KUALA LUMPUR: Scientex Bhd is eyeing a 10-fold increase in its production of biaxially oriented polypropylene (BOPP) film to 60,000 tonnes from 6,000 tonnes now, following the construction of a new BOPP film manufacturing plant in Pulau Indah, Klang, Selangor. The plant will be constructed in collaboration with Japan-based Futamura Chemical Co Ltd (FCC), with which the group signed a share sale agreement yesterday.

Scientex managing director Lim Peng Jin told reporters after the signing ceremony that the group’s expansion p lans entail a capital expenditure of RM300 million over a period of three years. “This investment and the expansion of our range of films would give us the opportunity to get a bigger slice of the consumer packaging market in the Asia-Pacific region,. Our primary objective is to acheive cost-effective production across a wide range of consumer films, so that our customers would benefit from the lower cost input prices.”

Apart from expanding its BOPP film production, Scientex is looking at expanding its polyethylene (PE) film production output to 48,000 tonnes per year from 24,000 tonnes by the end of the year. At the same time, the group is also entering a new market — cast polypropylene (CPP) film manufacturing with a targeted production capacity of 12,000 tonnes per year by 2015. BOPP, PE and CPP films are used in the flexible packaging of food and beverages.

Yesterday, Scientex Pacakaging Film, a wholly-owned unit of Scientex, and FCC signed a share sale agreement in which the latter would acquire a 5% stake in Scientex Great Wall Sdn Bhd (SGW), another wholly-owned subsidiary of Scientex. SGW is a wholly-owned subsidiary of Scientex Packaging Film and is involved in the manufacturing of BOPP film and packaging products.

SGW will issue 10 million new shares to increase its share capital to 100 million shares. Scientex will inject RM40 million in capital to subscribe to five million of the new shares, while FCC will inject the same amount into SGW to acquire a 5% stake. Following the share sale, which is expected to be completed by the end of next month, SGW will be a 95:5 joint-venture company between Scientex and FCC.

“Futamura’s participation via the equity stake in SGW reflects the long-term perspective adopted by both parties to jointly grow our consumer packaging business in Asia-Pacific,” said Lim. “We are certainly exploring further collaborations beyond base film into other aspects, such as barrier film capability and other functional films,” he said.

FCC is entitled to purchase up to 20% of SGW over the next five years.

Scientex, which had its shares suspended from trading yesterday, closed seven sen higher on Tuesday at RM6.95, with a market capitalisation of RM1.5 billion. For its fourth quarter ended July 31 of financial year 2014 (4QFY14), Scientex posted a 61.4% increase in net profit to RM48.8 million, from RM30.3 million a year ago, thanks to its manufacturing and property segments which saw higher profits in line with higher revenue. Revenue increased to RM415.4 million, from RM371.2 million.

The group recommended a final dividend of 26% or 13 sen per share for FY14. Its full-year net profit stood at RM148.5 million against RM110.3 million in FY13, while revenue rose to RM1.59 billion from RM1.23 billion.

This article first appeared in The Edge Financial Daily, on September 25, 2014.