KUCHING: Zhejiang, China-based battery maker Jujiang Power Technology Co Ltd (JJ) has emerged as a joint-venture partner in ABM Fujiya Bhd
(AFujiya) by taking a 40% stake in the latter’s indirect wholly-owned subsidiary, Fuya Energy Sdn Bhd (FESB).
JJ subscribed for 48 million new FESB shares at RM1 each for RM48mil. AFujiya wholly owns Amalgamated Batteries Manufacturing (Sarawak) Sdn Bhd (ABM), which, in turn, wholly owns FESB. With the issuance of the new shares to JJ, ABM’s equity interest in FESB has been reduced to 60%.
AFujiya’s shareholders approved the proposed share subscription at the company’s EGM on Dec 27, 2024. Subsequently, the company issued and allotted the new shares to JJ.
JJ, which in recent years has expanded to lithium battery production, develops and manufactures lead-acid starter batteries for motor vehicles, while AFujiya manufactures a comprehensive range of automotive batteries and batteries for storage and electrical application.
FESB, a principal subsidiary of AFujiya, accounted for about 51% of the company’s assets as at Dec 31, 2023.
AFujiya and JJ inked a memorandum of understanding (MoU) in October 2019 to explore the setting up of a new battery manufacturing plant in Malaysia worth RM500mil, which was officially opened by Sarawak Premier Tan Sri Abang Johari Tun Openg in September 2023.
The plant as well as machinery, located in Demak Laut Industrial Estate, Kuching, was partly funded through cash advances by JJ totalling RM56.38mil over four years.
The bulk of the cash advances was made in 2020 (RM23.83mil) and 2021 (RM19.69mil), according to AFujiya group executive chairman Datuk Seri Tay Ah Ching@Tay Chin Kin. To-date, JJ has not charged any interest on the cash advances to FESB.
He said the issuance of 48 million new shares in FESB was to offset the major portion of the cash advances JJ had lent to FESB, leaving an outstanding sum of about RM8.38mil.
Tay said the share subscription provided FESB with a swift and efficient means to settle most of its debts owing to JJ, avoiding the need for conventional bank loans or debt financing which would result in higher finance cost and higher gearing ratio for the company.
“Moreover, this strategy enhances the prospects of the AFujiya group through JJ’s substantial shareholding in FESB. Being a substantial shareholder in FESB, JJ will have a vested interest in FESB’s success and will be more motivated to share its expertise in battery manufacturing technology.
“As a profit-sharing partner, JJ is incentivised to ensure the manufacturing plant operates efficiently, which will directly impact its profitability. Furthermore, having a representative on FESB’s board (of directors) will allow JJ to provide valuable input and feedback on the plant’s operations and technical improvements.
“This involvement will not only enhance the efficiency of FESB’s operations but also strengthen the company’s expansion plans, contributing to the future profitability of the AFujiya group,” he added in a recent circular to shareholders in relation to the proposed share subscription in FESB by JJ.
The new battery plant has increased its production lines to four, with the fourth line targeted to operate at full capacity in the fourth quarter ended Dec 31, 2024 (4Q24). Products manufactured by the plant would be for both domestic and export markets.
“With better economies of scale in production and increasing staff’s expertise in running the group’s new battery manufacturing plant, the group has seen light in generating a gross profit at the group level (in 3Q24) which is mainly due to reduction in operational loss made by the new plant.
“However, in 3Q24, the group faces shortage of raw materials due to delays in shipment, increasing finance costs which resulted in the group making a cummulative loss before tax of RM7.86mil in the first nine months of 2024 (9M24),” AFujiya said when releasing its 3Q24 financial results.
In 9M24, AFujiya’s group revenue surged by about 42.5% to RM131.7mil (9M23: RM92.4mil), or up by RM39.2mil. The company anticipates the new plant would gradually boost the group’s overall performance.
According to Tay, FESB, in aligning with the Sarawak government’s commitment to reduce carbon emissions, has a collaboration with Sarawak’s i-Cats University to explore opportunities in producing eco-friendly lithium batteries.
“With the equity participating of JJ in FESB, JJ can share its knowledge and experience relating to lithium battery production technology with i-Cats University,” he said.
