Eonmetall sells stake in Lienteh amid challenging glove business environment

Eonmetall sells stake in Lienteh amid challenging glove business environment
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KUALA LUMPUR (Aug 8): Eonmetall Group Bhd plans to dispose of its 51% stake in glove company Lienteh Technology Bhd for RM35.7 million, amid the tough business environment in the glove industry.

The disposal plan was made after demand for gloves and price pressure caused some of Lienteh's customers to cancel current purchase contracts or negotiate new ones, as well as reduce orders, Eonmetall told Bursa Malaysia on Monday (Aug 8).

At the same time, the number of new entrants in the glove industry, as well as capacity of existing manufacturers have increased, leading to an oversupply of gloves and thus strong competition in the glove industry, the group said.

Eonmetall proposes to sell the 51% stake to Lienteh shareholders Envy Venture Sdn Bhd, E Metall Systems Sdn Bhd, Medical Spring International Health Management (Hong Kang) Co Ltd and Elogistic, and Industrial Estate Developer Sdn Bhd.

The proposal is considered a related party transaction as Lienteh's major shareholder, Envy Venture, is also a shareholder of Eonmetall, holding an 11.42% stake in the group.

Lienteh, which makes medical grade nitrile gloves and non-medical grade gloves, posted an unaudited loss after tax of RM14.76 million for the six months ended June 30, 2022, after reporting an audited profit after tax of RM250,000 for the year ended Dec 31, 2021.

“Amidst the challenging environment, Lienteh requires more management attention and financial resources to maintain its competitiveness in the glove industry, while there can be no assurance that the prospects of the glove industry will improve in the future," said Eonmetall.

The group said it intends to allocate its resources and focus on manufacturing steel products and metalworking machinery and other industrial process machinery and equipment.

Of the RM35.7 million gross proceeds from the sale, Eonmetall said RM17 million will be used to expand its production facilities, RM12 million to repay borrowings, and RM6 million for working capital.

The group intends to construct a new factory building, together with a three-story office building on part of its vacant land in Kapar, Klang, with an annual production capacity of 45,000 tonnes of steel products.

“The construction works of the new factory building and office building, which are estimated to cost approximately RM70 million based on the best estimates of the management of the group, are expected to commence in the first quarter of 2023,” said Eonmetall.

Eonmetall’s share price closed up two sen or 3.33% at 62 sen on Monday, giving the group a market capitalisation of RM173.39 million.

S Kanagaraju