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home > Annual Report 2013: Chairman’s Statement

Dear Fellow Shareholders,

The global economic situation remained largely cautious in 2013, moulded chiefly by the sluggish recovery of the Eurozone economy, ongoing uncertainty in the United States, and a slowdown in the manufacturing sector in the People’s Republic of China.

The bleak outlook in these key economies dampened domestic sentiment somewhat. Malaysia’s Gross Domestic Product (GDP) noted a 4.7% growth in 2013, compared with 5.6% a year ago.

Against such a discouraging external environment, however, Daibochi Plastic and Packaging Industry Berhad (Daibochi) recorded a commendable year under review, stemming from the continued sales expansion to food and beverage (F&B) manufacturers coupled with our efforts in product innovation and operations enhancement.

I am pleased to note that Daibochi strengthened its reputation as a flexible packaging provider of choice for multinational companies (MNCs) in the Asia Pacific region. This was amply demonstrated by the higher sales orders from existing customers, and in our success in securing new reputable MNC customers in 2013.

These positive developments helped the Group post another year of record financial performance, demonstrating double-digit growth in group revenue and net profit. This milestone would not have been possible without the dedication and hard work of our team of employees; we are proud of their contributions towards achieving the Group’s goals.

Our stellar financial report card was not in vain, for it played an integral role in Daibochi accomplishing a record market capitalization of RM472.5 million by end-2013. This vast improvement from the RM290.3 million market capitalization as at end-2012 is testimony of the enduring support for the Group from the local and regional investment community.

Therefore, it is my privilege to present to you the Annual Report and the audited financial statements of the Group and Company for the financial year ended 31 December 2013 (FY2013) on behalf of the Board of Directors.

Financial Review

Daibochi’s top line reached a new record of RM310.3 million in FY2013 – charting a respectable 11.3% increase year-on-year from RM278.8 million in the previous corresponding period.

Revenue from our core business of flexible packaging rose 9.2% to RM301.1 million in FY2013, compared to RM275.8 million previously. This was attributable to higher sales orders from existing customers in the F&B and Fast Moving Consumer Goods (FMCG) sector, as well as fresh contributions from newly-secured clientele.

The manufacturing sector in Malaysia had a challenging start to the year under review, as the minimum wage policy came into effect in January 2013. Fortunately, Daibochi had already adhered to the suggested minimum wage prior to the implementation of the policy, and was thus largely insulated from a drastic hike in our wage bill.

Even so – and perhaps more significantly – the management continued to place greater emphasis on improving employee productivity as a means to enhance operational efficiency. These steps, such as ensuring waste control at production floor-level, bore fruit in FY2013, and helped in enhancing overall returns for the Group.

The Group’s property segment contributed the balance RM9.2 million revenue, versus RM3.0 million a year ago. The higher contribution was primarily due to the sale of a piece of commercial land during the year under review. The Board would like to reiterate our commitment to phasing out the property development business in order to focus our resources towards further expanding the flexible packaging segment.

Group profit before tax expanded 7.2% to RM36.4 million from RM33.9 million previously. The relatively slower rise in PBT compared to revenue growth was due to slight margin compression resulting from higher raw material costs, coupled with time-lag in cost pass through.

Nonetheless, Daibochi ended FY2013 on a high note, with record net profit of RM27.5 million compared to RM24.6 million previously. The 11.4% increase in bottom line resulted in similar expansion in basic earnings per share to 24.2 sen in FY2013, from 21.7 sen a year ago.

From a wider viewpoint, Daibochi attained commendable compounded annual growth rates (CAGR), with group revenue climbing steadily by 7.4% over the last five years, and net profit reaching 27.5% CAGR within the same period. The accelerated growth rate in profitability is proof of the management’s success in focusing on achieving favourable product mix and enhanced operational efficiency.

The higher retained profits have led to shareholders’ equity increasing to RM162.1 million as at end-2013, compared to RM150.4 million a year ago. Group total borrowings rose to RM57.7 million from RM30.1 million previously, primarily due to investments for existing and new manufacturing plants, as well as higher working capital requirements in line with our enlarged operations.

Despite this, the Group’s net gearing level remained at a manageable 0.27 times, compared to 0.15 times at end-2012. Cash and bank balances stood at RM13.7 million as at end-2013, compared to RM7.5 million a year ago. This healthy balance sheet enables us to effectively fund our expansion as we pursue the next level of growth.


Daibochi has established a dividend policy of distributing not less than 60% of group net profits to shareholders. The dividends are to be distributed on a quarterly basis.

Daibochi declared total dividends of 15.0 sen per share in FY2013, namely three interim tax exempt dividends of 4.0 sen, 3.0 sen and 4.0 sen per share in the first, second and third quarters respectively; as well as an interim single tier dividend of 4.0 sen per share in the fourth quarter.

The Group’s FY2013 dividend payout, amounting to RM17.1 million in total, translates to 62.1% of FY2013 bottom line, thus meeting our dividend policy.

At this juncture, do allow us to record our appreciation to you – our institutional and retail shareholders – for your continuing support for the Group.

Awards for Corporate Governance and Investor Relations

Daibochi emerged the winner of the top overall Corporate Governance (CG) Award 2013 in the mid-cap category, comprising companies with market capitalization of between RM100 million and RM500 million.

Presented by the Minority Shareholders Watchdog Group (MSWG), the CG Award aims to recognize companies that have taken the initiative to raise the level of their CG practices. MSWG also revealed that the results were based on the ASEAN CG Scorecard which showcases well-governed companies within the ASEAN region, thus improving their visibility and investability.

Being affirmed for implementing Best Practices in Corporate Governance is certainly a commendable acknowledgement of Daibochi’s efforts in seeking to constantly and tangibly add value within the Company, be it in manufacturing processes, innovation, or customer service.

Daibochi is proud to receive this award, and will strive to be held in high regard by our stakeholders and the larger investing public.

Recognizing Investor Relations (IR) as one of the core pillars of Corporate Governance, Daibochi has actively engaged with the investor community to provide insight on the Group’s strategies, and established investor-friendly policies. To this end, we have organized investor briefings on a quarterly basis, maintained an updated IR portal within our corporate website, and declared a dividend policy.

Our commitment towards enabling effective two-way communication between Daibochi and the investment community has recently gained recognition from the Malaysian Investor Relations Association (MIRA).

The Group was nominated for “Best Company for IR – Small Cap” category in the MIRA IR Awards 2013. This was further complemented with the nomination of our Executive Director, Mr. Low Geoff Jin Wei as “Best IR Professional – Small Cap” category.

We certainly view these acts of recognition as indicators of industry excellence and accomplishment as we strive to deliver on our commitment towards effective investor relations and communication.

Industry Outlook & Growth Prospects

Demand for value-added flexible packaging is on an uptrend in line with increasing economic development and urbanization; as consumer affluence grows and increasingly-mobile users opt for convenience packaging. Emerging markets such as South East Asian countries therefore possess high potential for regional market expansion.

Furthermore, we are continuing to see a rising number of MNCs sourcing for flexible packaging from the South East Asian region to meet their global requirements. This surely presents a wealth of opportunities to Daibochi, even as we aim to strengthen our position as a leading regional flexible packaging provider for MNC clientele.

With these positive prospects, Daibochi intends to enter the next phase of growth via the following strategies:

  • Broadening our customer base

We intend to continuously increase our MNC customer base, leveraging on our reputation for consistent quality.

In addition to regional opportunities, we are also encouraged by the tremendous prospects in Malaysia, given the increasing number of global F&B manufacturers that have committed substantial investments to establish manufacturing bases in the country. With our track record in serving MNC clientele in the past decade, we believe we are well-positioned to capture these opportunities.

  • Improving operational efficiency

We are committed to improving operational efficiency through process improvements, and investments in state-of-the-art machinery and technology. We have yielded positive results in the recent years, and aim to better our performance going forward.

  • Increasing our production capacity

I am pleased to announce that the construction of our new manufacturing plant – Daibochi Films Complex in Jasin, Melaka was completed in December 2013. The new plant, located just 18km from our existing operations, is expected to commence operations in the early part of the second quarter of 2014. With this, Daibochi has the flexibility to streamline our operations for improved efficiency, by undertaking our metallizing and CPP film-making functions in-house.

More importantly, with the expanded manufacturing capacity, Daibochi is ready to support rising production demands from existing and new clients.

Overall, the Group expects to invest approximately RM20 million in FY2014 to fund purchases of new machinery in the existing and new plants.

  • Sustaining our Research & Development (R&D)

In terms of product development, we are heartened that our in-house innovations have been very warmly received by F&B manufacturers. We are pleased that our high-speed film – designed to increase output – has been commercialized with a few customers to date. At the same time, our two-layer flexible packaging – to help customers achieve cost-savings – is currently undergoing trial runs with various clients. We are confident of their take-up in the near future.

The positive headway made in our product developments are certainly a boost to our R&D team, and cements our resolve to continue such product innovations that bring tangible benefits to our customers.

We view this as a key competitive advantage that positions us positively vis-à-vis regional peers.

The years ahead hold promise of an exciting future for Daibochi. While we are grateful for the partnership and contribution of various parties in our journey thus far – including valued customers, suppliers, business associates, investors and Government authorities – we hope to continue counting on your support for mutual growth going forward.


Do allow me to extend my appreciation to the team of committed employees, performance-focused management and fellow Directors for working hand in glove to propel Daibochi to its record performance in FY2013. It is my hope that our success thus far will motivate Daibochi to achieve even greater heights in the coming years.


April 4, 2013

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