KUALA LUMPUR (June 2): Rex Industry Bhd has announced that it expects to recognise a provision for retrenchment costs amounting to RM2 million and other decommissioning expenses following the decommissioning of its production facility in Bukit Minyak Industrial Park, Seberang Perai Tengah, Penang.  

The canned food and beverage manufacturer told Bursa in a filing that the company estimates the decommissioning exercise to commence at the end of July 2023 and is expected to be completed by the first quarter of the financial year ending June 30, 2024.

The decision to decommission the 7.7-acre facility is part of the company’s business rationalisation plan, which aims to reduce overall business operating costs and improve its financial position.    

It also said that the decommissioning exercise only applies to the factory whereas the warehouse located within the said production facility will be maintained for inventory storage purposes.

As part of its business rationalisation plan, Rex Industry’s board has decided to downsize and reallocate the company's resources from its Bukit Minyak production facility to its two other production facilities, which will allow the company to utilise its resources more efficiently and reduce its operating costs.

Specifically, the company will reallocate certain identified machineries to the production facility in Jawa Timur, Indonesia and the identified machineries and manpower to the production facility in Batu Pahat, Johor.

“Additionally, by allocating more resources to its production facility in Jawa Timur, Indonesia, the company may potentially enhance the production capacity of its exported canned food to international customers, which may strengthen the company's revenue contribution from exports (which have contributed more than 50% of the company's revenue for the recent financial years).

“The board will also consider outsourcing certain production to third parties to maintain the minimum headcount in its production facilities,” it added.

Rex Industry incurred a net loss of RM5.64 million in the cumulative nine-month period ended March 31, 2023 (9MFY2023), against a net profit of RM1.97 million a year ago, despite revenue increasing to RM125.14 million, from RM120.21 million previously.

The net loss was due an operating loss of RM3.7 million in 9MFY2023 as opposed to an operating profit of RM3.56 million previously, increased interest expense to RM1.15 million from RM880,000 previously, and higher income tax expenses of RM784,000 from RM707,000.

In recent years, the company had incurred annual losses for three straight years from FY2018 to FY2020, before returning to profit in FY2021 and FY2022.

Shares in Rex Industry closed unchanged at 12 sen, giving the company a market capitalisation of RM79 million.