KUCHING: CCK Consolidated Holdings Bhd plans to invest RM20 million to expand its factory in Bintawa here by constructing a new coldroom, and another RM10 million to set up a new broiler farm in Sarawak.
Additionally, RM6.338 million will be invested in the digitalisation of the group and upgrading of digital technologies.
The funds for this capital expenditure totalling RM36.338 million represents about 41.2 per cent of the proceeds of RM88.1 million CCK is expected receive from the proposed disposal of a 26.5 per cent equity interest in wholly-owned Indonesian subsidiary PT Adilmart, according to CCK group managing director Tiong Chiong Hiiung.
The company will set aside RM30 million (34.1%) of the proceeds for capital management activities, RM20.9 million (23.7%) for working capital, he said.
On May 27, 2024, CCK entered into a term sheet agreement with Astrantia Sdn Bhd, a special purpose vehicle company of a fund advised by Creador, for the disposal of 31,772 existing ordinary shares (26.5%) in Adilmart to Astrantia for RM88.1 million cash.
Also inked was an agreement for the proposed share subscription of 27,047 new Adilmart shares, representing approximately 18.4 per cent of the enlarged issued Adilmart shares by Astrantia for RM75 million.
The proposed share subscription will be implemented in two tranches: RM60 million in first tranche and RM15 million in second tranche to be completed in 4Q2024 and by 4Q2025 respectively.
Pursuant to the proposals, Astrantia will hold a total of 40 per cent of the enlarged issued Adilmart shares.
Both parties had on September 12, 2024 entered into the definitive documents on the two proposals.
Adilmart is principally involved in the production and trading of frozen food, including sausage and other processed meats.
Astrantia is special vehicle company incorporated by Creador V to hold the investment of Creador V and undertake the proposals through Astrantia.
CCK will seek its shareholders’ approval on the two proposals at its extraordinary general meeting (EGM) here on November 27.
In a circular to shareholders on the proposals, Tiong said the proposed new coldroom measuring 21,506 sq m to be
constructed in the company’s Bintawa factory is envisaged to increase the total coldroom capacity by 5,000 pallets to 7,000 pallets, together with an automated storage and retrieval system for automatically storing and retrieving goods from defined storage locations to reduce labour requirements.
The company is awaiting approval from the relevant authorities for the proposed building plans for the new coldroom project.
Tiong said CCK intends to allocate RM2 million to acquire land and RM8 million for the construction of boiler farm on the land, which is in the midst of being identified.
“This new broiler farm is envisaged to have a maximum capacity of 200,000 heads per cycle which is expected to commence operation by first quarter of 2026,” he added.
On the digitalisation project, he said the company is in the final stages of negotiation with a vendor to award a RM4 million contract for services to digitalise its current operations and streamline its processes to improve efficiency.
The balance of RM2.3 million is budgeted for procurement of the necessary hardware to facilitate the upgrading of the digital technologies, such as new point-of-sale systems, new weighing counters and hand-held computers.
Tiong said the entire process is expected to complete within two months and is targeted to commence in first quarter of 2025.
He said the company intends to utilise RM30 million for the group’s capital management initiatives, including but not limited to an indicative special cash dividend for its shareholders within 12 months from the receipt of the proceeds for the proposed disposal of its stakes in Adilmart. This will translate into an indicative dividend per share of 4.83sen.
On the proceeds of RM75 million from the proposed share subscription in Adilmart by Astrantia, Tiong said RM8 million (10.7%) is intended to fund the purchase of land in Indonesia, RM40 million (53.3%) to be utilised to finance the construction of manufacturing facilities, RM22 million (29.3%) for purchase of machineries and RM5 million for other costs (motor vehicles and administrative).
The company is in the midst of identifying a suitable piece of land measuring about 11 acres for the construction of the manufacturing facilities, with an approximate built-up area of 19,200 sq m.
The new manufacturing facilities will increase the production capacity and output of the Adilmart group and facilitate its future business growth.
“These new facilities will be used to produce frozen good products such as sausages, nuggets, burgers, meatballs and other meat products, which are similar to products currently manufactured in the existing facilities. We expect to double our group’s production capacity and output following the commencement of operations in these manufacturing facilities.
“We intend to purchase and install automated machineries, such as the thermoforming machines, bowl cutter, forming machine and fryer for approximately 10 production lines in the new manufacturing facilities. These production lines are envisaged to have production capacity around 3,000-4,000 metric tonnes a month,” he added.
