KUALA LUMPUR: Ancom Bhd’s profitability would still be contributed primarily by its agricultural chemicals segment in the financial year ending May 31, 2020 (FY20).
Group chief executive officer Lee Cheun Wei said the agricultural chemical division has contributed steadily with about 25 per cent in compounded average growth rate (CAGR) annually in the last four years.
"We intend to grow this segment, regardless of the periodic climatic issue like flood and drought that may temporarily impact our earnings in certain years.
"Over a long term, we expect the short-term risk can be mitigated because we involve in the food chain supply as there is always a perpetual demand.
"If there is a shortage, prices likely to increase and more farmers will also grow their crop. All of these mitigations will automatically be adjusted,” he said at the company’s media briefing here today.
However, he caution that margins in the industrial chemicals segment may be squeezed in the downturn in the petrochemical sector with low price of solvent and chemical including urea and methanol.
"The challenging business environment is expected to persist as a result of the ongoing trade war between the US and China. However, our unique agrochemicals product portfolio will continue to drive growth," he added.
The group’s agricultural chemical segment involves in manufacturing active ingredient (AI) to control weed, particularly in sugar cane plant, cotton plant, oil palm and timber.
Lee said the company has over 50 registrations of herbicides products in 40 countries.
Throughout the year, he said more agricultural players approached the company to provide certain AI for their crop.
“We are looking at the next phase of growth with a new product portfolio solutions to customers.
“We expect to introduce three to four new products for the sugar cane industry for AI (weed controller) by 2021. We spent about RM20 million in capital expenditure to develop these products,” he said.
He said the company has extensive partnership network with growers, international distributors, domestic dealers, and peers in agricultural and chemical industries.
“We also produce insecticides, fungicides and timber preservatives,” he said.
Ancom was also keen to expand its manufacturing facility up to 70,000 sq ft ton develop new products and expected to have both internal funding and borrowing.
"Currently, our utilisation rate is between 70 per cent and 80 per cent at both plants in Shah Alam and Port Klang to manufacture herbicides," he said.