Salcon to seek shareholders’ approval for glove venture, as it may become major revenue contributor

Salcon to seek shareholders’ approval for glove venture, as it may become major revenue contributor

12 May 2021

Salcon Bhd said its proposed rubber glove business may be one of the major contributors to its revenue and net profit, and therefore is seeking its shareholders’ approval for the proposed diversification at an extraordinary general meeting (EGM) to be convened.

In a filing with the bourse, the water and wastewater engineering firm said it had completed the acquisition of the remaining 10% equity interest in Nusantara Jasakita Sdn Bhd (NJSB), making the latter a wholly-owned subsidiary of the group.

Last November, NJSB had entered into a share sale agreement (SSA) with Ganesan Subramaniam to acquire 1.02 million ordinary shares or 51% stake in JR Engineering and Medical Technologies (M) Sdn Bhd (JREMT) for RM28.56 million.

JREMT is involved in the business of manufacturing and trading of latex, nitrile and medical gloves.

It anticipates the glove business to immediately contribute to the group’s earnings amid the global demand for rubber gloves due to the Covid-19 pandemic.

As per Bursa Malaysia’s Listing Requirements, a company is required to obtain shareholders’ approval in a general meeting for any proposal that results in either the diversion of 25% or more of Salcon’s net assets to an operation which differs widely from its existing operations, or the contribution from such an operation of 25% or more to Salcon’s net profits.

“The board expects that the glove business will trigger the threshold above in the immediate future, and therefore intends to seek the shareholders’ approval for the proposed diversification,” it said.

Previously, the group said the proposed acquisition comes with a profit guarantee of RM10 million a year for the coming three financial years ending Dec 31, 2021 (FY21) until FY23.

“With an annual production of over 336 million gloves from four single former production lines in their factory located in Zurah Industrial, Rasa, Hulu Selangor, JR is currently operating beyond its capacity,” said Salcon.

In order to cater to the spike in demand in specific export markets, the group is targeting to ramp up its production capacity by an additional 12 lines to a total of 16 production lines within a year, at an estimated capital expenditure of RM150 million, to be funded via internally generated funds and bank borrowings.

This will bring the group’s total annual production capacity to three billion pieces.

Salcon closed unchanged at 23 sen, giving a market capitalisation of RM232.86 million.

Source: The Edge Markets