Furniture maker Wegmans Holdings to double production capacity

KUALA LUMPUR: Furniture manufacturer Wegmans Holdings Bhd, which is en route to a listing on Bursa Malaysia’s ACE Market on March 6, will be allocating RM11 million of the RM29 million it hopes to raise from the initial public offering (IPO) to construct a new factory in a bid to double its production capacity.

Another RM11 million will be used to purchase new equipment and machinery to increase automation. The rest of the proceeds will be used for working capital and to finance listing expenses.

According to its IPO prospectus, the group plans to develop the four parcels of land it owns, measuring 905,397 sq ft, in three phases. The first phase will encompass the construction of one factory, management office, showroom and workers hostel.

Executive director Collin Law told reporters at a media briefing after the prospectus launch ceremony today that the first phase is expected to be completed in the fourth quarter of next year.

Upon completion of the new facility, production capacity of chairs and tables is expected to double. Its current capacity accommodates the production of up to 480,000 chairs and 190,000 tables. Upon the completion of phase one, production capacity will double to 960,000 chairs and 380,000 tables.

Law said the group is planning to increase automation to reduce its dependence on foreign workers, who now comprise 80% of its workforce.

“Last year around July, we had a temporary shortage of workers but it has been resolved as foreign workers have started coming in since November.

“We are looking at more advanced machines for automation so that we can cut down our dependence on foreign workers,” he added.

While there are no concrete plans for the subsequent two phases at this juncture, they are said to include the construction of three more production plants, two in Phase 2 and one in Phase 3.

The group, which derives 99% of its revenue from exports, is also closely monitoring the fluctuations of the US dollar in relation to its cost and will make adjustments to its prices accordingly to maintain profit levels.

The bulk of its revenue comes from Japan (23%) followed by the US (18%), Australia (15%) and the UK (12%), while other markets account for 32%.

At this juncture, Law said, Wegmans has no plans to become a furniture retailer.
The group’s net profit for the first three quarters of FY17 stood at RM11.55 million while revenue stood at RM63.37 million.

The Johor-based furniture manufacturer’s IPO involves a public issue of 100 million new shares at an issue price of 29 sen apiece. Of this, 25 million shares will be made available to the Malaysian public, 15 million for eligible directors, employees and persons who have contributed to the group and its subsidiary’s success.

Besides that, 10 million shares will be made available by way of private placement to institutional and identified investors, and 50 million shares to identified bumiputra investors approved by the Ministry of International Trade and Industry.
There will also be an offer-for-sale of 50 million existing shares via private placement.

Applications for its shares close next Thursday.