Johore Tin to go big into the dairy business
PETALING JAYA: Johore Tin Bhd is focusing on rebranding and harnessing its in-house dairy products in its effort to become a reputable local and international brand, says chief executive officer Edward Goh Swee Wang.
Johore Tin to date is believed to be the only local company involved in the manufacturing and processing of milk powders as well as condensed and evaporated milk.
It also produces tin cans for the confectionery right down to the paint and chemicals businesses.
According to Goh, the group is constantly looking at new investment opportunities, which are related to its existing tin and dairy businesses.
“We plan to allocate a higher capital expenditure (capex) amounting to RM15mil this year compared with RM8mil last year.
“To further grow our business, we will explore possible investment opportunities, but nothing is firm right now, ” Goh told StarBiz recently.
During a recent webinar meeting hosted by BIMB Securities, Goh highlighted on the group’s big expansion into Mexico.
The new Lagos de Moreno plant, in which Johore Tin has a 43% stake, is equipped with dairy and tin production lines.
Johor Tin producers containers
“The plant is well-positioned with a strategic geographical presence in the United States, Mexico and South American markets, ” said BIMB Securities in its latest report.
Johore Tin, which commenced the construction of the plant at the end of 2018, started commissioning for the packaging lines in November last year.
The milk production for the Mexico plant is expected to kick off in the first half of this year, added the research unit.
During the webinar, Goh estimated that the capex allocation for the Lagos de Moreno-located factory at about RM50mil.
The new plant will produce condensed milk products with a production capacity of about 120,000 tonnes per year.
“It is expected to achieve 30%-50% utilisation rate by the first year of its operation, ” said the research unit.
Subsequently, the plant is expected to achieve 60%-70% and 80%-90% in the second and third year of its operation respectively.
This will be supported by the fresh orders from the neighbouring countries near Mexico.
Moving forward, Johore Tin’s management expects the total combined dairy annual production capacity to reach 280,000 tonnes per year, while the production capacity for tin cans is estimated at 48,000 tonnes per year.
Goh hinted that the Mexican venture would not be the last joint venture with an overseas company in the group’s effort to boost its export footprints.
To date, dairy-based products constitute about 80% of the group’s food and beverage exports.
“By having a factory in Mexico, Johore Tin is able to deliver to key customers such as Walmart within a shorter period.
“With its major partner Calkins, Burke and Zannie de México, the house brand Able Farm is ready to roll out the products by leveraging on the extensive distribution network with a ready market to be served, ” BIMB Securities pointed out.
Furthermore, the company is able to reduce its tax rate due to the zero tax rate via the Free Trade Agreement applied on condensed/evaporated milk exports from Lagos de Moreno in Mexico to neighbouring countries such as the US and South America.
Johore Tin also plans to further strengthen its long-term and stronger relationship with Calkins, Burke and Zannie de México.
BIMB Securities is of the view that the establishment of the new Mexico plant would provide reliability and a sustainable dairy product supply to the key customers.
Currently, about 70% of the dairy market in Mexico is controlled by Nestle’s premium products.
However, Johore Tin’s management expects that its Able Dairies products are expected to gain ground in the huge and largely untapped low-to-medium segment.
Johore Tin is a component of the FBM Small Cap Index with a market capitalisation of about RM565mil.
Last Friday, its share price rose three sen to close at RM1.82.