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Eonmetall Group Bhd is optimistic about hitting double-digit revenue growth in 2022 as the manufacturer of steel storage and racking systems is benefitting from the global eCommerce boom.
Group managing director and CEO Yeoh Cheng Chye says wholesalers, logistics and real estate investment trusts are expanding and building new warehouses.
“There is huge overseas demand for our storage solutions such as industrial steel racks, and we export 60% of our steel products to Asia, Australia, Middle East and the United States.
“This is driven by the eCommerce industry’s shift to shorten delivery lead time to consumers,” he says at a briefing in Kuala Lumpur.
He also points out that the group’s steel racks command double-digit margins due to its in-house manufacturing capability and production efficiency, and serve some renowned global brands.
Yeoh says he is optimistic about seeing a 20% to 30% growth in both turnover and earnings in 2022, noting that the group saw good results in the first quarter and is likely to see “the momentum continued in the second and third quarters.”
“I believe the second and third quarters would still be as good as the first quarter. But for the fourth quarter, rate hikes by central banks worldwide and other market uncertainties may pose some downside risks,” he says.,
While steel prices have declined in recent months, which Yeoh says is good for the group as its production cost also goes down, he remains wary as price volatility could impact the group’s cost of production and operating margins in the future.
“A rise in raw material prices is bad for us, as we are selling end products and there is a limit regarding how much we can increase our prices.
“For example, if your raw material price increased by 20%, you cannot raise your end-product prices by 20% also. No end user is going to buy from you – they can wait, right?
“It’s different if you are in the up or midstream industries; you can adjust your prices in line with the cost of raw materials. But we can’t,” he explains.
Penang-based Eonmetall, which started operations in 1990, is also a niche player in the designing and fabrication of metalworks and palm oil-related machines.
Eonmetall’s founder and executive director is Datuk Goh Cheng Huat, who is also an executive director of Leader Steel Holdings Bhd. Both companies are listed on the Main Market.
Leader Steel, also based in Penang, manufactures steel products like pipes and tubes, hollow section, sheets, flat bar, angle and square bars, and plates as well as sources and exports steel making minerals (iron and manganese ore).