KOTA KINABALU (Oct 22): Beverage manufacturer Life Water Bhd said it will not be affected by the upcoming sugary drink tax increase, as its carbonated drinks have sugar contents below the taxable threshold, according to executive director Chin Lee Ling.
As detailed in Budget 2025, the government plans to increase the excise duty rate for sugar-sweetened beverages to 90 sen per litre next year, from 50 sen currently. The levy is imposed on ready-to-drink beverages containing more than five grammes of sugar per 100ml.
Life Water is a beverage manufacturer specialising in the manufacturing and distribution of drinking water and carbonated drinks, primarily serving the Sabah market.
Carbonated soft drinks contributed 16.5% or RM27.46 million of its total revenue of RM166.53 million while drinking water contributed the most at RM138.72 million.
Increase efficiency and pass on increased cost to counter wage hike
On the planned minimum wage hike next year, managing director Liaw Hen Kong expects this measurement to have a minimal impact on its bottom line going forward.
The country’s monthly minimum wage will be raised to RM1,700 from RM1,500, effective from Feb 1 next year.
Nonetheless, he is confident the group can pass on the cost increases to customers, coupled with leveraging its economies of scale to drive efficiency to minimise the impact.
Up to 150 of its employees are subjected to the minimum wage increases. All in, the group has about 550 employees.
Increase presence in Brunei and Sarawak
The group, which derived almost 99% of its revenue from Sabah, is looking to expand its presence in Sarawak state and Brunei going forward via investing in marketing efforts. The group allocated about RM1 million to RM2 million annually for marketing and promotion purposes.
For Sabah, Liaw expects the demand for its product to be supported by increased tourist arrivals.
Overall, the group has an 11% market share in the bottled water market in Malaysia.
Life Water expects to raise RM63.42 million from the public issue, while the offer for sale will raise RM18.45 million, which will go entirely to selling shareholders.
Out of the proceeds raised from the sale of new shares, RM19 million will be used for setting up an additional drinking water manufacturing line for Sandakan Sibuga Plant 1. The company has also earmarked RM12 million to buy a drinking water manufacturing line for Sandakan Sibuga Plant 2.
The company has also set aside RM12.6 million to set up a second distribution centre in Sandakan, RM9.61 million for the expansion of existing plastic packaging facilities in Kota Kinabalu and RM4.21 million for funding the working capital requirements. The rest is to defray listing expenses.
Under the public issue, 23.66 million issue shares would be made available for application to the Malaysian public, followed by 14.20 million issue shares made available for eligible persons. The company is also allocating 560,000 issue shares for private placement to selected investors.
The remaining 59.14 million issue shares would be made available by way of private placement to approved Bumiputera investors.