This article first appeared in The Edge Malaysia Weekly on April 15, 2024 - April 21, 2024

Sunzen Biotech Bhd announced last week that it was exiting the animal health products business, leaving it to focus on loan financing and the human health and wellness segments.

It chose to exit because the animal health division has been continuously incurring losses in recent years amid a challenging business environment, which has strained the overall financial condition of the group.

Sunzen said it would focus its resources on the existing human health and loan financing businesses, which contributed 84.19% and 9.8% to the group’s revenue, respectively, for the financial year ended Dec 31, 2022.

In January, Sunzen’s 70%-subsidiary Ecolite Biotech Manufacturing Sdn Bhd, which deals in herbal drinks and foodstuff, had proposed to subscribe to a 10% stake in Farmers International Holding Sdn Bhd (FIHSB) for RM4.32 million or RM43.20 per share. The proposed subscription is expected to be completed by the first half of 2024.

Sunzen had said then that the proposed subscription will allow it to venture into the human health and wellness retail market immediately as FIHSB has 10 retail outlets across Kuala Lumpur, Johor and Penang.

The subscription comes with a profit guarantee from FIHSB and its existing shareholders, committing to a minimum net profit of RM9.6 million for the financial years from Jan 1, 2024 to March 31, 2026. In addition, as long as Ecolite remains a shareholder of FIHSB, both parties undertake to make a minimum order of RM10 million and a guaranteed order of RM5 million during the period.

Still, Sunzen needs to ensure the long-term commercial viability of its ventures as investors aren’t keen on companies that exit a business each time they cannot make money.

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