MR. YEAP SWEE CHUAN
Overall auto industry rebounded in Q3 and the Group turned profitable in the second half of 2020
2020 has been a very challenging year for the Group. Covid-19 created a great havoc to the business in Q2 and the Group suffered the most serious quarterly loss in its history, of over Baht 600 million. During that time, we did not have a clear idea how long the crisis would be. The immediate actions taken at that time was to reduce cost as much as possible as the business fell significantly below the breakeven levels. However, this downturn was somewhat short lived, overall auto industry rebounded in Q3 and the Group turned profitable in the second half of 2020.
During 2020, another negative factor was the strong Baht which created an exchange loss of about Baht 13 million. However, it should be noted that almost all of this FX loss was unrealized and had no cash flow impact. Strong Baht however led to reduction of export of motor vehicles from Thailand due to relatively higher cost and thus, lower global demand. Hence it affected our production volumes as demand for our components was reduced due to lower demand of Thai pickups by the global market. Thailand is largest exporter of pickups globally.
Our Portuguese iron casting and machining operations also suffered very severely in Q2 but recovered very strongly in Q3 and Q4. The Portuguese operations took a very innovative idea of reconfiguring their production. They moved work from the older and more traditional Maia plant to the newer and more cost-efficient plant at Agueda to run it at full capacity running 3 shifts and achieved economy of scale. With this rearrangement, overall cost was drastically reduced and the Portuguese operations became profitable despite lower volume than earlier budgeted due to Covid-19. However, it is quite a concern that the Covid-19 situation in Portugal has escalated recently with rising infection rate. Nonetheless, with strict guidelines and good discipline implemented by our local Management team, our three plants have been able to operate normally. Further, the Portuguese Government and banks have given strong support through practical policies that can be quickly implemented to allow for business to preserve liquidity during challenging time as well. Unfortunately, several of our associates have been infected with Covid-19.
China automotive forging component operations were less impacted by the pandemic and continued to be profitable. There was little impact to our business volume as car production in China remained quite stable in 2020. Credit should be given to the Chinese government for being able to put measures to control the pandemic.
The Malaysian dealership operations of Proton and Honda performed reasonably well despite the serious Covid-19 situation where the government implemented serious shut down over several months in 2020. We opened two more new Proton showrooms in the Pahang State. These showrooms are located at Temerloh and Kuantan. The second wave starting in December 2020, seems to be very serious. We hope the government can bring the situation back to good control in foreseeable future.
Car component demand continues to be strong starting from the end of Q3 2020 and this momentum has continued in 2021
At this juncture, I must say a big “thank you” to all our associates who co-operated sincerely in all the strong actions taken by the Company without a word of complaint
In Thailand, it is a blessing that none of our Associates were infected by Covid-19. We opened two new Mitsubishi showrooms. The Thai government did an excellent job from the start and kept the infection rate in good check and control. Business recovered well in Q3 and Q4. However, in overall, the car industry fell from a production volume of 2 million units in 2019 to 1.4 million cars in 2020. As a result, our Mitsubishi and Ford dealership sales and performance were impacted. However, on an overall basis, the automotive part production, which is our main business, did reasonably well. We expect this momentum to further improve throughout 2021. The forecasted car production for Thailand for 2021 is in the region of 1.5 million cars.
At this juncture, I must say a big “thank you” to all our associates who co-operated sincerely in all the strong actions taken by the Company without a word of complaint. They worked with passion in these difficult times. Without their close co-operation, it would have been very difficult to navigate through such a severe downturn due to the Covid-19. I am positive that the worst time from this pandemic is behind us and the Group is expected to do better going forwards.
We are very fortunate to be in an industry where we now operate in full capacity with two shifts in most of plants locally and globally. Car component demand continues to be strong starting from the end of Q3 2020 and this momentum has continued in 2021.
Finally, I would like to take this opportunity to thank our stakeholders for all your kind support during this challenging year. We expect to perform better in 2021.