accounting for 5% of the group’s net earnings of RM9.1mil. Given the solid earnings track record, with annual compounded growth of 40% between 2001 and 2005, Liew is confident that Jadi would graduate to the main board by year-end. On its domestic operation in Shah Alam, Jadi has added a production line dedicated for colour toner. This sixth production line, requiring an investment of RM1.8mil, will commence operations this quarter. Liew noted that colour toner was unlikely to generate significant contribution soon as colour printers had yet to gain popularity. However, he believes that the venture would bear fruit in the long run. “We will be ready to capture this new market when demand picks up,” he explained. The Malaysian production mainly caters for exports. Jadi’s toner reaches a large part of the globe. Asia, particularly the Middle East, South America and Eastern Europe, are the major export markets. In the past year, Jadi has utilised the fund raised from its listing exercise to double its combined annual capacity to 5,000 tonnes in Malaysia and China. “The added capacity allows us to enter new markets and that would help to boost earnings. “We want to adopt more aggressive marketing strategies, particularly in markets where we are not strong yet such as central and western Europe and the US,” said Liew. Besides enabling it to penetrate fresh territories, Jadi’s enlarged capacity also strengthens its bargaining power in purchasing raw materials. “We could bargain for a better price with our raw material suppliers since our volume is bigger now. This will bring down our (unit) costs,” said Liew. That’s also one reason that Jadi management is not too concerned about the fluctuations in crude oil price that affect the cost of plastic resin and silica. “We have actually got a lower price for our plastic resin supply for this year,” he said.
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