By THE STAR
PETALING JAYA: Having established a foothold in China, Gefung Holdings Bhd is spreading its wings to West Asia and North Africa via a joint venture with major shareholder, Saudi Economic & Development Co Ltd (Sedco).
Sedco direct investment group managing director Yousuf Khayat said the venture to new markets would help diversify Gefung’s income base and mitigate the fluctuations in its earnings from China.
China is a major market for Gefung, which has been riding on that country’s construction boom.
However, the marble and granite product manufacturer has been hit by the Chinese government’s measures to cool the property sector, which has been perceived as being overheated given the spiralling property prices.
Gefung managing director managing director Seo Aik Leong said the company’s earnings had been affected by the delays in several projects worth more than 50 million yuan (RM22mil).
The company has guaranteed pre-tax profits of RM28mil and RM28.3mil for the financial years ending Dec 31, and 2008, respectively.
For the nine months ended Sept 30, Gefung posted a pre-tax profit of RM9.56mil on revenue of RM43.9mil.
Seo admitted it would be difficult for Gefung to achieve the guaranteed profits this year. “We would have been able to make that much profit if not for the delays in the projects in China,” he added.
Yesterday, Gefung signed an agreement with its 22% shareholder Sedco, whereby it will form a JV with a Sedco affiliated company TAWJEEH. Gefung will 50.01% interest in the JV.
The JV will build a marble and granite processing plant in Turkey, which would have at least double the capacity of Gefung’s facilities in Shanghai, in order to serve the new markets in West Asia and North Africa.
The plant was expected to be completed by September, said Seo, who anticipates contribution from Middle East to flow in from next year. The JV firm will be incorporated in the Middle East with an initial paid-up capital of US$13.5mil.
Under the agreement, Gefung will inject its two quarries in Turkey into the JV company at a price to be determined later.