KUALA LUMPUR (May 15): Hextar Global Bhd has announced that it has entered into three separate agreements which will result in the group acquiring a chemical trading business whilst divesting its entire interest in its consumer products segment respectively.
This is intended to further streamline the group’s operations to focus on its core chemicals businesses.
Under the proposed acquisition, Hextar Global has entered into a share sale agreement with a related party Hextar Holdings Sdn Bhd (HHSB) to acquire an entire stake in Hextar Industrial Chemicals Sdn Bhd (HICSB) for RM10 million in cash, the agrochemical company’s statement showed.
HHSB is the largest shareholder of Hextar Global, with a shareholding of 62.49%. The cash consideration will be funded through its internally-generated funds, said Hextar Global.
HICSB started in the business of trading industrial chemicals in 2009 where it supplied chemicals to various industries such as food, pharmaceutical, plastic, coating, polyvinyl chloride (PVC), personal care, rubber, adhesive and others.
Hextar Global said the proposed acquisition is aimed at enlarging its participation in the specialty chemicals industry. By diversifying its revenue streams, Hextar Global will be able to develop its potential to achieve sustainable growth.
On a separate note, Hextar Global is disposing of the entire stake of two companies under the consumer products segment for a total cash consideration of RM3.5 million. This will result in Hextar Global exiting the consumer products segment.
The two companies are Halex Woolton (M) Sdn Bhd and Halex Marketing Sdn Bhd. These two companies will be disposed of to a non-related party, Vinayaka Capital Sdn Bhd.
The consumer products segment is principally engaged in the manufacturing and distribution of disposable healthcare products such as wet wipes, tissues and cotton-based products.
The segment, which has a manufacturing facility in Tampoi Industrial Estate, Johor Baru, has been recording losses due to stiff competition from foreign manufacturers and rising raw materials costs.
Hence, Hextar Global said the proposed divestment is not expected to have any major impact on its financial performance, considering the segment is non-core to Hextar Global’s business activities.
Following the proposed acquisition and divestment, Hextar will focus on its two core business divisions, namely agrochemicals and specialty chemicals.
Commenting on the transactions, Lee Chooi Keng, Hextar’s executive director and group managing director of Hextar Chemicals Sdn Bhd said in this current challenging environment, the proposed acquisition and disposal will allow the group to stay on track in growing its core chemicals businesses.
“We intend to leverage on our combined expertise, knowledge and strengths to capitalise on the synergistic benefits of our enlarged chemicals business and we are committed to the ongoing investments in our core capabilities that will set us apart from the competition,” said Lee.
She added that the decision to exit the consumer product business segment and to reinvest and refocus resources on the speciality chemical business is because the segment has proven its potential for growth, as demonstrated in its recent financial results.
For FY2022, Hextar Global reported a higher net profit of RM49.54 million from RM39.46 million a year ago, as revenue expanded to RM618.36 million, from RM464.12 million during the same period.
Agriculture and specialty chemicals are among the group's biggest revenue segments, contributing RM369.6 million and RM225.55 million for FY2022 respectively.
In FY2021, the agriculture segment contributed revenue of RM419.44 million, while the specialty chemicals segment contributed RM64.08 million to the group’s revenue.
Shares in Hextar Global closed unchanged at 64.5 sen, giving the company a market capitalization of RM2.54 billion.