Tropicana sells non-core ops for RM198mil

PETALING JAYA: Tropicana Corp Bhd is disposing of its non-core business of manufacturing explosives with the sale of its entire 73% shareholding in Tenaga Kimia Sdn Bhd for RM194.7mil cash.

The company said that its unit, Tropicana Tenaga Kimia Sdn Bhd, was disposing of the stake to Austin Powder Asia Pacific, a subsidiary of US-based Austin Powder Holdings Co.

“Proceeds raised will be utilised for working capital and repayment of bank borrowings of the group,” it said in a statement.

In a filing with Bursa Malaysia, Tropicana said the proposed disposal would enable it to realise the gains from an investment that was not considered as strategic and synergistic to the group.

“This exercise is also in line with Tropicana’s de-gearing initiatives to reduce the borrowing levels of the Tropicana Group,” it said.

The company also said it would benefit from interest savings as a result of the utilisation of the sale proceeds to lower borrowings.

“Tropicana’s de-gearing initiatives are bearing results. Taking into account the sale of 308.72 acres Canal City land to Eco World Development Group Bhd for RM471mil, which was completed on March 31, 2015, and the impending completion of the sale of 3.14-acre Bukit Bintang Land to a joint venture led by Agile Property Holdings Ltd for RM448mil and the sale of Tropicana City Mall and Office Tower to Capitamalls Malaysia Trust for RM540mil, Tropicana’s potential net gearing could fall to about 0.3 times.

“This will put Tropicana on a stronger financial footing while it continues to further strengthen its balance sheet via unlocking the value of its land bank.”

According to Tropicana, Tenaga Kimia and its group of companies manufacture and supply emulsion explosives and technical blasting services for various industries including construction, mining and oil and gas.

The group has a presence in Malaysia, Indonesia, the Philippines, Hong Kong, Taiwan, Indochina and other countries in the region.

According to Tropicana, Tenaga Kimia contributed RM18.9mil to its net earnings in 2014. It added that although Tenaga Kimia’s contribution would cease following the proposed disposal, the group expected to record a net gain of RM48.5mil for its current financial year ending Dec 31, 2015 following this proposed transaction.