07 Feb 2023 PCB expanding into Oceania market

KUALA LUMPUR: Glass mineral wool insulation maker PGF Capital Bhd (PCB) is making stronger strides in expanding to the Oceania region and establishing three new warehouses, which will be fully operational this year.

The company have already set up its regional headquarters in Melbourne in the third quarter (Q3) of 2022 and has been in operation for more than three months.

The second distribution hub will be in Brisbane, which will be fully operational on March 1, 2023, while the third distribution hub will be in Perth, which will be fully operational on May 1, 2023.

PCB’s fourth distribution hub will be in Sydney and is slated to be operational in the third quarter (Q3) of 2023.

“With our expansion plan, we are targeting a growth rate of 30 per cent per annum for the first three years in Oceania.

“The cost will be fully recovered in the financial year (FY) 2026 as most of the costs are operational expenditures. Moreover, the capital expenditure is relatively low as the warehouses are on long-term leases,” executive chairman Fong Wern Sheng told The New Straits Times.

Aside from the Oceania region, Fong is also looking to expand to South Korea as the country has experienced several massive fires in subway stations, and residential and multi-purpose buildings, causing large casualties due to the use of foam insulation made from petroleum-based chemicals.

“With the revision of the building code, the use of such flammable materials was banned in November 2019.

“As glass mineral wool is non-combustible, we believe there will be a huge demand for our products in the country.

“While we have to modify our production line to meet the requirements of customers from South Korea, we have begun the process and will be able to supply to them within this year,” Fong said.

When asked about the capital expenditure allocation the company is setting aside this year, Fong said RM33 million had been allocated for various growth initiatives.

“The fund will be channelled to increase the capacity of our insulation segment, building an eco-tourism resort and increasing the number of planted trees in our durian plantation.

“The funding will come from irredeemable convertible preference shares (ICPS) conversion, internally generated fund and banking facilities,” he said.

In 2020, PCB ventured into agrotourism through durian business and hatchery for freshwater aquaculture in Tanjung Malim, Perak.

PCB, through its subsidiary, Golden Approach Sdn Bhd (GASB), owns approximately 1,311.15 acres of leasehold land in Tanjong Malim.

The land, which has been developed for agriculture and aquaculture, is approximately 15km from Tanjung Malim electric train service (ETS) station and adjacent to Proton City.

Cash crops such as mangosteen, kumquat and passion fruit have also been planted and are expected to be harvested in the next few months.

“The 50-acre freshwater aquaculture centre was completed in April 2021. It has an integrated indoor breeding and grow-out facility with an annual fish fingerlings capacity of five million pieces per year.

“The activity of aquaculture hatchery and the sales of fish fingerlings commenced in FY22 and have contributed to the company’s bottom line,” Fong said.

He said revenue contribution from cash crops like kumquat and passion fruit would not be significant, and they will support the cash flow of the company’s durian plantation.

“We will only see significant revenue contribution from this segment once the durian trees are ready for harvesting from 2025 onwards,” Fong said.

PCB’s subsidiary Diamond Creeks Eco Farm Sdn Bhd (DCEF), which was incorporated on  December 1, 2020, carries out the plantation of tropical fruits, primarily durian, mainly Musang King, and other tropical fruits such as mangosteen, kumquat and passion fruit.

A total of approximately 200 acres was identified for durian plantation.

Durian trees were planted on the land in early 2022.

PCB’s net profit jumped to RM2.03 million for its Q3 ended November 30, 2022, 52 times the RM39,000 it made in the same quarter last year, thanks to higher production output and higher sales revenue from its insulation business.

Revenue for the quarter grew 31.29 per cent to RM17.75 million from RM13.52 million.

Fong said the earnings increase was due to a comparison to a relatively low base year, with the pandemic, disruption of workflow due to quarantine and so forth, all contributed to a low growth rate in the previous financial year.

“We anticipate a steady double-digit annual growth rate in the insulation segment as we have begun our expansion plans in the Oceania region, where our market is relatively small at this moment.

“Therefore, the room for growth is huge. The demand for insulation from this region continues to be promising as great emphasis is placed on increasing the energy efficiency of buildings.

Further, the revision of the National Construction Code (NCC) in Australia and of the Building Code in New Zealand, which will be implemented this year, will contribute to the increase in demand for building insulation materials.

“This revision will happen every three years. With the constant increase in demand, we expect steady growth for the long term,” Fong said.

On another business segment, PCB, in June 2020, commenced its production of melt-blown non-woven fabric for the face mask application.

The high-efficiency filtration media is a non-woven sheet made of special ultra-fine polypropylene fibres and is the key material used to produce N95 (FFP2), N99 (FFP3), KN95, and 3-Ply surgical face masks.

When asked what this business’s current status is as the demand for face masks has dwindled, Fong said the demand for melt-blown fabric has normalised, but it is still higher than the pre-pandemic level.

“The market has also become less competitive as many of our local and foreign competitors have ceased their operations since last year, which has led to a slight increase in sales for us.

“To increase the utilisation of our plant, we are looking into other applications such as air filter media, oil absorbent pad and breathable membrane,” he said.

Fong said the breathable membrane project had been fast-tracked over the other applications as it complements the company’s glass wool insulation in the Oceania region.

The breathable membrane is used to form a weather barrier in the construction of roofs and external walls. This effective vapour permeable solution helps prevent dampness, mould and even timber rot to prevent the weakening and other associated problems within the building structure and the health of the occupants.

“Throughout the rest of Oceania, many builders who understand this technology will insist on using breathable membrane over the traditional foil.

“We are in the final stage of setting up a plant for this application and expect that it will contribute positively to our top line in FY24,” Fong said.