Nam Lee Pressed Metal

[dydx]

Understandably Nam Lee remains the sole supplier of aluminium frames to Carrier Transicold's Container Refrigeration Division, which has its HQ in SG. Carrier Transicold mounts refrigeration units on the frames, and sells the finished products as the most important component to container manufacturers which produce the final reefer containers used by shippers worldwide to store/transport perishable goods, like bananas.

[Dosser]

I find the Annual Report:

https://links.sgx.com/FileOpen/Nam%20Lee...eID=742421

rather depressing reading. Increased turnover but reduced profit. Significant increase in borrowing (from very little). Projection for significant reduction in demand over the next year in the reefer segment.

The main issues are increasing labour and raw materials costs in an environment where external demand is dropping. The company seems to have a good job of controlling costs at the corporate level. This appears to be as much about the general business environment as the specific markets Nam Lee is in, or the operation of the company.

Rising costs combined with weakening external demand does not bode well for the manufacturing sector in Singapore over the next year or two. This does not appear to be fully priced into the market yet.

[ghchua]

Hi Dosser,

With respect to the increase in borrowings, the company had been trying to use trust receipts to finance stocking up of inventories for orders in hand to mitigate the risk of raw material cost and supply chain disruption.

Though reefer segment is not doing well, construction activities is expected to be better in the coming FY. Although outlook is not as good as before in the short term, we can take comfort from the fact that they still maintain their final and special dividend payout for FY22.

[Dosser]

Hi Dosser,

With respect to the increase in borrowings, the company had been trying to use trust receipts to finance stocking up of inventories for orders in hand to mitigate the risk of raw material cost and supply chain disruption.

Though reefer segment is not doing well, construction activities is expected to be better in the coming FY. Although outlook is not as good as before in the short term, we can take comfort from the fact that they still maintain their final and special dividend payout for FY22.

My concern is whether this is a canary in a coal mine. Singapore manufacturing companies face a nasty combination of:

• Rising labour costs
  
• Rising material costs
  
• A weak external environment
  
• A strong S$
  

which is not going to be good for profits. 

A distinction can be made between those companies that are focused on the local market and those which are primarily affected by the external market. Nam Lee straddles both, and it is the external side that is a worry for this year and probably next.