August 17, 2004

 

Confarm Seeks Bailout To Keep Egg Production Business Intact

 

Consolidation Farms Bhd (Confarm) is looking to maintain its core business in integrated egg production, says its chairman and chief executive officer Heng Keah Yong.

 

He said the board of directors wanted to preserve the company's value for its stakeholders ranging from shareholders to creditors.

 

"We are not considering letting someone to buy the company over for the listing status and liquidate all the assets. That will not give the stakeholders maximum value.

 

"We have been exploring very actively for the last few months to get a party that is interested in continuing with our business rather than breaking it up," he said.

 

Heng said Confarm was in the midst of talking to a company that might fit into its restructuring scheme.

 

Confarm has appointed Deloitte KassimChan Business Services Sdn Bhd as its financial advisor to formulate a restructuring scheme.

 

It has until November 21 to submit the scheme to the Securities Commission for approval. The company has ceased its layer farm operation in Kalumpang, Selangor since May due to cashflow difficulties.

 

Heng said Confarm's facilities were intact and were ready to run once again as soon as money was injected into the company to address its tight cashflow.

 

"It will take four to five years for anyone to build farming facilities to our standard, and the holding costs will be enormous. The facilities can take off within six to eight months the moment innovative financing comes in," he said.

 

In retrospect, Confarm undertook the modernisation and integration of its facilities at a wrong time, he said.

 

He said negative factors such as the severe acute respiratory syndrome (SARS), avian influenza and high prices of corn and soybean meal had depressed egg consumption and affected the feed quality.

 

Corn and soybean meal are the two key ingredients for making chicken feed, which makes up 75% of the cost of egg production.

 

But he defended the modernisation move, saying it was in line with the government's call for greater use of technology and innovation in agriculture-related industry. "We would have done the same if we had a second chance."

 

Under the modernisation drive, Confarm expanded its fixed assets from RM70 million in 2000 to RM180 million in 2004, mostly on borrowed money.

 

As at Jan 31, 2004, the company's borrowings stood at RM121.37 million and it failed to make payments due for various bank loans amounting to some RM16 million. It had also accumulated net losses of RM61.42 million since 2001.