KUALA LUMPUR (June 21): Ann Joo Resources Bhd said its 55%-owned indirect subsidiary Konsortia Etiqa Sdn Bhd (KESB) has acquired a 99.9% stake in Kinsteel Bhd's Perfect Channel Sdn Bhd (PCSB) for RM10.1 million in a bid to expand its upstream steel division.

In a bourse filing on Wednesday (June 21), Ann Joo said KESB acquired 102,000 shares or a 51% stake in PCSB from Kinsteel, which is in liquidation, for RM10 million and subscribed to another 100 million new shares in the company for RM100,000.

In turn, KESB emerged with 99.9% equity interest in PCSB, while the company’s remaining shareholder Maju Holdings Sdn Bhd’s shareholding of 98,000 shares was diluted to a 0.1% stake.

Ann Joo said PCSB is principally engaged in the manufacturing of hard-drawn wires, galvanised steel wires and other wire products, but ceased its manufacturing operations since May 2019 due to a fire incident and currently generates income by letting out its industrial building.

For the financial year ended Dec 31, 2022 (FY2022), PCSB recorded a loss after tax of RM28.57 million and negative shareholders’ funds of RM122.04 million.

Ann Joo said the acquisition would enable the group’s upstream steel division to expand into the production of engineering-grade steel wire rods by leveraging on PCSB’s plant and machinery capabilities, and will endeavour to revive and turn around PCSB’s manufacturing business.

“The acquisition is also in line with the group’s ambition to diversify its business into property development and property investment in the industrial segment,” the group said, citing PCSB’s 436.8-acre industrial land in the Gurun Industrial Park in Kedah.

However, Ann Joo noted that PCSB's financial results, assets, and liabilities will be consolidated into the group’s consolidated accounts, resulting in its financial performance and financial position being affected.

“The group has assessed these exposures and sought to mitigate these risks with prudent implementation of business strategies and financial management,” Ann Joo added.

For the first quarter ended March 31, 2023 (1QFY2023), Ann Joo was in the red with a net loss of RM21.08 million versus a net profit of RM32.93 million a year earlier, with flat revenue of RM670.73 million as compared to RM673.21 million previously.

Shareholders’ funds stood at RM1.17 billion as at end-March.

Shares in Ann Joo closed one sen or 0.97% higher at RM1.04, giving the group a market capitalisation of RM601.73 million.