KUALA LUMPUR: Hong Seng Consolidated Bhd is shelving a RM3 billion project to build and operate a nitrile butadiene latex (NBL) manufacturing plant in Kedah Rubber City, amid a downturn in the glove industry.
"The group has made a strategic decision to suspend the development of the NBL plant in view of various factors including project requirements, funding requirements and external factors beyond the group's control, such as the current weak market sentiment regarding the glove industry, capital raising needs and inflows of private and foreign investments," the company said in a filing with Bursa Malaysia Securities today.
Hong Seng bought 42.49 hectares of federal land in Kedah Rubber City for RM45.74 million from Northern Corridor Implementation Authority (NCIA) for the set up of the plant in 2020.
Kedah Rubber City is the first dedicated rubber industrial park in Kedah, covering an area of 494.5 hectare.
Following its decision to suspend the NBL plant, the company said it will renegotiate with NCIA on the terms of the agreement in relation to the Kedah Rubber City NBL project and explore alternative use of the land.
With its decision, a plan by its subdiary, HS Petchem Logistics Sdn Bhd, to build storage tank facilities to store feedstocks such as Butadine (BD) and Acrylonitrile (AN) petrochemicals, and provide logistics services for the supply of feedstocks to the NBL has also been aborted.
BD and AN are the raw materials required for the manufacturing of NBL.
The group has reached an agreement to terminate the sub-lease of 1.2 hectare of industrial land from Penang Port Sdn Bhd, where the storage tank facilities were to be built, for a period of 20 years for a total rental payment of RM8.5 million.
Hong Seng's share price was down 10 per cent to 4.5 sen on the news as at time of writing.