KUALA LUMPUR (Dec 27): Loss-making OCB Bhd (KL:OCB) is to sell its loss-making and indebted wholly owned subsidiary Agrow Malaysia Sdn Bhd for RM3 million cash.

The purchaser, Tan Sim Lam, will also take over OCB’s role as the building materials unit’s guarantor of RM20.32 million debt as part of the deal, according to the consumer food and bedding maker’s bourse filing on Friday.

Tan is the project director of property development and construction company Mawar Abadi (M) Sdn Bhd.

“The proposed disposal forms a key component of OCB’s strategic restructuring initiative aimed to fortify its financial position while enabling a sharper focus on expanding its consumer foods, bedding products and property development divisions moving forward,” said OCB.

The disposal of Agrow marks OCB’s exit from the building materials sector.

OCB has been in the red since 2018. The company said these losses have resulted in financial constraints, limiting Agrow’s ability to pursue growth opportunities and undertake capital-intensive expansion plans required to compete with its peers.

“Agrow’s reliance on OCB to support its operations and fund turnaround strategies is also deemed to place a stain on resources, diverting capital and management focus away from profitable segments, in particular, consumer foods, bedding products and property development business,” the company said.

The RM3 million in proceeds is to be used mainly for working capital.

On a pro-forma basis, deconsolidating Agrow from OCB’s balance sheet, the company’s retained earnings as at end-December 2023 will fall to RM59.72 million from RM74.64 million, while total borrowings will decline to RM68.15 million from RM80.65 million.

The disposal is expected to result in an estimated loss of RM14.92 million on loss of Agrow’s carrying value.

Shares in OCB ended unchanged at 73 sen, valuing the company at RM75.08 million.