Pelikan sees profit growth, warns of expansion setback

Thursday June 11, 2009

PETALING JAYA: Stationery maker Pelikan International Corp Bhd sees a growth in profit this year, but warned that the global economic slump may have set the company’s business expansion back by at least two years.

Chief executive officer Loo Hooi Keat said the group’s “internal target is to achieve a 10% growth in profit’’ in the financial year ending Dec 31 (FY09) from FY08’s RM36.7mil. Sales would probably match last year’s RM1.29bil.

“We have already locked in our raw material needs for the peak production period beginning March at a cheaper price than last year, so this will help boost our margins,’’ he told reporters after the group’s AGM yesterday.

Pelikan, which counts on Europe for 80% of its sales, took a hard hit in the first quarter as the global financial crisis cut demand from consumers in recession-hit countries.

“The second and third quarters would be crucial for us,’’ Loo said.

Already signs are pointing to a recovery in demand, as orders started picking up in April. Loo said the company had also enjoyed cheaper cost of raw materials during its peak production period that began in March.

Traditionally, the second quarter, which coincides with the “back-to-school” period in Europe, generates nearly half of the company’s annual sales and profits.

The company made a net profit of RM8mil in the three months ended March 31, against RM24mil in the previous corresponding period.

“The economic crisis has set us back by at least two years from achieving our five-year target growth,’’ Loo said when asked how severely the economic slowdown had affected the group.

Pelikan made a net profit of RM36.7mil in FY08, sharply lower than the RM96mil posted in FY07.

The resulting credit crunch from the crisis meant Pelikan had to scrap plans to buy companies in China to expand its business in the world’s most populous nation. Loo said Pelikan instead had opted to work with partners there.

The group had recently started operations in India and Kenya under its longer-term strategy to develop new markets.

Loo is the biggest shareholder in the company with a 29.45% stake, followed by Lembaga Tabung Haji at 28.16%.

“We view the company as our long-term strategic holding in a global brand,’’ said Rozaida Omar, the pilgrims fund board’s group chief financial officer and a non-executive director at Pelikan.

Rozaida was appointed to the board in November last year after the fund doubled its stake in Pelikan between June and October.

Shares in Pelikan closed at RM1.45 yesterday, up seven sen for the day. That was the stock’s highest level since Oct 22 last year.