Malaysian firms hit by Thai floods

Malaysian companies that have operations in Thailand are not spared from the country’s worst flood in decades.

The flood, which has sunken a land mass around 20 times the size of Singapore, has prompted some public listed companies in Malaysia to announce the shutdown of their operations in Thailand.

Filings with Bursa Malaysia yesterday showed that Eng Teknologi Holdings Bhd (Eng Tek), Fraser & Neave Holdings Bhd (F&N), Notion VTec Bhd and D’nounce Technology Bhd in Thailand had succumbed to the flood, with the extent of damage yet to be determined.

“Things are not certain at this point of time, but we will ascertain the quantum of the impact,” Notion VTec chairman and executive director Thoo Chao Fah told The Edge Financial Daily. “Everyone will be affected there. We have not received any feedback from our customers and suppliers yet,” adding that people have been denied access to the affected areas.

Two counters affected by the flood took a hit on Bursa Malaysia yesterday following the release of announcements. F&N was the third largest loser on FBM KLCI yesterday. It dropped eight sen to RM16.22 while Eng Tek dropped five sen to RM2. Notion VTec added one sen to RM1.56 while D’nounce remained unchanged at 35 sen.

On Eng Tek, it is worth noting that the closing of RM2 yesterday was 50 sen lower than the takeover offer price made in July 2011 by its major shareholders. To recap, the shareholders via TYK Capital Sdn Bhd had proposed to acquire the entire business and undertakings of Eng Tek for an aggregate purchase consideration that is equivalent to RM2.50 per share.

Severe flooding in Thailand had disrupted industrial production, especially in the province of Ayutthaya, one of the worst affected areas. It was reported that companies such as Honda Motor Co Ltd, Nikon Corp and Toyota Motor had suspended their operations in Thailand.

“This will be disheartening for Thai auto and electronics manufacturers who have only just recovered from the Japan-related supply chain disruptions,” Fred Gibson, Moody’s Analytics associate economist said in a research note yesterday.

The research house expected the flood, which had battered 27 of Thailand’s 77 provinces since late July, to cost the Thai economy US$1.9 billion (RM5.9 billion). Despite rising downside risks to the Thai economy, Moody’s forecast for Thailand’s near-term GDP growth remained unchanged at 3.7% year-on-year (y-o-y) for 2011 and 3.9% y-o-y for 2012.

Hard disk drive manufacturer Eng Tek said its wholly owned subsidiaries Engtek (Thailand) Co Ltd and Altum Precision Co Ltd, both located in Ayutthaya, had temporarily shut down their operations due to severe flood condition.

”The company and its management team are in the process of determining the extent of the damage which the management believes is adequately covered by its insurance policies,” said Eng Tek. “The management team is currently working out alternative plans to minimise disruptions to their customers.”

In terms of F&N, its dairy product manufacturing facilities in Ayutthaya, under F&N Dairies (Thailand) Ltd, a wholly owned subsidiary, were flooded yesterday morning and had ceased production.

“At this time it is not possible to assess the extent of the damage,” said F&N. “The group will provide an update on the effect of the flood, after employees regain access to the plant, and is able to carry out an assessment of the damage and lead time for obtaining replacement parts, components, repairs and restoration of supplies.”

Dairy product business made up some RM1.53 billion or 52% of F&N’s total revenue of RM2.92 billion for the three quarters ended June 30. It contributed some 28% or RM106.27 million of F&N’s total operating profit of RM378.45 million for the nine-month period ended June 30.

D’nounce, an electronic products and consumables maker, yesterday announced that the manufacturing facilities of one of its subsidiaries in Thailand, ISCM Technology (Thailand) Co Ltd located in Ayutthaya, were affected by the flood last Sunday morning. Its manufacturing facilities in Ayutthaya are principally involved in visual and mechanical inspection services, and tray and component washing.

Notion VTec also announced that its subsidiary in Thailand, Notion (Thailand) Co Ltd (Notion Thailand), had stopped operations due to the severe flooding in Ayutthaya. Its principal business in Thailand is the manufacture of certain camera components including machining, anodising treatment as well as sub-assembly works. Notion added that one of its camera customers was also based in the vicinity and its factory had temporarily stopped operations. Notion’s main customer in Thailand is Nikon Corp.


Written by Yantoultra Ngui Yichen, theedgemalaysia.com