Supermax plans RM1.3bil capital expenditure

KUALA LUMPUR: Supermax Corp Bhd will spend RM1.3bil on its capital expenditure (capex) over the next nine to 12 years under its Integrated Glove Manufacturing Complex (IGMC) and Glove City project.

Executive chairman and group managing director Datuk Seri Stanley Thai said both projects, worth RM750mil and RM550mil, respectively, would be executed concurrently.

Notably, IGMC will be built in the Supermax Business Park, which Thai has conceptualised based on the company’s existing model in the United States.

The project sits on a 40ha tract in Serendah, Selangor, that the company had bought for RM78.4mil.

“About 75% of the land would be used for development, 22% for infrastructure and 3% for landscaping,” he told analysts, investors and reporters at a briefing.

Based on the 30ha available for development, it would use 60% for the expansion of nitrile medical, surgical and dental examination gloves lines.

The remaining 10ha would be carved out into smaller parcels of 0.8ha to 1.2ha for smaller factories built for supporting industries with a gross development value of RM350mil to RM400mil, he said.

Asked on how he would market the business park, which it has planned to launch next year, he said: “There would not be many units (10 to 15 units) and we are selling to the supporting industries, of which, most are our long-term business associates and friends. There is already demand before launch.”

He said the development was still at its initial stage and had yet to firm up with the gross margin for the project, but noted that the selling prices might be higher than projected.

He also said the profits gained from selling the factories would then be pumped into the capex for the IGMC that would be developed in two phases over nine years.

Phase 1A of the IGMC, expected to be fully commissioned by the financial year ending Dec 31, 2015 (FY15), would see an additional production of 2.71 billion pieces.

With a development period from 2014 to 2018, the total capacity for phase one is 10.85 billion pieces and 4.65 billion pieces for phase two that spans from 2019 to 2022.

Breaking down the capex, it would spend RM125mil for 2013-2014 and RM164.5mil for 2014-2015.

Meanwhile, phase one of Glove City that is also expected to be fully commissioned by FY15, would add 4.1 billion pieces to its nitrile glove production.

He said the company would need cash to expand the business in 2014 to 2015 and might look into revising its dividend policy in 2015 to 2016 as its cashflow improved.

Commenting on the electricity tariff hike, he said the glove maker would have to spend RM3.5mil extra for its utilities in 2014, which would, in turn, hurt its bottomline by 2.9%.

Thai said the company would explore ways to use electricity more efficiently and that one such way was via renewable energy (RE). He said the company was exploring the usage of RE and urged the Government to further liberalise the green energy sector so that more players could take part in the development of RE.