KUALA LUMPUR: AutoV Corp Bhd is strengthening its position as an automotive parts manufacturer through mergers and acquisitions, as an early defence for the eventual cutback of Proton’s vendors, said chairman Kong Kok Leong.
AutoV yesterday acquired Proreka (M) Sdn Bhd, a vendor and maker of OEM (original equipment manufacturer) and ODM (original design manufacturer) automotive parts, for a consideration of RM27.88 million.
“With this merger, we are fulfilling Proton’s vision of its vendors consolidating, becoming bigger and better equipped to support Proton. Proton currently has 230 vendors and it wants to cut this down by half or a quarter,” Kong said at the signing of the agreement for the acquisition of Proreka yesterday.
In FY10 ended Dec 31, Proreka recorded RM60 million in revenue, of which 60% to 70% was derived from Proton. Kong said Proreka will add value to AutoV’s position in the automotive supply chain.
“Although the two companies cater to the same industry, we deliver different products and specialise in different areas. For example, AutoV has metal working facilities but not plastic manufacturing facilities that Proreka will be able to provide,” he explained.
AutoV had also in March acquired JP Metal Sdn Bhd (JPM) for RM7 million in cash. JPM manufactures and fabricates tools, dies and metal stamped components for the automotive and electronics industries.
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| (From left) Proreka (M) Sdn Bhd CEO Yong Nam Yun exchanging documents with Kong, witnessed by Proreka executive director Thomas Lim. |
“These acquisitions gave us better footing in the automotive industry as we can now provide (a wider range) of quality products with increased efficiency, and obtain economies of scale and benefit from the sharing of technical skills, client bases and R&D resources,” said Kong.
AutoV is still looking for more acquisitions, for parts of the business the group currently outsources. Kong said doing so would create new business opportunities and provide cost savings.
For 1QFY11 ended March 31, AutoV’s net profit fell 44.7% to RM1.9 million from RM3.4 million the year before while revenue dropped 11.5% to RM23.4 million from RM26.5 million. Earnings per share fell to 3.27 sen in 1Q from 5.9 sen.
The stock gained 11 sen yesterday, soaring to more than a year’s high of RM1.50 with 214,000 units traded.
This article appeared in The Edge Financial Daily, June 2, 2011.