Dilemma of Asian Bags

Categories: AsiaBusiness

Asia Paper Bag has since 1990 operated as a manufacturer of plastic carrier bags supplying them on a contract-manufacturing basis to well-known supermarket chains, fast-food outlets, pharmacies and department stores. Lately, Asia Paper Bag exports customized plastic carrier bags to Marks n Spencer and Boots Pharmacy in the United Kingdom.

During the Asian financial crisis, Asia Paper Bag had difficulties in meeting its term loan repayment, and had to restructure the term loan last year. The term loan was restructured by way of a debt moratorium of 24 months on the principal and an extension of the maturity period from five years to eight years.

Currently, Asia Paper Bag‘s turnover is about Rs 3million per month with an average net profit margin of 7%. Lately, with the increase in world oil prices, raw materials for plastic bag production have increased by over 5% to USD1,200 per ton. Asia Paper Bag’s capacity utilization is still low at only 40%, after it expanded rapidly pre-crisis. Asia Paper Bag Sdn Bhd ‘s production capacity increased from 200,000tonnes per annum to 350,000tonnes per annum during the pre-crisis period.

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This was when the company borrowed a term loan of Rs. 10 million to finance the machinery. The raw materials, PE resins, are purchased mainly from Singapore and Thailand, whilst only 15% is sourced domestically.

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Dilemma of Asian Bags. (2016, Apr 02). Retrieved from https://studymoose.com/dilemma-of-asian-bags-essay

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