KUCHING: Hong Seng Consolidated Berhad’s (Hong Seng) through its wholly-owned subsidiary Hong Seng Industries Sdn Bhd (HS Industries) today has accepted a Letter issued by Northern Corridor Implementation Authority (NCIA) in relation to its interest to acquire a federal land in Kedah Rubber City (KRC) measuring approximately 105 acres (approximately 4,573,800 sq ft) at an offer price of RM45.74 million for the purpose of setting up its nitrile butadiene latex (NBL) manufacturing plant there.
Commenting on the latest corporate exercise, Hong Seng executive chairman Datuk Teoh Hai Hin said: “HS Industries was incorporated with the intention to engage in the business of manufacturing and trading of NBL.
Datuk Teoh Hai Hin
“NBL which is also referred to as butadiene is the main and crucial raw material used for the production of nitrile gloves which accounted for 70 per cent of the total gloves exported from Malaysia according to Malaysian Rubber Glove Manufacturers Association (Margma).”
Due to the unprecedented demand and production of highly sought-after nitrile gloves caused by the pandemic, Teoh said there is a shortage in NBL across the world leading to all-time high cost in securing NBL supply.
“Currently,
there are many gloves players emerging in the market, however, not all of them have secured their NBL supply which may cause serious operational risks and unexpected material costs in the nitrile glove production as they may face a supply cut causing operation halts or procure its NBL supply at a premium cost thus affecting their margins.
“Hence, by setting up our own NBL plant, it will provide a timely opportunity to secure constant internal supply for
our subsidiary, Hong Seng Gloves Sdn Bhd’s plant in Kedah and at the same time, filling the vacuum in the NBL shortage to capture the market.
“Ideally, this will enable us to be an integrated glove and NBL manufacturer in Malaysia by having both upstream and downstream segments of the glove manufacturing supply chain,” he elaborated.
NCIA is the
statutory body established in 2008 under Act 687 and responsible for providing direction, devising policies and strategies that promote and accelerate the development of Northern Corridor Economic Region (NCER), while KRC is the first dedicated Rubber Industrial Park in Kedah. Covering an area
of 1,244 acres, it is envisioned to accelerate the development of Malaysia’s rubber industry.
A filing with Bursa Malaysia showed that there is no upfront payment required to be made by HS Industries upon accepting the Letter. The details of the land and the salient terms of the purchase (including the
manner of payment) will be detailed out in a Letter of Offer to be issued by NCIA to HS Industries at a
later stage upon HS Industries’ acceptance of the Letter.
In the event that HS Industries enters into the Letter of Offer and Sale and Purchase Agreement with NCIA for the Proposed Land Acquisition, the Company will make the necessary announcement and/or seek the shareholders’ approval in a general meeting, if required, in accordance with the Main Market Listing
Requirements of Bursa Malaysia Securities Berhad.
T
o recap, Hong Seng had on 15 December obtained shareholders’ approval to diversify its business to include
manufacturing and trading of gloves and other PPE products, supply of healthcare products and services, as well as hire purchase.
The group also received shareholder approval for its Turnkey Agreement, which entails engaging Howellcare Industries Sdn Bhd to plan, design, supply, install and commission the Glove Production Plant, as well as undertake all marketing and sale of the nitrile butadiene rubber gloves for the Group for the initial stage.
The contract value for the Turnkey project is set at RM59.40 million.
The business d
iversification will provide additional income streams to the group and reduce over-reliance on its existing businesses in the search and advertising segment and the information technology segment. This will also help to improve the Group’s financial performance and enhance the group’s prospect.
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