SUBANG JAYA, 12 NOVEMBER 2020 – Salcon Berhad (“Salcon”) today announced that its’ subsidiary, Nusantara Jasakita Sdn Bhd (“NJSB”) has entered into a Share Sale Agreement to acquire a 51% stake in JR Engineering and Medical Technologies (M) Sdn Bhd (“JR”), a glove manufacturing company for a purchase consideration of RM28.56 million(“the Proposed Acquisition”). The Proposed Acquisition comes with a Profit Guarantee of RM 10 million per annum in JR for the financial year 1 January to 31 December for years ending 2021, 2022 and 2023.
With an annual production of over 336 million gloves from four (4) single former production lines in their factory located in Zurah Industrial, Rasa, Hulu Selangor, JR is currently operating beyond its capacity. In order to cater to the spike in demand in specific export markets, the Group is targeting to increase and ramp up production capacity by an additional 12 lines to a total of 16 production lines within 1 year at an estimated capital expenditure of RM150 million, to be funded via internally generated funds and bank borrowings. Once completed, this will bring the total production capacity of the Group to 3.0 billion gloves per annum. JR has already in place the necessary approvals such as the Food and Drug Administration (FDA) certification and the CE Marking Certification (CE) that will enable the Group to export to the US, European market and other countries.
Dato Eddy Leong, Executive Director of Salcon Berhad said, “Upon completion of the transaction, Salcon will have immediate access to a trained labor force, existing customers and an immediate source of revenue whilst cutting down on lengthy product approval and registration processes.”
“The acquisition is well-aligned with Salcon’s strategy of growth and diversification. We are confident the resulting significant synergies, economies of scale and enlarged market presence will strengthen the Group’s growth profile and bring greater long-term value to our stakeholders. 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 added
The acute global shortage of gloves has worsened as Covid-19 cases worldwide have shown no signs of slowing down. Many developed markets (with high glove usage per capita), such as the United States and United Kingdom have continued to record new highs in daily Covid-19 cases. The situation is expected to worsen as more western countries head towards the winter period, which could lead to further spikes in Covid-19 cases. The shortage of gloves due to the coronavirus driven surge in demand is expected to carry over into the next year. A recent Bloomberg commentary expects Malaysia to churn out in excess of 240 billion units of gloves this calendar 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.
JR’s Managing Director, Mr Ganesan Subramaniam will continue to helm its operations, together with his management team. “We look forward to working with Mr Ganesan, who brings with him an extensive wealth of industry experience, as well as his team of highly committed people, to take our business to the next level of success. We will continue to support JR’s employees, customers, suppliers and key stakeholders towards business continuity and enabling positive synergies.” Dato Eddy Leong continued.
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