KUALA LUMPUR (Jan 18): Chemical Company of Malaysia Bhd (CCM) is planning to reactivate its Pasir Gudang Works 1 (PGW1) via wholly-owned subsidiary CCM Chemicals Sdn Bhd (CMCC) at an expected cost of RM68.5 million, which includes the cost of equipment purchase and installation.

In a filing with Bursa Malaysia today, CCM said the project will take about 18 months to complete and is expected to be ready in the second quarter of 2019.

“The reactivation of PGW1 is necessary to enable CCMC to grow its Chlor-alkali Business and seize market opportunities in Malaysia for its chlor-alkali products,” said CCM, adding that it is expected to increase the production capacity for the chlor-alkali products by about 50%.

The reactivation of PGW1 will also allow CCMC to leverage on the shorter lead time and lower cost to increase its production capacity in relation to starting on a green field site as most of the required infrastructure is already in place, said CCM.

“The proposed reactivation of PGW1 will be funded by a combination of internal and external funds, and is not expected to have a material effect on the gearing ratio of CCM Group for the financial year ending Dec 31, 2018 (FY18),” said CCM, adding that save for the additional borrowings of RM50 million to fund the project, there are no additional liabilities anticipated from the proposed exercise.

While the proposed reactivation of PGW1 is not expected to have any material effect on the CCM’s earnings for FY18, CCM said it is expected to contribute positively to the group’s future earnings.

To recall, in November 2016, as part of its Operational Excellence rationalisation exercise of its PGW1 and Pasir Gudang Work 2 (PGW2) to modernise the plant facilities aimed at optimising production cost and production output, CCM said PGW2 capacity was increased from 20,000 Electro-Chloro Units (ECU) to 40,000 ECU, whilst PGW1 was deactivated and kept as reserve capacity for future expansion.

Shares in CCM shares rose to an eight-year high of RM2.23 two days ago (Jan 16). Today, the stock was unchanged at RM2.16, for a market capitalisation of RM360.07 million. Over the past year, the stock has grown about 104.74% from RM1.06.