WATER and wastewater engineering-based Salcon Bhd has ventured into the glove manufacturing business via a share sale agreement to acquire 51% stake in JR Engineering and Medical Technologies (M) Sdn Bhd for RM28.56 mil.
The proposed acquisition through Salcon’s subsidiary Nusantara Jasakita Sdn Bhd comes with a profit guarantee of RM10 mil per annum in JR Engineering for the financial years ending 2021, 2022 and 2023 (from Jan 1 to Dec 31).
With an annual production of over 336 million gloves from four single former production lines in their factory located in Zurah Industrial, Rasa in Hulu Selangor, JR Engineering is currently operating beyond its capacity.
“To cater to the spike in demand in specific export markets, the group targets to ramp up production capacity by an additional 12 lines to a total of 16 production lines within one year at an estimated capex of RM150 mil to be funded via internally generated funds and bank borrowings,” Salcon noted in a media release.
“Once completed, this will bring the total production capacity of the Group to 3 billion gloves per annum.”
JR Engineering has already put in place the necessary approvals such as the Food and Drug Administration (FDA) certification and the CE Marking Certification that will enable the group to export to the US, European market and other countries.
Salcon’s executive director Datuk Eddy Leong said Salcon will have immediate access to a trained labour force, existing customer base and an immediate source of revenue while cutting down on lengthy product approval and registration processes.
“Although there are other manufacturers ramping up production capacity and new entrants venturing into this sector, we believe a structural change in usage of gloves will ensure there will be continued and strong demand in the market in the near- to mid-term.” he pointed out.
The acute global shortage of gloves has worsened as COVID-19 cases worldwide have shown no signs of abating. The situation is expected to worsen as more western countries head towards the winter period which could lead to further spikes in infection rate.
A recent Bloomberg commentary expects Malaysia to churn out in excess of 240 billion units of gloves this year with demand already pushing production lines to maximum capacity up till mid-2021 compared to 182 billion glove pieces in 2019.
Lead times for delivery of orders have climbed from 30 days to 150 days and the demand is seemingly incessant. – Nov 12, 2020
