[The Edge Daily] Daibochi eyes value-added products

02 Jan 2013

Daibochi eyes value-added products

The Edge Daily

Written by Surin Murugiah

KUALA LUMPUR: Daibochi Plastic and Packaging Bhd, a manufacturer and converter of flexible packaging within Asean, is looking at penetrating the higher value-added medical gloves and electronics markets.

Managing director Thomas Lim told The Edge Financial Daily in an email interview that the company has begun supplying small quantities of flexible packaging (also known as flexpack) to medical glove manufacturers in Malaysia, and has undertaken testing and trials worldwide for electronics packaging.

“Daibochi is of the view that diversification into this sector is a step in the right direction in sustaining our growth prospects, as it enables us to complement the resilience of our food and beverage [F&B] clientele and improve our learning curve to ultimately enhance the group’s financial performance. We are definitely committed to this endeavour for the long haul,” he said.

Established in 1972, Daibochi provides packaging solutions for companies mainly in the F&B, fast-moving consumer goods (FMCG) and speciality sectors, locally and overseas.

Some of its international clients are Nestle, Kraft, Cadbury, CNI, Kimberley-Clark, Colgate-Palmolive, British American Tobacco and Fonterra.

On the company’s goals for the coming year, Lim said Daibochi’s immediate objective is to stake its claim as one of the leading flexpack providers in the region.

“We intend to expand our multinational company [MNC] clientele from new countries, as well as penetrate into the new sectors as mentioned above.

“We have made much effort in recent years to ensure our products and facilities are ready for the next step, and certainly hope that 2013 will be the time for us to reap the rewards,” he said.

On the possibility of mergers and acquisitions, Lim said the company recognises the benefits and is open to explore opportunities.

For the packaging industry as a whole, Lim said flexpack will remain the packaging of choice going forward.

He said it allows manufacturers to stock up larger quantities of products than rigid packaging such as glass and hard plastics, while at the same time enjoying the corresponding cost advantages in transport and storage.

“Furthermore, end users increased mobility and preference for convenience in this time-compressed era will drive demand for F&B packaging in single portions or those designed to reduce food preparation time.

“For brand owners, the ability to add elements of convenience and marketing messages, such as promotional stickers and flaps, onto flexpack are plus points,” he said.

Citing international industry research outfit Freedonia Group, Lim said demand for converted flexible packaging is projected to increase 3.8% a year from 2011 to 2015.

Prices of resin were less volatile in 2012 compared with the fluctuating trends in 2009, he said, due to additional capacity coming onstream and less speculation globally.

\”On this note [medium term] demand for flexpack could come from customers in developed countries as they shift their focus to source flexpack requirements from Asian manufacturers for the cost advantage,” said Lim.

He said demand is anticipated to come from developing countries such as China and India, where growing affluence and a rising population of people “on-the-go” would naturally drive demand for convenience packaging.

He added that it would be strategically viable for Daibochi to leverage its experience in meeting the requirements of MNCs, particularly at a time when regional MNCs are increasingly sourcing their packaging requirements from Asia in order to be cost competitive without compromising on quality.

“We have identified Australia as one of the main countries we can leapfrog [into] in a big way, while also [looking at] Southeast Asia as an exciting growth area,” he said.

Daibochi recorded a net profit of RM20.13 million on a turnover of RM284.23 million for the financial year ended Dec 31, 2011 (FY11).

For the first nine months of FY12, the company saw net profit increase 32.5% to RM18.76 million from a year earlier despite revenue slipping 1.7% to RM204.99 million. The stock closed at RM2.55 on Dec 31.

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