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KUALA LUMPUR: Six months after roping in Wilmar International Ltd as a major shareholder via a private placement, Three-A Resources Bhd (3A) has put into effect its proposed overseas business partnerships with, and leveraging on, the larger Singapore-listed group.

The two parties agreed yesterday to set up a factory in Shanhaiguan, China, for the manufacture of food and beverage ingredients, one of many more equity joint ventures (JVs) to come.

Pursuant to a framework cooperation agreement, the two companies agreed to explore the possibility of setting up other equity JVs in China and to collectively invest up to US$40 million (RM129.2 million) or such agreed sums in the ventures. Each party will contribute equally to the investments.

Immediately pursuant to that, their respective units agreed to incorporate a specific JV company, Three-A (Qinhuangdao) Food Industries Co Ltd, to undertake the F&B ingredients business in Shanhaiguan. Wilmar held a 16.67% stake in 3A as at April 30.

In an announcement yesterday, 3A said the total investment of the JV company would be US$12 million, which would include a registered capital of US$5.1 million

3A’s subsidiary Three-A Food Industries (M) Sdn Bhd and Wilmar’s subsidiary Yihai Kerry Investments Co Ltd (YHK) will each contribute US$2.55 million, representing half of the registered capital.

YHK group is mainly engaged in grain and cooking oil processing, chemical processing of oil, storage and logistics, and domestic and foreign trade. It is also involved in the coal business, clean energy development and real estate.

The rest of Three-A Qinhuangdao’s investment requirements will come from bank borrowings or loans from the JV parties. The specific JV is for a period of 50 years.

3A said the joint company’s board would have equal representatives from both parties. It said the potential ventures, including the one in the F&B ingredient business, were subject to separate feasibility studies, and expected to start operations next year.

The JV agreement is subject to, among others, various approvals from the relevant parties and the issuance of a business licence by the authorities in China.

3A group is involved in the manufacturing of caramel colour, glucose syrup, maltose syrup, soya protein sauce, hydrolysed vegetable protein, natural fermented vinegar, distilled vinegar, rice vinegar, ketchup, chili sauce, table vinegar, mayonnaise, pickles, caramel powder, HVP powder, soya sauce powder and Maltodextrin.

Its products are widely used in the food manufacturing and pharmaceutical sectors such as non-dairy creamer, flavours, seasonings, sauces, beverages, dry mixes, confectionery, frozen food and snacks.

3A was thrust into the spotlight last year when it placed out a 16.67% stake comprising 61.6 million new shares to Wilmar at 75 sen apiece for a total of RM46.2 million. The exercise was completed last November. It was seen as a further diversification downstream for Wilmar, which emerged as 3A’s second largest shareholder.

Fang Chew Ham and family are 3A’s single largest shareholder, with a 37.2% stake. Lembaga Tabung Haji has a 4.6% stake in 3A.

In its announcement, 3A said: “China’s economy has grown rapidly in the last few decades, and the food and drink sector has seen a boom in output — with 150% growth between 2004 and 2008. In the first five months of 2009, the output of  the country’s food industry was 1.82 trillion yuan (RM861.17 billion), an increase of 14.6% over the same period of 2008.”

It added that by 2008, production of flavours, flavourings and fragrances had more than doubled to 300,000 tonnes from 145,000 tonnes in 2000.

“Increasing demand for flavours from Chinese food manufacturers has led to rapid growth in the last decade and has encouraged more foreign firms to set up their operations in China,” it said.


This article appeared in The Edge Financial Daily, May 6, 2010.

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