Please visit GCB Group at FIE 2019 (03-05 Dec 2019), Paris Nord Villepinte, Booth 6P70 (Hall 6)

Going For Listing: Taking Guan Chong to next level

Date : 10 April 2005

Manufacturer of cocoa-derived food in-gredients Guan Chong Bhd (GCB) is looking to raise roughly RM38.5 million from its listing on the Main Board next week.

According to the company’s managing director Brandon Tay Ho Lien, the listing would help elevate GCB to the next level, in addition to being a fund-raising exercise for the company.

GCB plans to use the largest portion — some RM20.8 million — for its expansion programme, which will stretch over the year. Of the balance, the company will use RM13.8 million for working capital and RM1 million for the purchase of equipment for research and development (R&D), while RM1.4 million is to be put aside for the repayment of bank borrowings. The remaining RM1.5 million will be used to finance estimated listing expenses.

GCB has come a long way from its humble beginnings in the early 1980s, when it was known as Guan Chong Food Industries Sdn Bhd. Its principal activity was the trading of cocoa beans.

The company’s roots are in Parit Jawa, Johor, but it operates out of its main plant in Pasir Gudang at present. Figures from the company show that for 2004, production capacity in terms of cocoa beans was 53,000 tonnes.

Today, GCB manufactures and exports its four main products, namely cocoa liquor, cocoa butter, cocoa cake and cocoa butter to such multinational corporations as Masterfoods Australia New Zealand, Atlantic Cocoa Co and General Cocoa Co. The products are marketed under the company’s own brand name of “Favourich” and it exports 94.8% of its products. The remaining 5.2% is consumed by the local market.

Most of GCB’s exports are to Europe (35.47%), followed by Asia (33.83%) and North America (24.45%).

Since the company fully imports its raw materials in either dollars or pound sterling, it faces foreign exchange risks. However, says Tay, because GCB also exports in these two currencies, it creates a natural hedging effect that acts as a buffer against exchange rate fluctuations.

A look at GCB’s profit and loss statement reveals that revenue has been increasing steadily over the years — in FY2002 ended Dec 31, GCB posted total revenue of RM220.3 million, which went up to RM370.9 million in FY2003. Likewise, net profit almost doubled in those two years from RM7.4 million in FY2002 to RM14.8 million in FY2003.

For the 10-month financial period ended Oct 31, 2004, revenue was RM274.6 million and net profit RM11.8 million.

Looking ahead, the company entered into a joint venture with Singapore sugar company SMC Food 21 Pte Ltd (SMC) last year. This resulted in Enrich Mix Sdn Bhd, which specialises in the blending of cocoa-derived products with other food ingredients, a relatively new venture for the company. However, it is one for which Tay has high hopes.

Also included in GCB’s future plans is a slight shift in focus from the manufacture of cocoa cakes to cocoa powder. According to Tay, the reason for this is that cocoa powder commands higher margins and has more demand from manufacturers than cocoa cake.

In its prospectus, the group has forecast that it expects to pay a dividend of 2.08 sen for FY2005.