Friday, 13 January 2017

(The Star) EKA Noodles to close flagship plant in Baling

PETALING JAYA: EKA Noodles Bhd has decided to close its flagship rice and sago sticks (vermicelli) manufacturing plant in Baling, Kedah, and cease its operations by the middle of next week.
The company, which lapsed into Practice Note 17 (PN17) status in August last year, told Bursa Malaysia that this cessation of the operations of Kilang Bihun Bersatu Sdn Bhd (KBBSB) and EKA Foodstuff Sdn Bhd (EFSB) from Jan 18 would entail an asset disposal.
EKA noted that it now had eight months to submit its regularisation plan and said the proposed asset disposal was an opportunity to unlock the value of these assets to repay the liabilities of KBBSB and EFSB, which have suffered losses for the past several years and are not expected to turn around in the near future.
However, EKA added that there was no guarantee that the group would be able to realise a higher value of these assets to be disposed of.
The net book value of the assets as at Nov 30, 2016, totalled RM35.7mil.
Its original cost of investment in KBBSB was RM31.66mil, while the cost of investment in marketer EFSB was RM2.
According to the company, the proposed cessation is expected to result in cost savings (in terms of salaries and wages, utilities, etc) of up to RM200,000 per month and interest savings of about RM8.4mil per annum.
KBBSB, which is a major subsidiary, posted a net loss before tax of RM3.37mil for the 18-month financial period ended Dec 31, 2015.
For the financial year ended June 30, 2014 (FY14), its net loss was larger at RM13.9mil.
This was mainly due to a higher production cost incurred such as in the price of raw materials (broken rice and sago starch), an increase in the electricity tariff and the implementation of the minimum wage of RM900.
EKA also attributed the loss to an allowance of impairment losses of trade debtors totalling about RM5.39mil.
The proposed cessation of operations will affect 96 employees (49 at KBBSB and 47 at EFSB), who will be made redundant.
Based on the preliminary review, the employee redundancy and other related costs are estimated at about RM690,000.
EKA pointed out that the proposed cessation would not result in the complete cessation of the group’s manufacturing and marketing activities.
EKA triggered the PN17 criteria in August last year as its shareholders’ equity on a consolidated basis was 25% or less of its paid-up capital and was less than RM40mil in its unaudited interim financial results for the second quarter ended June 30, 2016.
The group incurred a pre-tax loss of RM15.5mil for the 18-month financial period ended Dec 31, 2015 – a smaller loss compared with RM37.2mil for the preceding FY14.
For the first nine months of last year, the company continued to suffer losses (an unaudited pre-tax loss of RM14.52mil).

Recently, three of the company’s shareholders requested for an EGM to remove all its board members except for group managing director Datuk Seri Chin Seak Huat. The EGM is yet to be held, but the board has indicated it will proceed with the proposed meeting.