SHAH ALAM: UMW Holdings Bhd is allocating RM607 million capital expenditure (capex) for its three divisions namely automotive, equipment and manufacturing, and engineering in the financial year ending December 31, 2019 (FY19).
President and group chief executive officer Badrul Feisal Abdul Rahim said the capex would be used for heavy equipment rental business (RM262 million), equipment purchases for the aerospace (RM93 million) and modernisation of Shah Alam auto manufacturing plant (RM174 million).
“We will also spend about RM52 million for other investments and RM1.6 million for land development in Serendah, Selangor.
“We believe it is going to be a good year despite the challenges and the negative side of the US-China trade war, which might affect the growth of consumer spending,” he said after UMW’s annual general meeting here today.
The conglomerate is hopeful of achieving higher car sales this year backed by Bank Negara Malaysia’s reduction in the overnight policy rate (OPR).
“Hopefully, there will be more demand for cars, regardless of Toyota or Perodua. We initially projected 75,000 units and 231,000 units for Toyota and Perodua sales this year,” he added.
Badrul Fiesal said UNMW was keen to offer more locally assembled models for Toyota to boost sales.
“We have a two-year strong strategy to introduce locally assemble sport utility vehicle and hybrid for Toyota vehicles.
“We will also launch facelift versions of the new Toyota Avanza and Innova in the fourth-quarter this year,” he said.
UMW has two Toyota assembly plants in Shah Alam and a 51 per cent-owned new facility in Bukit Raja, Klang.
The company spent about RM2 billion on the new plant, which is capable of producing 50,000 vehicles a year.
The new plant is currently running on a 70 per cent production capacity, mainly for the new Toyota Vios and Yaris models.
He said UMW had no immediate plan to increase its stake in Perusahaan Otomobil Kedua Sdn Bhd (Perodua) after the deal lapsed last year.
Badrul Fiesal said the conglomerate expected a triple-digit volume growth from a double-digit in 2018 for the aerospace unit, driven by continued orders from the British engine manufacturer, Rolls-Royce.
UMW Aerospace Sdn Bhd produced over 50 fan cases last year.
The New Straits Times had reported that UMW Aerospace produces fan cases for the Trent 1000 and Trent 7000 engines to power up the Airbus A330neo and Boeing 787 Dreamliner aircraft.
UMW Aerospace is a tier-one supplier for Rolls-Royce successfully executing the first delivery of fan case end November 2017.
“We are looking at optimising our manufacturing facility and capability (aerospace). It involves precision engineering and the same skills set can be applied for other high-value manufacturing such as health and medical devises or energy,” he said.
Badrul Fiesal said UMW did not foresee any impact on its aerospace business from the US-China trade war, citing that the supply of fan case was shipped directly to Roll-Royce final assembly plant in Seletar, Singapore before proceeding to the United Kingdom.
“We are also in talks with all aerospace manufacturers to produce other parts and components. However, it is premature for us to announce today as aerospace negotiations and deals usually takes time to materialise,” he said.
Citing as example, he said UMW Aerospace took about three years to finalise its negotiations with Rolls-Royce to produce the fan cases.
Meanwhile, trade tension might negatively impact the company’s manufacturing and engineering sector in China, particularly the lubricant Repsol.
However, Badrul Fiesal said the Chinese domestic market would still be sufficient and continue delivery profits to the group.