GPA Holdings units to cease manufacturing ops

PETALING JAYA: GPA Holdings Bhd’s subsidiaries GP Autobat Sdn Bhd (GPA), GPA Plastic Industries Sdn Bhd (GPAI) and GPA Technologies Sdn Bhd (GPAT), plan to shut down their respective manufacturing operations in the fourth quarter of 2015, following years of losses.
The group said it will instead focus on expanding its business in the distribution and trading of imported maintenance-free automotive batteries, using its own brands.
The group arrived at the decision to cut its losses in anticipation of incurring further losses if operations continue, based on existing market conditions.
“The manufacturing operations are not expected to be able to turn around in the near future as the current operations have been hampered by high manufacturing costs primarily due to lack of economies of scale.
“Furthermore, our facilities and technology of production are outdated and inefficient compared with the latest technology available in the battery manufacturing industry and are not able to produce similar quality products in a competitive manner, especially with respect to maintenance-free batteries,” GPA Holdings said in a filing with the stock exchange.
In view of the non-competitive costs, the group had over the past few months gradually scaled down the production of automotive batteries and had sourced its batteries from other reputable manufacturers, and expanded its business in the distribution and trading of imported maintenance-free automotive batteries.
The proposed cessation will affect the consolidated earnings of GPA Holdings and its group of companies for the current financial year ending March 31, 2016, with the impairment loss on plant and machinery and the retrenchment cost to be incurred.
It will affect the consolidated net assets value and gearing of GPA Holdings and its group of companies for the year ending March 31, 2016 with the reduction of net assets per share from 0.11 sen to 0.09 sen.
“The exceptional items relating to the cessation of the subsidiaries’ manufacturing operations to be charged to the group’s financial statement for the financial period ending Dec 31, 2015 are estimated to be about RM12.5 million, being the impairment of the subsidiaries’ fixed assets (RM9 million) and cash payout in relation to the staff retrenchment exercise (RM3.5 million),” said GPA Holdings.
With the cessation of the subsidiaries’ manufacturing operations, the group expects its overall operating results for its next financial year ending March 31, 2017 to show improvement.
The subsidiaries will continue to fulfil accepted sales orders in hand and are expected to completely cease operations by end-November.
“The board of directors of GPA Holdings, having considered all aspects of the proposed cessation, are of the opinion that the exercise is in the best interests of the group.”
The proposed cessation is not subject to the approval of GPA Holdings shareholders or any authorities.