What can you know about Condensed Milk and Johotin's future earning?

Today, I will continue to talk on Johotin future potential when sugar price is dropped. Many know Johotin as a company that manufacture tin can for various uses such as paints and F&B tin packaging.

But in fact, the real revenue driver of Johotin is actually derived from it's F&B business. According to the previous quarter result, the food & beverage division is making up approximately 75% of the total revenue.

In the future, F&B business will be the main pillar for Johotin as new factory start operating in the Q4 of 2018.

So coming back to my previous topic that Johotin will stand to benefit from a lower sugar price in Malaysia. As I am not going to drill into the very detail calculation, let me show you some rough idea how much sugar is needed for a can of sweetened condensed milk.

This is a can of sweetened condensed milk by Nestle which is produced in Australia. We will drill down to the nutritional facts of this can of condensed milk. The information is published here in Nestle Australia as well.

As you can see, every 100g of condensed milk, there is 55.9g of Sugar in it. That is like 56% of it being made of sugar. Stunning isn't it?

Now if you work down on the cost for producing this condensed milk, you can see that the input raw material cost will be reduced significantly because more than half is actually sugar, and the price of sugar will be reduced drastically to match the global sugar price.

The sugar price will be brought down in order to reduce the consumer burden of high cost of living.

Finance ministry Lim Guan Eng informed that the new price of sugar will be made following a study on the matter - Source from The Star https://www.thestar.com.my/news/nation/2018/08/20/guan-eng-announcement-on-new-sugar-price-to-be-made-following-study/

Lim said cited structural factors and monopolies practiced by certain industries as reasons why prices of certain goods are fixed.

"For example, why is the sundry price of sugar RM2.90 per kilo which is almost double that of global market price of RM1.40 per kilo.

"This is due to structural factors and the power of monopolies which do not benefit the people," he said.

News are floating on government will put a 10 cents ceiling from the market price, which means it is talking of a potential RM 1.50 per kilo in the future for the price of sugar.

From RM 2.90 to RM 1.50 per kilo, that is almost 50% reduction. If you are a right minded business man, you will know this new ruling will definitely give the business a better profit margin in the coming future.

So what do you think about Johotin?

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Disclaimer:This is not a recommendation to buy or sell any equity. The information contained should be treated for general information only. Any decision to deal with any securities, please consult your own investment adviser.