KUALA LUMPUR (Jan 20): Mieco Chipboard Bhd (KL:MIECO) is disposing of two pieces of industrial land in Kuantan, Pahang, for RM40 million to transportation company G-Force Sdn Bhd, in a bid to reduce fixed overhead costs and improve production efficiency. The disposal will result in an estimated net loss of RM2.45 million.

This disposal follows Mieco’s strategic rationalisation, which involved consolidating operations at its Kuala Lipis plant to centralise production and achieve cost efficiencies. The company said it had listed the properties for sale for over a year.

"Given the volatile business environment, as well as the management’s evaluation of options to ensure the group’s sustainability, the disposal offers an opportunity to improve liquidity, and fortify the group’s financial position," the chipboard manufacturer said in a filing with Bursa Malaysia on Monday. 

The properties, comprising two pieces of leasehold industrial land in Kawasan Perindustrian Gebeng, have a combined land area of about 17.76 hectares and a built-up area of 638,767 sq ft, comprising factory, warehouse, and ancillary buildings ranging in age from eight to 30 years.

Mieco originally acquired the properties on Feb 2, 2005, at a total investment cost of RM62.44 million, which included development and finance charges. As of Dec 31, 2023, the carrying value of the properties stood at RM42.45 million.

Proceeds from the sale are earmarked for debt redemption amounting to RM24 million, working capital amounting to RM15.7 million, as well as transaction-related expenses amounting to RM300,000. 

The company expects to complete the transaction in the second half of 2025, subject to the approval of the Pahang state authorities for the transfer of the leasehold properties.

Mieco shares closed unchanged at 69 sen on Monday, with a market capitalisation of RM685 million.