PETALING JAYA: Rubberex Corp (M) Bhd has proposed to dispose of its manufacturing operations in China for HK$135.0 million cash (RM71.6 million) as the business is no longer viable following new regulations by the government there.
The company entered into a conditional share sale agreement (SSA) on Dec 31, 2018 with Nutraceutical Biotech Global Holdings Limited (NBG) to dispose of its entire equity interest in two subsidiaries, which are Pioneer Vantage Ltd and Lifestyle Investment (Hong Kong) Ltd.
Rubberex said as the Huizhou municipal people’s government had prohibited the consumption of high pollution fuels such as coal in the Huizhou municipality, LPL and LSP would be required to invest in new boilers, which are to be fuelled by other types of fuel sources such as natural gas and other clean energy sources to continue operating in the same location.
“Such investment in new boilers is not viable as alternative fuels are too expensive and would reduce the margin of business operations.
“Furthermore, having considered the low margin of the vinyl disposable glove (the type of glove manufactured by LPL and LSP) for the past three financial years, the age of the plant and machinery, the fact that the glove manufacturing plants are prone to breakdown, the downward trend of the average selling price of the vinyl disposable glove for the past three years, the board is of the view that it is not viable for Rubberex Group to continue its manufacturing operations in China,“ the group said in a stock exchange filing.
In this regard, it is in the best interest of Rubberex to exit the manufacturing operations in China and focus its resources in Malaysia, particularly in improving its existing nitrile disposable glove manufacturing plant, which has higher margin.
Source: The Sun Daily