SEVEN out of 10 manufacturers expect it will take between four and 24 months before their businesses can recover after the restrictions placed to keep the Covid-19 outbreak under control, said the Federation of Malaysian Manufacturers (FMM).

Among those surveyed, 23.5% said it will take one to two years to recover while another 15.8% pointed to 10-12 months.

Some 14.8% of the manufacturers said they needed seven to nine months while 17.5% will take four to six months for their businesses to bounce back.

FMM president Soh Thian Lai said 38.9% of those surveyed will only be able to sustain their businesses for up to 12 months.

He said this in a briefing in Kuala Lumpur today where he presented key findings of the FMM-Mier Business Conditions Survey that was conducted last month.

He added only a quarter of manufacturers (24.6%) said their businesses have not been affected while 34.2% will be able to sustain their businesses for more than 12 months.

The survey showed that 82% of manufacturers faced a drop in revenue while 80% saw reduction in profitability.

“The drop in earnings is in line with the FMM business activity index that has fallen 59 points to 31 in the first half of 2020 (1H20),” said Soh.

The survey showed in 1H20 local and export sales fell 50 points to 16% and 21%, and capital investment dropped 48 points to 61 as compared to the second half of 2019 (2H19).

On the outlook for the second half of 2020, FMM said business activity is expected to bounce back to 76 points while local and export sales are expected to return to 49% and 50% as compared to 1H20.

“With the pandemic far from over in many countries, manufacturers are taking a pessimistic stance in their business prospect projections for the rest of 2020.

“All forward-looking indicators fell to their lowest since the survey started in 2012, with most respondents replying negatively.”

It added that the latest index indicated that business activity will be scaled down in the coming months.

“We hope the government will look at extending the loan moratorium to the end of the year,” said Soh.

He added while bigger companies may be able to have sufficient cash flow to keep their businesses afloat, the smaller SMEs and micro producers will have problems sustaining their businesses when the moratorium is lifted after September.

The nationwide survey was carried out from July 2 to 31, and covered topics such as business conditions, sales, capital investment, production volume and employment.

For the survey, interviews were done with 549 respondents from 16 industry sub-sectors such as chemical products (14.9%), food, beverage and tobacco (14.6%), electrical and electronics (10.4%), plastic products (9.5%), fabricated metal products (8.4%) and others.

The twice-a-year survey is used as an indicator of manufacturing confidence in the country. – August 19, 2020.