Johan Holdings to invest over RM600m to diversify into glove manufacturing
29 Mar 2021
Johan Holdings Bhd has proposed to diversify into glove manufacturing, which is expected to involve a capital expenditure of about RM679.5 million including the costs of land acquisition and plant construction.
The company, which is in the hospitality and card services business, said wholly-owned subsidiary, Dynacare Sdn Bhd, today signed an agreement to buy a parcel of industrial land measuring 71,980 metres in Manjung, Perak, for RM27.3 million cash.
Johan Holdings said it had earmarked the land, which has five factories and other buildings on it, as the site for its glove manufacturing plant.
“The plan for the gloves business is to install and commission 42 production lines within the next 24 months to manufacture examination and surgical gloves, which are expected to yield production capacity of about 12 billion pieces of gloves per annum,” it said in a filing with Bursa Malaysia today.
The company estimated an additional financial commitment of about RM652.2 million was required to build the plant and to put the glove business on-stream.
Johan Holdings said the first production line’s commercial operation was expected to start in August this year, with a total of six production lines to be fully operational by year-end.
It said the remaining 36 production lines would be commissioned and operational in stages in 2022 and 2023.
This is part of the company’s proposed diversification to include the manufacture, sale and distribution of gloves including other personal protective equipment and related products, pharmaceutical and medical products and devices and services, as well as related upstream and downstream activities.
Johan Holdings said its board had identified the glove business as new business segment to expand the group’s revenue and income stream, as the group had been incurring losses for the past three financial years.
The company has also proposed a rights issue of 389.34 million shares on the basis of one share for every two existing Johan shares held, together with free detachable warrants on the basis of one warrant for every one rights share subscribed for, at an issue price of 10 sen per share.
It said the estimated gross proceeds of up to RM38.93 million would be used to fund the glove business and for other expenses.
The company has also extended an offer to George Kent (Malaysia) Bhd, in which its chairman and chief executive Tan Sri Tan Kay Hock is also a major shareholder, to subscribe for 40 per cent equity interest in Dynacare for RM40 million, with Johan Holdings retaining the remaining 60 per cent stake.
George Kent, it said, would be an equity partner only and any dealings of Dynacare with Johan and/ or George Kent would at all times be conducted on arm’s length basis.
“George Kent has accepted the offer which is subject to both shareholders’ approval, whereby Dynacare will give the rights to George Kent to build the manufacturing plant and installation of machinery for the gloves business on the land for a contract value of RM624.1 million,” it added.
Johan Holdings said the board was optimistic of the potential demand of gloves premised on the outlook of the glove industry.