KUCHING: YKGI Holdings Bhd has proposed to undertake a capital reduction exercise with the proceeds derived to be used to pare down its accumulated losses.
The proposed exercise entails a reduction of some RM137.92 million from the company’s issued share capital which is not represented by available assets.
The corresponding credit of RM137.92 million will go to reduce the company’s accumulated losses which stood at about RM30.48 million as at Sept 30, 2018 as well as allowance for impairment amounting to RM107.44 million.
The allowance for impairment was derived based on the aggregate book value of the assets to be disposed as at Sept 30,2018 amounting to RM232.44 million and the proposed disposal of the company’s coated coil business and assets in Selangor to NS BlueScope (Malaysia)Sdn Bhd for RM125 million in cash.
These assets comprise the company’s production facilities (land and buildings), plant and machinery used in coated coil business and the production related stocks.
The proposed disposal, which is currently pending the submission of the relevant applications to the authorities, is expected to be completed in second quarter-2019.
YKGI shareholders will vote on the proposed capital reduction at the company’s extraordinary general meeting (EGM) on Dec 18.
The Hii family of Kuching is the controlling shareholder in YKGI (formerly Yung Kong Galvanising Industries Bhd), with a stake of over 30%.
Japan’s Marubeni-Itochu Steel Inc is the second largest shareholder which owns equity interest of 26.75% in the company as at March 30, 2018.
YKGI executive deputy chairman Datuk Soh Thian Lai said the proposed capital reduction was to rationalise the group’s financial position by reducing the company’s accumulated losses which include the allowance for impairment by way of cancellation of its issued share capital which is lost or unpresented by available assets.
This, he explained a circular to shareholders, is to reflect more accurately the value of the group’s underlying assets and its financial position.
Other rationales for the proposed exercise are to enable the company to declare and pay dividends in the future when the group returns to profitability, and to encourage efficiency of capital usage which would result in improvement of its return on equity and increase its attractiveness among investors.
“The proposed capital reduction will not result in any change in the total number of YKGI shares in issue and any adjustment to the company’s share price immediately after the proposed capital reduction.
The proposed capital reduction is expected to be completed in first quarter-2019.The company’s board of directors has recommended shareholders to vote in favour of the resolution in relation to the proposed capital reduction.
YKGI, which also own manufacturing facilities in Demak Laut Industrial Park here, is
primarily involved in coated coil business as well as metal roofing and trading in hardware and building materials.
In the third quarter ended Sept 30,2018,YKGI recorded lower group revenue of RM86.8 million from RM101.7 million in 3Q-2017 while pre-tax losses widened to RM6.5 million from RM3.2 million during the same period.
Years of losses have led to a drag in YKGI share price which currently hovers around 12sen.