DIALOG Group Berhad (“DIALOG”) is pleased to announce that DIALOG via its wholly owned indirect subsidiary, Dialog Malic Acid Sdn. Bhd., will build, own and operate a specialty chemical plant producing malic acid in Gebeng, Kuantan, Pahang Darul Makmur, Malaysia (“Project”). The Plant will be situated within the Integrated Chemical Site operated by BASF PETRONAS Chemicals Sdn. Bhd. This represents DIALOG’s first foray into production of specialty chemicals and act as a catalyst for DIALOG to expand its footprint in this sector by producing high value specialty chemical products.
Rationale and Prospects
Malic acid is a specialty chemical that is mainly used as a food additive in the food and beverage (“F&B”) industry, which has steady market demand growing along with the gross domestic product.
DIALOG’s proposed development of its malic acid plant in Malaysia will not only support the growing demand in the Southeast Asia region but also tap into business opportunities created by the increasing demand for malic acid worldwide. This malic acid plant in Kuantan will supply the required malic acid to major customers and distributors in Malaysia and overseas. The feedstock for the production of the malic acid will be supplied by local suppliers.
DIALOG will undertake internally the engineering, procurement, construction and commissioning (“EPCC”) of the malic acid plant with a production capacity of approximately 12,000 metric tonnes per annum and an investment value of approximately USD80 million.
The Project to build, own and operate a specialty chemicals plant producing malic acid will further expand our downstream business, which is in addition to our existing venture to produce food grade recycled PET pellets, currently undergoing commissioning. Both projects represent substantial investments to strengthen DIALOG’s downstream and sustainable sector generating additional long term recurring income to the Group.
DIALOG will remain focused and steadfast in the pursuit of diversification across the upstream, midstream and downstream energy sector as well as the sustainable and renewable sector to strategically position the Group to weather different economic cycles.
The Project will also spur socio-economic development of the East Coast Economic Region ("ECER") by creating job opportunities for locals during the construction and operations stage.
2. DETAILS OF THE PROJECT
2.1 SCOPE OF WORK
DIALOG will undertake the engineering, procurement, construction and commissioning of the malic acid plant with a production capacity of approximately 12,000 metric tonnes per annum and an investment value of approximately USD80 million.
2.2 THE PROJECT PERIOD
The EPCC of the Project will commence immediately and is expected to be completed in Q2 2026.
2.3 INFORMATION ON DIALOG MALIC ACID SDN. BHD.
Dialog Malic Acid Sdn. Bhd. was registered on 28 August 2023 with an initial paid-up share capital of RM1,000 and is an indirect wholly owned subsidiary of DIALOG.
2.4 SOURCES OF FUNDING
DIALOG will fund its portion of investment and working capital of the Project from internally generated funds and/or bank borrowings including proceeds from sukuk issuance.
3. FINANCIAL EFFECTS
The Project is not expected to have any effects on the share capital and substantial shareholders’ shareholding of DIALOG and is not expected to have any material effects on the earnings, net assets and gearing of DIALOG for the current financial year ending 30 June 2024. However, it is expected to contribute positively to the future earnings of DIALOG group.
Risk factors affecting the Project include but are not limited to execution risks, such as availability of skilled manpower, technical expertise and materials, changes in prices of materials, and changes in political, economic and regulatory conditions. Nevertheless, DIALOG will undertake all the necessary efforts to mitigate the various risk factors identified.
5. DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS
None of the directors of DIALOG, major shareholders of DIALOG and/or persons connected with them have any interest, whether direct or indirect, in the Project.
This announcement is dated 25 September 2023.