Tomei expects no impact from higher gold prices

Tomei expects no impact from higher gold prices
Tomei expects no impact from higher gold prices

KUALA LUMPUR: Jewelery company Tomei Consolidated Bhd does not expect any material impact to its bottomline from the rising price of gold.

Group managing director Datuk Ng Yih Pyng said any gains in profit margins don’t stick and will usually normalize over the longer term.

“We think gold prices may rise further. Many reports are expecting gold prices to be between US$2,000-US$2,400 an ounce. As of now, it is nearly US$2,400 an ounce, it has gone up a lot this year.

“Any rise in selling prices will be passed on to the consumer, but having said that, our replacement costs will be at market prices as well,” Ng said at a press conference held after the company’s annual general meeting yesterday.

“So our cost structure will generally go up during times like these. Overtime, margins will be normalized. In the short term we may have slightly better margins but when we buy back (gold) at market prices, the average cost will increase during times when gold prices are on a rising trend,” he said.

During times when gold prices rise quickly, Ng said the company is also unable to pass on all additional costs to the consumer.

Further weakening of the ringgit would also mean gold prices, which are denominated in the US dollar would be sold locally at higher prices in ringgit terms assuming the former remains unchanged.

Tomei, which specializes in gold and jewelery retailing, manufacturing and wholesaling said it had experienced increased sales thanks to higher tourist arrivals.

This came after the granting of visa-free status to tourists from China and India some months back and the postponement of the luxury goods tax.

“The trend is two months before any new tax is imposed we will see a surge in sales. Now it is back to normal. While for tourists, the visa-free status has helped to a degree – they do buy but not in a big way,” Ng said.

The company also anticipates that the newly introduced Employees Provident Fund’s (EPF) Account 3 may help boost sales.

“While the announcement of the EPF Account 3 is generally a positive for the retail scene, we are currently focused now on the implementation of e-invoicing soon,” he said.

Moving forward, Ng expects the company to grow its financials “moderately” along with the expected growth in the local economy.

The company also recently launched a new business segment through pawnshops, but does not expect this front to be a meaningful contributor to profits for now.

Tomei had seen its share price rising by almost 60% year-to-date and it closed 29 sen higher at RM2.03 yesterday.

The company yesterday posted a 76% year-on-year (yoy) jump in its net profit to RM20.94mil for the first quarter ended March 31, on the back of a 32% yoy rise in its revenue to RM322.76mil.

The better earnings and revenue was due to higher sales volume and higher prices for gold jewelery sold to customers, Tomei said in a filing with Bursa Malaysia.

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