This article first appeared in The Edge Financial Daily, on April 18, 2016.

KUALA LUMPUR: SKB Shutters Corp Bhd expects to swing back into the black for the financial year ending June 30, 2016 (FY16), after reporting losses for the previous three years, on the back of improved demand for shutters.

The roller shutter and steel door maker’s executive director, Michelle Sin Siew Huey, said the loss suffered in FY15 was mainly attributable to currency fluctuation and a change in revenue recognition due to the implementation of the goods and services tax (GST).

“Since the implementation of [the] GST on April 1, 2015, which was our 4QFY15 (fourth quarter of FY15), our revenue recognition required a longer period as we needed to wait for a payment certificate from our clients before we could issue invoices. That was why our sales amount was affected during that quarter,” Siew Huey said in an interview with The Edge Financial Daily.

“For export businesses, people were adopting a wait-and-see approach when it came to procurement because it was not only the ringgit that was depreciating. Other Southeast Asian currencies were depreciating as well, while our sales are usually US dollar-denominated.  

“But this year (FY16), we are seeing projects being kicked off,” she added.

Close to 40% of SKB’s revenue came from overseas sales, according to the group’s FY15 annual report.

Siew Huey said SKB cannot depend on existing customers alone to remain sustainable in the marketplace, especially with rising operating costs due to higher raw material prices.

Labour costs are also set to rise further with the implementation of the new minimum wage of RM1,000 per month for workers in Peninsular Malaysia with effect from July.

Siew Huey, an accountant by training, said it is therefore crucial for SKB to grow its top line further by widening its product offerings to tap into new market segments.

“We are exploring [the] ASRS (automated storage and retrieval system) now, as we see huge potential in demand for automated warehouses, particularly as labour and operating costs are increasing over time,” she said.

The ASRS is a type of warehousing system that consists of a variety of computer-controlled systems for automatically placing and retrieving stocks from defined storage locations in a warehouse.

Prior to this, SKB’s exposure to warehousing businesses was limited to supplying racking equipment, which accounted for about 30% of the group’s total revenue.

SKB endured a higher net loss of RM588,125 for FY15, compared with RM227,063 for FY14, while revenue declined by 7.06% to RM51.16 million from RM55.04 million.

“As a group, we saw [a] slower growth in revenue for FY15. However, this has [been] quickly readjusted in FY16, as we now see an increase in market acceptability of the current economic situation,” said Siew Huey.

For 2QFY16, SKB posted a net profit of RM597,000, up 20.12% compared with RM497,000 in the previous corresponding quarter. Revenue rose 5.39% to RM15.81 million from RM15.01 million.

However, for the first half of FY16 (1HFY16), SKB’s net profit was down 64.9% to RM604,000 from RM1.72 million in 1HFY15, while revenue was flat at RM28.51 million compared with RM28.52 million in 1HFY15.

Another executive director of SKB, Melissa Sin Tze Yi, is nonetheless confident that the group will report a profit for FY16, as demand for durable products has been increasing.

“In the past three years, we have seen increasing demand for fire-rated steel doors. We have been educating the market on the advantage of using steel doors instead of timber doors, so now we are seeing the results coming back to us,” she said.

She believes that after SKB’s expected turnaround in FY16, the group’s top line and bottom line will continue to grow by double digits in FY17.

“Many projects that were on hold are now back in discussion. We foresee FY16 revenue to increase given the positive market sentiment and because a few of the projects that we are bidding [for] are promising,” she said, declining to reveal further details of the jobs that SKB is tendering for.

SKB’s share price closed unchanged at 51.5 sen last Friday, with a market capitalisation of  RM20.6 million.