A reality check for Salutica

FOR a stock that once drew massive headlines, Salutica Bhd now finds itself facing a far less flattering reality.

The company has started cutting about 250 jobs – roughly 53% of its workforce – beginning April 30.

Through its wholly-owned subsidiary, Salutica Allied Solutions Sdn Bhd, the group says the retrenchment is part of a rationalisation exercise following a review of staffing needs, market conditions, and operational efficiency.

In plain terms, costs have to come down because the business can no longer carry what it once could.

The news marks how far Salutica has come from the days when the counter was one of Bursa Malaysia’s more talked-about names.

The company captured investors’ attention in January 2022 when it took legal action against Apple Inc’s Malaysian subsidiary Apple Malaysia Sdn Bhd, over its wireless pairing technology.

For a small Malaysian electronics manufacturer, suing a global technology giant is something rarely heard of.

Such news had, at one point, bolstered the stock, which was actively chased on hopes that a legal breakthrough could unlock value far beyond what its manufacturing business alone justified.

The possibility of patent monetisation created excitement, even though the company’s operating numbers were already under pressure.

However, that excitement did not last.

Salutica has been loss-making for seven consecutive years, despite occasional revenue improvements, suggesting that stronger sales have not translated into meaningful margin recovery.

The court case also failed to deliver the catalyst many investors once anticipated.

When the High Court ruled against Salutica, the share price fell sharply and the speculative premium disappeared.

What is left now is the harder business of staying competitive in an electronics manufacturing sector where customers are cautious, margins are thin, and labour remains one of the biggest fixed costs.

That is why this retrenchment is necessary.

A company does not cut half its workforce unless management sees little room for delay.

The market once priced Salutica for what it might become.

Today, management is being forced to deal with what the company actually is – a manufacturer under strain.