The affirmation of EP Manufacturing Bhd’s (EPMB) long and short-term ratings of MARC-2ID/AID on its RM150.0 million Islamic MUNIF/IMTN reflect the Group’s position as a Tier-1 parts vendor for the national carmaker, Proton, via its subsidiary; PEPS-JV (M) Sdn Bhd. Moderating factors include its dependence on the sales performance of national cars (i.e. Proton and Perodua) which contributed approximately 72.87% to the company’s revenue and the inherent risks of the automotive industry.

EPMB manufactures and supplies automotive products to both the original and replacement markets. Its original markets comprise mainly national car makers, i.e. Proton and Perodua manufacturing plants, while its replacement market covers both Proton and Perodua’s service and parts centres. As part of its on-going business re-engineering initiatives, EPMB is evolving to be a supplier of components in a modular form with system integration.

EPMB currently operates from two manufacturing plants in Shah Alam (EP Polymers) and Ulu Yam (PEPS-JV). Going forward, EPMB’s prospects will be driven by its 79.5%-owned subsidiary PEPS-JV which is a tier-one supplier to Proton and Perodua. Other growth drivers include its 100%-owned subsidiary which supply braking system to Proton under a BOSCH Contract and also export components for a face-lift version of the Toyota Land Cruiser for the Middle East markets.
Revenue continued its uptrend since FY2001, to reach RM239.1 million in FY2004. However, this was significantly below EPMB’s earlier projection of RM305.9 million. The shortcoming was due to the delay in the launching and production of Gen 2 resulting in the Group’s composite division generating RM5.5 million in revenue against RM69.5 million projected previously. Nevertheless, revenue from the Group’s automotive segment grew by 13.4% to RM233.6 million. Similar to most component manufacturers, EPMB is exposed to foreign currency fluctuations arising from parts and raw material purchases which are mostly denominated in Yen.

As anticipated, the Islamic MUNIF/IMTN issue resulted in EPMB’s debt leverage increasing to 0.83 times in FY2004. The impact of the higher borrowings was somewhat mitigated by the accumulated retained earnings. Under the terms and conditions of the Islamic MUNIF/IMTN issue, EPMB’s gearing is capped at 1.5x.

The Group derives adequate financial flexibility from its listed status, its manageable gearing and the relationship that it has nurtured with its existing bankers. The Group currently enjoys a credit line of around RM54.0 million of which RM14.85 million remains unutilised.