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Thursday, May 25, 2017

MBM Resources eyes to turn auto parts manufacturing unit profitable by end-2017

Anette Appaduray / theedgemarkets.com
May 25, 2017 14:21 pm MYT

KUALA LUMPUR (May 25): MBM Resources Bhd hopes to turn its loss-making automotive parts manufacturing division profitable by the end of the current financial year ending Dec 31, 2017 (FY17), by improving the efficiency of its alloy wheel plant operations.

According to the auto retailer and parts manufacturer's president and chief executive officer Nor Hadi Daud, losses incurred at its alloy wheel plant has put a drag on the auto parts manufacturing segment's performance.

Despite higher revenue and production in the first quarter ended March 31, 2017 (1QFY17), the division had incurred higher losses by RM1.8 million to close at a loss of RM6.3 million primarily due to the losses incurred at the alloy wheel plant.

"Our auto parts manufacturing losses were mainly driven by [the losses incurred at] our alloy plant operations, which currently has a high rejection rate [of alloys]," he told reporters after MBM Resources' annual general meeting here today.

The auto parts manufacturing division's pre-tax loss widened by 40% to RM6.28 million in 1QFY17 from RM4.49 million in 1QFY16.

To address the issue, Nor Hadi said the group has managed to reduce the rejection rate of its alloy products at the alloy wheel plant by half from almost 40% in 1QFY17.

The group is targeting to further lower the rejection rate to 10% over the next six months in order to improve the cost management of the plant.

"Reducing the rejection rate of our alloys is not something that can be done overnight, particularly when reducing the percentage closer to 10%, but we target this to be done over the next six months," Nor Hadi added.

MBM Resources shares ended the morning session down 2 sen or 0.83% at RM2.40 today, with 15,700 shares done, bringing a market capitalisation of RM953.76 million.

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