PETALING JAYA: PDZ Holdings Bhd has proposed to diversify its business operations into the manufacture, sale and marketing of gloves in an effort to turn around its financial performance.
PDZ intends to acquire, install and commission up to four double former glove-dipping lines, which are expected to yield a production capacity of up to 829 million pieces of gloves annually.
The group intends to install the glove-dipping lines at a new factory building to be acquired, and the installation is expected to begin by the third quarter of this year and be completed in stages by the third quarter of 2022, with the first glove-dipping line to be completed by the second quarter of 2022.
“At this stage, the group has identified a supplier for the glove-dipping lines and is in the midst of identifying suppliers/distributors for the supply of raw materials required for the production of rubber gloves such as raw nitrile and other related chemicals. The raw materials are expected to be sourced locally and/or overseas such as China,” it said in an exchange filing.
In terms of target markets, PDZ intends to export the rubber gloves to places with high Covid-19 infection rates such as the US, India, and countries in Europe, Africa and South America.
The glove business is anticipated to contribute 25% or more of the net assets and/or net profits of the group, and will be undertaken by Erat Marine Sdn Bhd, a wholly owned subsidiary of the company.
“The proposed diversification allows the group to capitalise on a booming segment with favourable long-term prospects while making the most out of the opportunities created by the pandemic. Moreover, the proposed diversification will provide an alternative source of income to the group’s current core business. This represents part of the group’s business turnaround plan to improve its financial performance.”
Apart from the diversification, PDZ is also proposing a consolidation every 10 existing ordinary shares to one share, as well as proposing a renounceable rights issue of up to 797.75 million new shares together with up to 398.87 million free detachable warrants on the basis of six rights shares together with three free warrants C for every one consolidated share held.
Based on an illustrative issue price of 10 sen per rights share, PDZ intends to raise a minimum of RM10 million from the proposed rights issue with warrants to meet the funding requirements of its glove business.
Along with the rights issue, the group is proposing a variation of the utilisation of proceeds previously raised from a rights issue exercise previously undertaken by the company which was completed on Feb 7, 2018 to go towards the acquisition of a factory building in Kulai, Johor, capital expenditure for the glove business as well as other working capital needs.
The group targets to enter into an agreement to acquire the Kulai factory within three months from completion of the proposed rights issue with warrants.
The proposals are expected to be completed by the second quarter of 2021.
In a separate Bursa filing, PNE PCB Bhd proposed a diversification of its business to include the manufacture and sale of rubber gloves. Further to this, the group is proposing a private placement of up to 194.51 million new ordinary shares, representing a 30% share in PNE PCB, to independent third-party investors.
Based on the illustrative issue price of 19.28 sen per share, gross proceeds are expected to be up to 37.5 million, and will go towards the purchase of five double former glove-dipping lines, installation and commission of related facilities, and certification expenditure.
All the machines are expected to be sourced in Malaysia with some parts and components from overseas, such as China and Germany. The maximum production capacity of the five glove dipping lines is estimated to be 1.34 billion pieces a year.
The installation of five glove-dipping lines is expected to begin by the third quarter of 2021 and be completed in stages by the third quarter of 2022, with the first glove-dipping line expected to be ready by December this year.
Any shortfall between the group’s funding requirements and the proceeds raised from the proposed private placement will come from internally generated funds, bank borrowings and/or future fundraising exercises.
The proposals are expected to be completed by the second quarter of this year.