GEORGE TOWN: Chin Well Holdings Bhd
expects flat growth for the financial year ending June 30, 2024 (FY24) due mainly to weakening demand amidst soaring inflation in Europe.
Group executive director Tsai Chia-ling told StarBiz that Europe, a primary contributor to its revenue and profit margin, would generate only about 30% of the group’s FY24 income compared to 32% in FY23 and 43% in FY22.
Chin Well sells industrial fasteners to Europe’s construction and renovation industry.
“High interest rates and soaring building costs have drastically reduced the demand for new buildings in Europe.
“Home buyers and firms are reluctant to invest in new premises due to the weaker economy, high interest rates and increased building costs.
“We expect little or even zero growth from Europe for FY24,” Tsai said.
According to Tsai, the demand for renovation and maintenance – an essential component of the construction industry – is less affected by inflation.
“We may even see the demand for renovation and maintenance increase during an economic crisis.
“For instance, homeowners unable to sell their houses often opt to enhance their existing living spaces to meet their changing housing needs.
“As a result, this can lead to an increase or at least sustained demand for the renovation and main sector,” Tsai added.
In the second quarter ended Dec 31, 2023, Chin Well’s net profit plunged to RM254,000 from RM8.51mil a year ago while revenue fell to RM83.58mil from RM111.46mil.
For the six months of FY24, the group sold RM50.9mil worth of fasteners to Europe compared to RM99.73mil registered for the corresponding period in 2023.
Malaysia is a significant contributor to the group’s revenue.
For the six months just ended, Malaysia generated RM49.1mil for the group, making it the top Asian contributor.
Malaysia is expected to generate about 30% of the group’s revenue in FY24 compared to 33% in FY23 (28% in FY22; 32% in FY21).
Since the outbreak of the Russian-Ukraine War, the group’s fastener output per annum has declined to 70,000 tonnes in FY23 from 100,000 tonnes in FY22. For the six months just ended, its output was 28,000 tonnes compared to 35,000 tonnes recorded in the same period a year ago.
According to an Expert Market Research report, the construction industry in Europe is poised for sustained expansion.
It is projected to grow at a compounded annual growth rate or CAGR of 4.9% between 2024 and 2032, ultimately surpassing a valuation of around US$4.23 trillion by 2032.
The European construction market size attained a value of approximately US$2.75 trillion in 2023.
“According to European construction industry statistics, in 2023, the European Commission announced its plan to invest �6.2bil in 107 selected transport infrastructure projects in European Union grants from the Connecting Europe Facility, which can increase the Europe construction market value.
“More than 80% of the total funds allotted will be directed towards projects aimed at improving the sustainability and efficiency of critical transportation networks, such as railroads, inland waterways and marine routes of the trans-European transport network,” the report says.
