Tek Seng feels the heat in solar power business

PETALING JAYA: Penang-based Tek Seng Holdings Bhd is planning to suspend its photovoltaic solar business in the wake of intense market competition.
This comes on the heels of India’s plan to impose a 25% duty on imports of solar cells and modules from Malaysia and China.
Tek Seng told Bursa Malaysia that its 50.69%-owned subsidiary TS Solartech Sdn Bhd (TSST) decided to halt its entire production activities this quarter.
TSST is mainly involved in the manufacturing and sale of photovoltaic products and is a major Tek Seng subsidiary.
For the first quarter ended March 31, it incurred a net loss of RM11.1 million. Last year, it reported a net profit of RM22.2 million against RM16.7 million in 2016.
According to Tek Seng’s latest annual report, besides photovoltaic solar, the group is also involved in polyvinyl chloride sheeting, PP non-woven and PVC leather segments.
Tek Seng revealed that the suspension will result in the redundancy of a total of 118 production workers. However, the provision of the activities regarding 1.1766MW feed-in tariff solar system will continue to operate.
Detailing the rationale behind the suspension move, Tek Seng said the tough and challenging operating environment for TSST was due to the continuing tense competition in the solar industry as well as price erosion for the solar cells as a result of excess inventory in the supply chain.
“Further, the export sales of TSST have been significantly affected due to the US safeguard tariffs over a period of four years and India safeguard tariffs over a period of two years, on importation of solar cells and modules from Malaysia.”
Tek Seng opined that TSST’s prospects remain very challenging and is not expected to improve in the near future.
It foresees a financial impact on the group for the financial year ending Dec 31 on the back of the one-off redundancy cost and impairment loss on assets to be incurred.
“At this juncture, TSST is unable to ascertain the extent of the cessation costs, as such, TSST will made the corresponding announcements to Bursa Securities in due course.”
Tek Seng was unchanged at 29.5 sen today on 555,000 shares traded.