KUALA LUMPUR (Jan 15): Colform Group Bhd, a Sabah-based steel product manufacturer en route to ACE Market, said it will pass on higher raw material costs to its customers.
Elevated steel prices will affect its gross margin if the costs are not passed on to customers, said Colform managing director Kang Ket Hung. The company’s gross margin has shrunk over the past few years, dropping to 23% in 2023 from 32% in 2021.
Further, the weakening of the ringgit also poses risks as “some of our raw materials are imported”, Kang said at a virtual media briefing following the launch of its initial public offering (IPO) prospectus.
"We… may employ forward currency contracts with banking institutions when necessary to lock in favourable rates,” Kang said. “Our diversified supplier base, combined with strategic financial management, ensures that we can minimise the impact while maintaining cost efficiency.”
Colform sources raw materials mainly consisting of steel coils, roofing coils and truss coils from suppliers in Malaysia and from countries such as China, Vietnam, India, and Indonesia.
More than half of its purchases in 2023 were denominated in ringgit, while those in US dollar make up 42% and about 5% in Chinese renminbi, according to its prospectus.
Colform, which primarily operates out of Kota Kinabalu, Sabah, manufactures and processes steel products, as well as trades building materials. It also provides supply and installation services for its steel products, along with project management services for construction projects.
The company has set its IPO price at 36 sen per share, which may gross up to RM60.63 million ahead of its ACE Market listing on Feb 10.