Thursday 20 Jun 2024
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KUALA LUMPUR (May 21): Hong Seng Consolidated Bhd’s (KL:HONGSENG) previously suspended plan to expand its glove business seems to be back on the table as the group eyes an alternate, albeit smaller, site for a synthetic rubber manufacturing plant in Kedah Rubber City.

After talks with the dedicated rubber industrial park’s developer, the Northern Corridor Implementation Authority (NCIA), Hong Seng said the diversified group's prior sublease for a 102.6-acre industrial land for 60 years for RM44.69 million is to be mutually terminated, subject to the group subleasing an alternate land measuring 10.42 acres from NCIA for 60 years for RM4.59 million.

“The alternate land is intended to be used for Hong Seng’s future gloves business expansion which is dependent on, among others, the market condition and sentiment at any relevant time,” the group said in a bourse filing on Tuesday.

It pointed out that it has yet to take possession of the 102.6-acre site. It inked the sublease agreement for the site back in June 2021.

The move to terminate the sublease on the prior land in turn for a smaller alternate site forms a continuation of Hong Seng's previous plan to build and operate a nitrile butadiene latex (NBL) manufacturing plant on the 102.6-acre land, which the group shelved in September 2023.

The group announced its plans to build the NBL plant in 2021 during the peak of the Covid-19 pandemic and the height of rubber glove demand.

It was envisioned to cost the group RM3 billion over a development process encompassing four phases, altogether resulting in a targeted full production capacity of 960 kilo-tonnes per annum.

The group suspended its plans to build the plant citing various factors, including project and funding requirements as well as external factors, such as the current weak market sentiment regarding the glove industry, capital raising needs and inflows of private and foreign investments.

Hong Seng noted that it had paid an RM11.17 million advance in sublease consideration for the previous 102.6-acre land paid to NCIA.

As per conditions of terminating the sublease agreement, Hong Seng said the advance will be utilised to offset the RM4.59 million sublease consideration for the new alternate land, while the remainder RM6.63 million will be refunded to the group.

Shares in Hong Seng ended unchanged at 1.5 sen, valuing the group at RM57.47 million.

Edited ByS Kanagaraju
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