MBAM: Weakening ringgit affects builders’ margins

KUALA LUMPUR (Sept 5): The weakening ringgit has affected construction profit margins as it increases the cost of importing raw materials, according to the Master Builders Association Malaysia (MBAM).   

“The companies that secured new projects recently and need to import raw materials may see their margins getting thinner. The worst case scenario is they may face losses if they fail to manage their costs well,” said MBAM president Matthew Tee during a press conference at the MBAM appreciation dinner  yesterday.

Tee added that profit margins for local construction businesses remained low at a single digit range of 5% to 8%. 

As at Friday, the ringgit weakened to 4.2600 against the Greenback.

Tee said the depreciation of the ringgit to a 17-year low was an unexpected event. The construction companies which have hedged their stocks earlier will be less affected in the short term.

According to Tee, some companies which secured government contracts will not be affected as most contracts allowed price fluctuation in currency. 

Meanwhile, MBAM immediate past president Kwan Foh Kwai said some raw materials which are produced locally, such as steel bars, sand and cement, could help in reducing the cost burden. 

However, Kwan warned that if the ringgit continues to weaken, it may cause an inflationary spiral effect, which is more damaging to the overall economy.

"While items such as electric cables are manufactured locally, the copper used is imported. For the short term, the manufacturers are not affected as they still have stocks, but once they need to replenish copper stocks, that is the problem,” he explained.

Kwan hoped the newly formed Special Economic Committee will have solutions to stabilise and strengthen the country’s economy growth.