KUALA LUMPUR (July 18): Tek Seng Holdings Bhd said today its 50.69%-owned subsidiary TS Solartech Sdn Bhd has decided to temporarily stop its photovoltaic (PV) production activities in Penang in the third quarter of this year.

Tek Seng said the continuing tense competition in the solar industry coupled by the eroded prices of the solar cells due to excess inventory in the supply chain had posted a very tough and challenging operating environment for TS Solartech.

"Further, the export sales of TS Solartech have been significantly affected due to the US safeguard tariffs over a period of four years and India safeguard tariffs over a period of two years, on importation of solar cells and modules from Malaysia," Tek Seng said in a filing with Bursa Malaysia today.

"The board is of the view that the prospects of TS Solartech will continue to be very challenging and this situation is not expected to improve in the near future. In this respect, the board decided to [temporarily] stop its production to minimise its losses," it added.

The temporary halt of TS Solartech's operations will affect 118 workers, who will be made redundant. However, the provision of the activities regarding the 1.1766MW feed-in tariff solar system will continue to be in operation, it added.

Tek Seng said the move will have a financial effect on the group for the financial year ending Dec 31, 2018 (FY18) as a result of the one-off redundancy cost and impairment loss on assets to be incurred.

"At this juncture, TS Solartech is unable to ascertain the extent of the cessation costs," Tek Seng said, adding that it will make an announcement to Bursa in due course.

In FY17, TS Solartech posted a higher net profit of RM22.2 million compared with RM16.7 million in FY16. Revenue fell 53.7% to RM117.8 million from RM254.3 million.

Tek Seng shares closed unchanged at 29.5 sen today, with 555,000 shares done, bringing a market capitalisation of RM102.70 million.