This article first appeared in The Edge Financial Daily, on January 27, 2016.

KUALA LUMPUR: EKA Noodles Bhd, which posted a net loss of RM15.29 million for the 15 months ended Sept 30, 2015, expects to return to the black in the financial year ending Dec 31, 2016 (FY16), driven by its new liquid fructose venture, its group managing director Datuk Seri Chin Seak Huat said yesterday.

He  is optimistic about the new diversification, as it will provide the rice vermicelli maker with an additional source of steady income.

Chin, the single largest shareholder of EKA with a 13.88% stake, said the production of liquid fructose presents a good business opportunity, due to the new product’s wide industrial applications and ready market in the Asean region, as well as higher profitability margins and lesser competition, compared to its existing product range.

He also sees EKA benefiting from the ready supply of broken rice in the northern region, as well as the ready demand from the processed food and beverage industries in Malaysia, and surrounding Asean countries for liquid fructose.

Additionally, Chin said rice protein powder, a by-product of liquid fructose production, can also be used as raw material for the production of animal feed and therefore is expected to have wide ready markets in Malaysia and surrounding Asean countries, in view of the sizeable agricultural and aquaculture industries.

On Jan 18, EKA announced a memorandum of understanding (MoU) with China’s Anhui HuiJia Biological Science and Technology Co Ltd (HuiJia) for the transfer of technology for the production of liquid fructose and rice protein powder.

Under the MoU, HuiJia will provide the technology transfer and support in producing liquid fructose in accordance with the needs of EKA’s business, while EKA will provide the relevant market information to HuiJia to facilitate the technology transfer.

Chin said the two companies are expected to sign a definitive agreement after the Chinese New Year next month.

When asked about the liquid fructose business’ potential boost to EKA’s earnings, Chin said it is still in the process of estimating the costs and production capacity of the proposed production line.

For the 15 months ended Sept 30, 2015, the group posted a revenue of RM82.86 million.

“One of the major challenges we face is [a] higher-cost environment. For instance, under Budget 2016, the minimum wage for workers in the private sector is set to increase from [the] current RM900 to RM1,000.

“Nonetheless, we have embarked on our cost-cutting initiatives to improve operational efficiency, and reorganised our sales team to boost local and international sales. With these measures and our new venture, we hope to break even in the fourth quarter of 2015 and return to the black in FY16,” said Chin.