GuanChong - shrinking net profit

Its financials in recent times have exhibited a shrinking net profit.

It is one of the largest cocoa ingredient producers in the region.

The dwindling profit in the past year was attributed to lower average selling prices of cocoa powder and stiff competition among intl players.

It has aggravated by a massive inventory writedown brought about by lower ASP for cocoa powder. It had written down rm21.54 million in inventories.

Its net margin also slumped in financial year end Dec 31 2013.

The company’s cocoa grinding process produces two main substances – cocoa butter, which is used to create the melt in mouth effect in chocolates and cocoa powder, which is used in cakes, and ice cream.

Since early 2014 cocoa powder has recovered… In 2013, it was in oversupply that caused an inventory build up.

Going forward, Guan Chong, it is facing a lot of competition from bigger players.

While outlook for cocoa powder prices seems lackluster and uncertain, it could reap better profits from its industrial chocolate factory that was commissioned a year ago that can be sold to bakeries and confectioneries.