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Ancom sees opportunities in China supply disruption

KUALA LUMPUR: ANCOM BHD is banking on growth opportunities stemming from the raw material supply chain disruption in China as well as expectations of better climate conditions for the year.

Ancom manufactures agricultural chemicals via its wholly-owned unit Ancom Crop Care Sdn Bhd (ACC) and is also involved in the production and distribution of industrial chemical products through its 47%-owned listed entity Nylex (Malaysia) Bhd.

Speaking at a media briefing yesterday, Ancom group CEO Lee Cheun Wei noted that purchasers of agrichemical supplies are shifting away from being over-reliant on China’s supply.

This is due to the many uncertain policies in China that create an inconsistent stream of supply.

“These policies include registration, environmental standard, explosion incidents and the relocation of factories outside of Jiangsu — all of which interrupt the supply chain.

“Ancom is in a prime position to capture this opportunity, given the small number of players in the global market,” he said.

On the impact of Covid-19, Lee said the group can tide over a temporary supply interruption for one to two months.

This is due to the 2019 year end raw material stockpile that was accumulated in anticipation of a slowdown in supply during the Chinese New Year.

“However, beyond April to May, we may have a hard time dealing with the interrupted supply of raw materials from China.

“This will depend on how quickly the petrochemical and polymer plants in China can resume operations,” he said.

Almost 60% of ACC’s raw materials are sourced from China, amounting to an annual purchase value of RM100mil.

For the first half of the financial year ending May 31, 2020 (FY20), Ancom registered a net profit of RM1.94mil, which was a 78% year-on-year decline, dragged by losses from the group’s media business, Nylex, and high corporate costs.

Ancom is optimistic of a recovery in the second half of calendar year 2020, particularly for its agricultural chemicals segment, which was largely impacted by the severe flooding in the US as well as severe drought in Australia and South Africa.

Going forward, another growth potential for the group will come from the development and manufacturing of four to five new active ingredients from its upcoming plant in Klang, which will bring its portfolio of active ingredients to 10.

The 70,000 sq ft manufacturing facility is estimated to complete construction by the third quarter of the year, which would help ACC maintain its compound annual growth rate of 25% in revenue.

Source: TheStar