This article first appeared in The Edge Malaysia Weekly on August 5, 2024 - August 11, 2024

In the crowded landscape of the country’s consumer products and services sector, one company has quietly outshone its peers: trading and distribution outfit Harrisons Holdings (M) Bhd (KL:HARISON). Over the past few years, Harrisons has been delivering both revenue and profit growth, even during the disruptive pandemic.

The company, which took home the Highest Growth in Profit after Tax over Three Years award under the consumer products and services sector two years ago for stellar profit growth between 2018 and 2021, has continued to see net profit growth, charting record profits and revenue yearly from 2021.

Net profit for its fiscal year ending Dec 31, 2022 (FY2022), jumped 60% to a new high of RM66.7 million from RM41.7 million in FY2021, as revenue broke the previous year’s record, climbing to RM2.17 billion from RM1.93 billion. For FY2023, net profit reached a new peak of RM67.4 million, as revenue climbed further to RM2.26 billion.

Even without a dividend policy, the company has been making decent payouts. From annual payouts of 20 sen per share in FY2019 and FY2020, its dividend payout rose to 30 sen per share for FY2021, and then 50 sen per share in FY2022 and FY2023.

In tandem with its strong profit growth and increasing dividend payouts, Harrisons’ share price charted significant growth over the last three years. It jumped from RM3.46 (adjusted) on March 31, 2021, to RM9.09 by March 31, 2024. For an adjusted compound annual growth rate of 37.96% over the three years. This clinched the company the award for Highest Returns to Shareholders Over Three Years at The Edge Malaysia Centurion Club Corporate Awards 2024.

Harrisons is 42.33% controlled by Bumi Raya International Holding Co Ltd, which has its roots in Indonesia and is primarily involved in the trading of consumer, engineering and chemical products, as well as building materials. It is linked to the Bumi Raya Utama Group.

Harrisons’ strong performance over the years can be attributed to its diversified portfolio. The group’s income is mainly derived from the marketing, sales, warehousing and distribution of consumer, building materials and engineering products, fine wines, agricultural and industrial chemicals, the operation of shipping/logistics, travel agencies and retailing.

These are grouped into three main segments: (i) trade and distribution, which comprises mainly fast-moving consumer goods (FMCG) in Sabah and Sarawak, and building materials and engineering products in Peninsular Malaysia; (ii) Retail segment, under which it sells Famous Amos cookies and Komonoya products; and (iii) shipping and others.

This diversity not only provides multiple revenue streams but also mitigates risks associated with dependency on a single product line or market segment, the group’s latest annual report shows.

Take FY2023 as an example. When revenue from the distribution of FMCG dipped by 0.34% or RM5.97 million, its building materials and engineering products registered over 30% growth in revenue or RM94.69 million. This also more than offset top-line weaknesses in shipping, industrial and agricultural chemical products.

Technology has also been a key ally. Harrisons, which has an extensive network of 27 branches and 47 warehouses located throughout Malaysia — 13 in Peninsular Malaysia, nine in Sabah and five in Sarawak — has invested in upgrading its systems to handle large transaction volumes more efficiently.

This is probably why, despite the challenges of increased finance costs and a slight drop in gross profit margin, the company’s profitability has remained resilient — a noteworthy feat given the broader economic uncertainties and competitive pressures in the market.

Looking ahead, Harrisons expects slow global growth, rising prices of goods and local affordability to impact the domestic economy. “We also appreciate that FMCG (segment) is more resilient and less impacted by moderate price increases. As such, we remain confident that the medium- to long-term outlook of our trading and distribution business remains positive and is well positioned to grow,” it says in its annual report.

The group sees “moderate growth” in its core trading and distribution business, which it anticipates will move in tandem with Malaysia’s expected gross domestic product growth of 4% to 5% in 2024.

“We see increasing competition in our FMCG distribution business in East Malaysia. We are also faced with challenges of increasing operational costs. We will continue to focus and leverage on the strength of our comprehensive network of 27 branches to grow our business. Our 1,900 experienced workforce will continue to be upskilled and motivated to meet the challenges and demands of the industry,” it adds.

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