Tariffs Will Impact Guan Chong's Margin For US-Bound Products -- MIDF Amanah

KUALA LUMPUR, April 24 (Bernama) -- The United States’ (US) tariffs will negatively impact the margin for Guan Chong Bhd’s (GCB) US-bound products, especially butter and liquor, MIDF Amanah Investment Bank Bhd said.

In a research note today, the investment bank said President Donald Trump’s tariff gaps suggested margin erosion risk for GCB’s US-bound sales, especially from high-exposure regions like Malaysia and Côte d’Ivoire.

“This directly affects GCB, given that their two plants based in these two countries are the main supplier to GCB’s US market. Based on its 2024 financial year total group sales, GCB has 28 per cent butter, 15 per cent liquor, 9.0 per cent cake, and 3.0 per cent powder exposure to the US market.

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“Butter and liquor, which are higher margin products, face the highest US tariffs and exposure, directly pressuring GCB’s profitability,” added MIDF Amanah.

The investment bank said GCB’s export volume to the US is substantially butter and liquor, adding that GCB is mitigating the tariff impact by diversifying exports to the European Union (EU), the United Kingdom (UK) and a ratio-based pricing model. 

“Its Schokinag (Germany) and UK operations provide alternative markets with no/low tariff exposure. The Côte d’Ivoire plant is running at 100 per cent; half of the production supports EU chocolate factories. Its UK facility increased capacity to 22,000 metric tonnes in the second half of 2024,” MIDF Amanah said.

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Other than diversified global operations, MIDF Amanah said mitigation could be done via a ratio-based pricing model, which protects profit despite cocoa price volatility.

It also said that high cocoa prices support average selling prices as well as earnings before interest, taxes, depreciation, and amortisation.

“GCB’s earnings resilience is intact, but the US market contribution faces structural headwinds due to trade policy,” it added.

-- BERNAMA