KUALA LUMPUR (Sept 30): Kawan Food Bhd (KL:KAWAN) said it is closing its manufacturing facility in China, due to the impact of US tariffs and limited room for expansion.

The group, which produces food products like paratha, flatbread and pastries, operates two manufacturing plants — one in Pulau Indah, Selangor, and the other in China through wholly-owned Kawan Food (Nantong) Co Ltd (KFN).

In a filing with Bursa Malaysia on Monday, Kawan Food said the imposition of US tariffs on Chinese imports since 2018 had made it more competitive and efficient to export from the Pulau Indah factory.

Apart from that, rapid urbanisation in the region surrounding the KFN factory has limited opportunities for future expansion, according to the group.

“The closure of KFN will not have significant financial impact on the company, as its sales contribution was less than 5% of the company's [total], and the manufacturing operations have been underutilised since the imposition of US tariffs in 2018,” the group added.

Following the closure of KFN in China, Kawan Food plans to expand the Pulau Indah factory by using equipment and machinery from the KFN facility, supplemented by investments in newer technology.

This strategy, it said, is aimed at better serving the needs of the Chinese market, and enhance its competitiveness in the domestic market as well as export markets, including the US, Europe, Asia, Africa, the Middle East, Australia, and New Zealand.

Additionally, Kawan Food said it plans to realise the value of its land and buildings at the KFN site in China at a later date.

Shares of Kawan Food closed up one sen or 0.59% at RM1.71 on Monday, giving the group a market capitalisation of RM589.3 million.