PETALING JAYA: China-based XingHe Holdings Bhd is expanding its presence in Malaysia through the proposed purchase of a prawn farm and farm assets in Tawau, Sabah for RM100 million, as its business in China has been affected by the campaigns against environmental pollution in the smog-prone region.
XingHe told Bursa Malaysia that its wholly owned subsidiary company XW Aquaculture Sdn Bhd (formerly XJ Marine Sdn Bhd) had on Dec 31, 2018 entered into a sale and purchase agreement and an assets sale and purchase agreement with Pegagau Aquaculture Sdn Bhd for the exercise.
The acquisition was for a 97.9 ha farm land at a price of RM12.5 million; as well as all ponds, other land improvements, buildings, plant and machinery, equipment, motor vehicles, livestock and consumables for RM87.5 million.
The purchase consideration is to be funded via internally generated funds and/or borrowings and/or debt to be raised from fund raising exercises.
XingHe’s existing revenue is solely generated from its production, blending and marketing of peanut oil and other edible vegetable oil, all of which are based in China.
“Due to directives by the local authorities in China to industrial plants including the group’s plant to restrict production so as to improve air quality, the group’s plant had been unable to run its production for a reasonable amount of time to fulfill sales orders. These production curbs have resulted in the group not being able to accept new orders for its products and, consequently, the group’s revenue has been on a downtrend since August 2016.”
“These have caused the group’s financial performance to deteriorate with its profit before tax declining from RM125.1 million in the financial year ended Dec 31, 2015 (FY15) to RM8.9 million for the FY17. For the current financial year to Sept 30, 2018, the group has incurred losses for two out of three financial quarters announced to-date (exception being the financial quarter ended March 31, 2018 where there was a profit before tax of RM2.8 million) and as of Sept 30, 2018, the group’s loss for the year to-date amounted to RM14.5 million,” it noted.
XingHe said the proposed acquisition will enable the group to expand its business and strengthen its financial performance by having a new Malaysian-based resilient business to supplement its existing edible oil operations in China.
Source: The Sun Daily