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YKGI sells off coated coil business to NS Bluescope

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KUCHING: YKGI Holdings Bhd is selling its loss-making coated coil business to NS Bluescope (Malaysia) Sdn Bhd for RM125 million.

Shareholders gave their nod to the proposed disposal at the company’s extraordinary general meeting (EGM) on Wednesday (Feb 20). The disposal is expected to be completed in May.

Selangor-based NS Bluescope is involved in manufacturing and marketing of coated steel sheet and coil products.

The assets in connection with the coated coil business to be sold include an industrial premises in Selangor that comprise a single-storey detached factory, a three-storey detached office building, uncompleted single storey factories and other ancillary buildings as well as plant and machinery.

The premises is currently occupied by YKGI for the production of mid-stream steel products in respect of pickled and oiled hot rolled coils, cold rolled coils, galvanised iron coils and pre-painted galvanised iron coils and storage of inventories and raw materials, according to YKGI executive deputy chairman Datuk Soh Thian Lai.

On the rationale for the proposed disposal of the coated coil business, Lai said it was operating in an increasingly challenging operating environment.

“The proposed disposal will enable our company to address the material uncertainty on our group’s and company’s ability to continue as going concern (as highlighted by Messrs KPMG PLT in its independent report on our audited consolidated financial statements for the FYE 31 December 2017) and put our group on a better financial footing by deploying its resources more efficiently to grow our downstream business.

“The proposed disposal will result in our group exiting from the coated coil business in West Malaysia, and enable our group to focus on our profitable downstream business held and operated by Asteel Resources Sdn Bhd and its subsidiaries (Asteel Group) in East Malaysia. Our company intends to expand our downstream business to west Malaysia,” he added in the circular to shareholders on the proposal disposal.

Proceeds from the disposal would be utilised for repayment of loans and borrowings (RM65.98 million), payment to a trade creditor (RM54.02 million) and defraying expenses incidental to the proposed disposal (RM5 million)

Asteel’s downstream business produces metal roofing products as well as trading in hardware and building materials.

“Due to the nature of the product of the downstream business, which are value-added final products used for construction, the gross profit margin and hence profitability of the group via downstream business in expected to be higher than its current levels which have been hindered by the coated coil business.

“Notwithstanding that Asteel group is currently the market leader in the metal roofing segment in Kuching, it will continue to expand geographically to other areas in East Malaysia.

“Asteel group targets to open two concept stores in Sarawak and two other production facilities in Sabah as part of its business expansion plan. Asteel also intends to expand its presence to Kalimantan, Indonesia, in addition to its expansion plans in East Malaysia.

“YKGI also intends to bring over the expertise of the downstream business to west Malaysia,” said Lai.

He said the plan for the company’s downstream business in the peninsula would be through joint venture(s) or acquisition(s) of existing metal roofing company(ies).

The company, he added, has identified several potential ventures and was in the midst of evaluating its potential ventures.

 Kuching-based Asteel group currently has five manufacturing facilities – in Kuching, Bintulu, Miri, Kota Kinabalu and Sabah. Its products are mainly sold in Malaysia, with about one percent exported to Indonesia, Singapore, Brunei, Solomon Islands and Fiji.

The group operates seven envio concept stores that trade hardware and building materials.

According to Lai, YKGI intends to expand its product offerings of building materials to include safety glass, metal door frames, window frames, metal ceiling and sunshade products.

This business expansion plan, he said, would be undertaken via its joint venture company – Asteel Ajiya Sdn Bhd – which was set up with Ajiya Bhd.

“As part of the said joint venture, YKGI will also be venturing into the provision of industrialised building systems i.e. to supply and install its Ajiya green integrated building system,” he added.

Meanwhile, YKGI has reported the group’s pre-tax loss of RM122.86 million on revenue of RM87.3 million for the fourth quarter ended Dec 31, 2018 (4Q-2018) as compared to loss of RM6.97 million a year ago.

The company attributed the huge loss to impairment loss of RM107.44 million in the sale of the coated coil business to NS Bluescope.

YKGI said it had completed the proposed capital reduction of some RM137.92 million from the company’s issue capital, which was not represented by available assets, on Feb 1, 2019.

“Following the completion of the proposed capital reduction, the issue share capital of the company is RM38,746,828 comprising 350,684,180 ordinary shares and 21,726,000 shares in redeemable convertible preference shares,” it added in notes to its latest quarterly financials.

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