Delta plans European acquisition, more mechanisation

Corporate July 31, 2014 00:00

By Chairat Srisuk

The Nation

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With a healthy cash position of Bt14 billion, Delta Electronics (Thailand) is ready to proceed with its plan to acquire a business operation in Europe and invest in equipment and machinery to reduce reliance on labour. Delta hopes to maintain annual profi

Executive director Anusorn Muttaraid said the company would attempt to acquire a business entity in Europe in the same line of business as Delta next month.

As for investments during the remainder of this year, Delta will focus on acquiring new machinery and software to reduce dependency on labour, which accounts for 3 per cent of its production costs. The additional equipment should boost Delta’s net profit by almost 1 per cent, Anusorn added.

The company is optimistic that it can continue to expand in the current half as it did in the first six months of the year, especially with parts and components for hybrid vehicles. However, network-related products will likely suffer from falling demand due to the transition of technology.

Delta should be able to achieve net profit growth of 5-10 per cent, similar to last year, and maintain a 12-per-cent profit margin. This should help it post new record profits for three straight years, Anusorn said.

Meanwhile, the volatility of the baht has no adverse impact on Delta, as the company does business in US dollars and various local and regional currencies, and is fully hedged against foreign-exchange risk. However, there is some negative impact in terms of accounting records, as figures are recorded in baht.

Delta posted second-quarter sales revenue of Bt10.9 billion, up 13.7 per cent year on year, thanks to 34.1 per cent higher sales of power-supply products used in the telecommunications sector. Profit for the quarter reached Bt2.96 million, up 16.8 per cent year on year.

According to CIMB Securities (Thailand) Co, strong sales growth pushed Delta’s second-quarter profits above expectations, especially sales to India and China, where there is strong demand for industrial equipment and tools, as well as industries with high electricity consumption.

Delta recorded a one-time profit of about Bt254 million from the sale of a subsidiary; apart from this amount, net-profit growth was 24.6 per cent from the same period last year. Delta’s better-than-expected operating results and strong sales figures were not in line with pessimistic initial projections. Since the third quarter is typically high season, results should improve slightly before easing up in the fourth quarter with a normal inventory-reserve level, Anusorn said.