This article first appeared in The Edge Financial Daily on July 24, 2019 - July 30, 2019

KUALA LUMPUR: KUB Malaysia Bhd is disposing of its factory and the land it occupies in Mukah, Sarawak for RM43 million and RM1.8 million respectively, as it seeks to eliminate underperforming assets, as well as reduce cash outflow and the deterioration of its financial performance.

In a filing with Bursa Malaysia yesterday, KUB said its subsidiaries, namely KUB Maju Mill Sdn Bhd and KUB Sepadu Sdn Bhd, had entered into sale and purchase agreements with Sinong Pelita Oil Mill Sdn Bhd for the disposal of the factory with its ancillary equipment and machinery, as well as a plot of leasehold land measuring approximately 60ha.

The factory is built on part of the land to be sold, which is in an estate located in Oya-Dalat Land District, Mukah, Sarawak.

As at Dec 31, 2018, the net book value of the factory was RM45.59 million. KUB said the factory is currently encumbered via a debenture for banking facilities provided to KUB Maju Mill by a local bank.

Meanwhile, the estimated net book value of the land as at Dec 31, 2018, including bearer plants, was RM169,858. KUB said the land was planted with oil palms in 1994 and produced approximately 1,826 tonnes of fresh fruit bunches from 2016 to 2018.

KUB said proceeds from the sale of the factory will be used to settle its bank borrowings and reduce other debts, while the proceeds from land disposal will be used for operational requirements.

The proposed disposals are expected to be completed within 90 days, with a 30-day extension option with 8% interest per annum.