Ocean Glass Plc (OGC) is Thailand“s largest manufacturer of glass tableware products, which include tumblers, glasses, plates and bowls and account for 39% of the country“s total production capacity…
Ocean Glass Plc (OGC) is Thailand“s largest manufacturer of glass tableware products, which include tumblers, glasses, plates and bowls and account for 39% of the country“s total production capacity. The company is a major exporter of glassware with clients in more than 30 countries. Its export sales account for 70% of total sales with 42% to countries in the Asian region followed by China with 20%, Australia and Europe with 15% each, and the US at 8%. About 50% of the company“s major domestic clients are beer and soft-drink manufacturers, 30% are hotels, restaurants and catering businesses, and 20% are retailers such as Siam Makro and Tesco Lotus. Ocean Glass has been operating at almost full capacity of 120 million pieces per year for some time. It recently announced plans to increase production capacity by 8% this year in order to meet the continuous rise in demand from India and China, as well as from Europe, due to the permanent closures of a number of plants in the region. The capacity expansion plan entails an increase in glass pressware production capacity in the third quarter of this year by 8 million to 10 million units, which should result in THB 80 million to 100 million in additional sales revenuein 2002. It will also increase the capacity of its blownware capacity by 15 million units or 12% in the third quarter of 2003, which would add about THB 200 million in sales revenue in 2003. Despite the added expense from increasing capacity, analysts expect the company“s gross margin will continue to rise from 38% in 2000 and 40.4% in 2001 to 41% this year and to 41.3% in 2003. The reason is that energy costs, which account for 20% of the company“s production costs, have fallen considerably as a result of the company“s switch from using fuel oil earlier this year to cheaper natural gas in its production process. Ocean Glass“s financial status looks strong with a low gearing of 0.2 times. Its earnings before interest, tax, depreciation and amortization (EBITDA) are high at THB 500 million baht per year. The firm plans to use 200 million of this to cover the increase in pressware capacity, while the THB 250 million needed to increase its blownware capacity will come partially from EBITDA and loans. The high level of EBITDA enabled the company to pay a dividend in 2001, and the same should be the case in 2002 and 2003. It paid an interim dividend of THB 2 a share for its 2001 performance in June last year and paid another THB 3 in May. Sales in the first quarter of 2002 totalled THB 274 million, which weakened from THB 342 million in the previous quarter and from 285 million in the first quarter of 2001. This was attributed to weak consumer spending and a slight weakening in export sales because of the stronger baht in the quarter. Ocean Glass reported a first-quarter net profit of THB 42 million, down from THB 61 million in the fourth quarter of last year. This was expected, however, as last year“s profit was higher than normal due to a one-time gain from debt restructuring. Without this item, the company“s net profit declined by only 4% quarter-on-quarter, which was partially because it began paying a full tax rate as losses carried forward were used up last year. With new capacity to come online this year and next, the earnings outlook is expected to improve this year.