CSH Alliance shelves glove venture plans

KUALA LUMPUR: CSH Alliance Bhd is seeking approval from its shareholders to vary the utilisation of the proceeds of its right issue, following a decision not to venture into the gloves manufacturing business.

On Jan 26, 2022, the group had completed a right issue and raised total proceeds of RM103.61mil, of which RM76.1mil was to be allocated to its foray into the gloves business.

However, the board of directors said it has reassessed its decision given the falling average selling prices (ASP) of gloves, lower margins and heightened competition in the market.

"The Board is of view that it may not be viable now for the group as a late entrant to venture into the gloves business now which requires significant capital investment in additional to longer gestation period in planning, construction and commissioning stages of the production plant prior to business commencement and leading to longer payback period," it said in a bourse filing.

Following the change in direction, the group's subsidiary APPI Sdn Bhd terminated its agreement to appoint Howellcare Industries Sdn Bhd as the turnkey contractor for planned production lines and a utilities support system.

According to the group, it has not commenced the construction of the glove production plant and only preliminary works have been performed due to the previous Covid-related lockdowns and restrictions.

It said it would be able to recover the deposit of RM4mil from Howellcare, which would be reallocated to the group's working capital and projects.

"The Mutual Termination will allow the Group to exit from the high capital investment business to minimise the business risks and financing risks to the Group as well as to focus its resources to expand its existing businesses including financial services, transportation and logistics businesses which have been progressing well with revenue generated and to explore other good potential business opportunities," it added.

The group said the quantum of the variation of the proceeds of the right issue has not yet been determined and will be announced at a later stage.

"Pending utilisation of the proceeds, such proceeds will be placed as deposits with financial institutions or short-term money market instruments as the Board may deem fit," it said.

Meanwhile, the group announced in a separate bourse filing that it has signed a memorandum of understanding with BYD Malaysia Sdn Bhd to explore a partnership in the business of distributing fully electric commercial vehicles and providing related after-sales services in Malaysia.

"The MOU is part of the CSH’s initiative to drive its transportation and logistics business forward particularly in the supply of EV for the logistics industry," it said.

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CSH Alliance , Howellcare , gloves , EV


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