The venture will see a return on investment within 5 to 6 years based on a profit margin between 18% and 25%
By RAHIMI YUNUS / Pic By MUHD AMIN NAAHRUL
JIANKUN International Bhd proposed a venture into the rubber glove supply chain by partnering nitrile rubber producer ChuanPlus Industries Sdn Bhd.
Jiankun signed a memorandum of understanding (MoU) with ChuanPlus to form a joint venture (JV) to produce nitrile butadiene rubber (NBR) and make nitrile gloves.
The two companies agreed to form a special-purpose vehicle (SPV) company and build a new NBR production plant in Klang, Selangor, with a proposed investment of RM50 million.
Jiankun’s newly appointed chairman Tan Sri Mohamed Apandi Ali said the new board decided to expand and enter the NBR production business to meet the demand from the rubber glove production upstream industry, and in the process, expand the property developer’s source of profit.
Jiankun ED Datuk Tan Choon Hwa, who is also newly appointed, said the company will hold an 80% stake in the proposed SPV, while the rest of the shares will be owned by ChuanPlus.
ChuanPlus CEO Chuan Tuck Soon said the RM50 million investment is for the purchase of machinery, reactors, as well as other equipment and installations.
He said the company has also earmarked RM70 million for land cost, bringing the total investment to RM120 million, adding that the company is looking at a nine-acre (3.64ha) land plot for the manufacturing site. Jiankun, however, will consider renting a factory as an alternative.
Chuan said the new NBR production is expected to begin in 2022 with a capacity of 40,000 metric tonnes (MT), about 5% of the local demand.
He said 30% of NBR supplies in Malaysia are currently obtained locally, while the remaining 70% are imported.
“There is a high demand for raw materials at all gloves factories. We expect demand for gloves will continue even after the pandemic with high peak seasons in the next two to three years,” Chuan said.
He said the JV will have an order- book of above RM175 million after the first year of production.
He added that the venture will see a return on investment within five to six years based on a profit margin between 18% and 25%. Jiankun’s shares closed 12.3% higher at 68 sen yesterday, with a market capitalisation of RM114.6 million.
Global glove demand in 2020 is projected to be about 330 billion pieces, according to Malaysian Rubber Glove Manufacturers Association data. Of that, 64% or 211 billion gloves are being supplied by Malaysian glove companies.
In 2021, global glove demand is estimated to grow to 396 billion against the production capacity of Malaysian glove companies of 280 billion.
The world’s glove demand is expected to further expand to 475 billion in 2022 against the projected production capacity of Malaysian glovemakers of 363 billion.
The supply gap has seen more than a dozen Malaysian companies such as Mah Sing Group Bhd, GPA Holdings Bhd, Salcon Bhd and AT Systematization Bhd announce plans to move into the glove-making business this year amid the spread of the Covid-19 pandemic across the world.