Ancom’s expansion plans to resume after delay

By Asila Jalil

ANCOM Bhd’s capacity expansion plans of its agriculture chemical segment, Ancom Crop Care (ACC), are experiencing delays as a result of the Covid-19 pandemic and the various movement restrictions enforced nationwide.

Ancom CEO Lee Cheun Wei said the development of the new factory in Port Klang, which was set for completion by the second half of this year (1H21) is now pushed back to 1H of next year.

“Unfortunately, there are some delays there and as we speak, construction for the new factory is still not allowed to resume. It has been stalled for a few months now.

“We still aim to complete it within 1H22. Our internal target for completion is by March 2022 and we would need between three and four months to install the equipment,” he told The Malaysian Reserve (TMR) recently.

Ancom received the development order letter dated July 30, 2021, for its new factory. Constructions will resume in the nearest term, subject to the government’s ruling on vaccinated workers which the contractors would comply with.

Despite the delay, Lee said the group managed to adjust and adapt to the situation by manufacturing new active ingredients at its existing facilities and is expected to add a few more to its portfolio once the new plant is ready.

ACC was slated to operate from the new factory, on top of its existing operations in Shah Alam, Selangor.

With the new factory, ACC is expected to ramp up production to increase its line of active ingredients to eight from the current four.

Lee had previously told TMR the construction of its new 70,000 sq ft factory involves RM16 million of additional capital expenditure which includes the development of equipment to produce new molecules for the active ingredient.

Another delay faced by Ancom is the proposed reverse takeover (RTO) of Ancom Logistics Bhd (ALB) by S5 Holdings Inc which Lee had previously said was supposed to complete within 1H21.

Lee said both parties had signed heads of agreement and the matter is now dependent on S5 to complete the internal documentation required to enable the RTO to proceed.

“We are still waiting for them to complete their part of the obligation and the original head of agreement allows 18 months of the validity period. We are well within that period as it will only expire by mid-January next year.

“Both parties communicate every month and they keep us updated with their latest progress. On our end, we inform our board of directors on the updates every three months,” he said.

In July last year, ALB entered into heads of agreement with MyEG Services Bhd’s subsidiary MyEG Capital Sdn Bhd, S7 Holdings Sdn Bhd, Merrington Assets Ltd and Avocat Sdn Bhd to undertake a proposed RTO of S5 Holdings.

The exercise entails a proposed acquisition by ALB of S5 Holdings’ entire share capital from its shareholders at a price to be agreed upon by the parties, subject to an independent valuer’s valuation report.

S5 Holdings is a global integrated security solutions provider that delivers solutions to governments and enterprises.

For its fourth quarter ended May 31, 2021 (4Q21), Ancom recorded a net profit of RM7.6 million compared to a net loss of RM11.8 million in 4QFY20 mainly due to contribution from its agricultural chemical segment.

Revenue came in at RM445.89 million, up by 44.1% year-on-year (YoY) compared to RM309.45 million in the same period last year.

For its full financial year, Ancom registered a net profit of RM23.95 million compared to a net loss of RM9.7 million a year prior while it clocked in a revenue of RM1.54 billion against RM1.47 billion the previous year.

Lee said it was the highest full-year profit the group had registered in the last decade buoyed by its agricultural chemical segment that has outperformed amid the challenging period.

“The pandemic did not hit the division because we are involved in food securities where all the agrichemical solutions, we provide to our customers were utilised to support the food industry.

“The second reason that contributed to our earnings was the recovery in the petrochemical division mainly because of the recovery in commodity prices,” he said.

The recovery in commodity prices had seen the volume of industrial chemicals recover compared to a year ago.

Lee expects earnings for its 1Q21 to be slightly impacted by the Full Movement Control Order (MCO) and Enhanced MCO that had been enforced in several states in the country.

Despite the slight dent anticipated in the coming quarter, he said the impact would not be substantial as agrochemical products are deemed important in the country.

Commenting on the group’s proposed takeover of Nylex (M) Bhd, Lee said both parties are one step closer to closing the transaction after Nylex’s board had accepted Ancom’s offer to acquire all of its assets and liabilities for RM179.3 million.

Lee said both parties will now require to seek shareholders’ approval which is supposed to be done in October.

“The transaction is likely to be completed in January 2022,” he added.

Ancom is planning to increase its yearly production of ethanol to 10 million litres from the current six million litres to reduce the country’s dependence on other markets for the ingredient.

Lee said the production of ethanol, which is done via its subsidiary Nylex, will likely take 24 months to reach the planned capacity.