KUALA LUMPUR (Dec 27): Karyon Industries Bhd is exiting the metal stearates and mixed metal stabilisers manufacturing business in China via the cessation of operations at its China-based joint venture (JV) company, Karyon (Jinhua) Advanced Materials Co Ltd (KJAM).

Karyon, via its wholly-owned subsidiary Karyon Ventures Sdn Bhd (KVSB), owns 66.67% of KJAM shares, while the remaining 33.33% stake is held by Southern Aluminium Product Co Ltd (SAP).

In a filing with Bursa Malaysia today, Karyon said the cessation follows a request from SAP for a mutual termination of a JV agreement entered into by the two companies on Sept 18, 2006.

"On Dec 17, KVSB received a letter from SAP, informing them that Yang Jian Ping, being one of the directors and the senior key management of KJAM, of age 63 years, is due for retirement," said Karyon.

"Despite numerous efforts, he has not been able to identify any suitable successor to continue to lead the management and operation of KJAM. As such, SAP has requested for a mutual termination of the JV agreement," it added.

The decision for the termination took into consideration the cost required to purchase the remaining 33.33% equity interest from SAP and the time, as well as resources required to either seek for a new JV partner or for the group to manage and operate KJAM on its own in China, said Karyon.

"The board of directors is of the view that resources are better allocated to other profit generating units in the group," it noted.

KJAM, which commenced business operation in 2007, will be liquidated with the assets being distributed to KVSB and SAP in accordance with their respective shareholdings in the JV company.

"Premised on the foregoing, the board has estimated a distribution sum of not more than RM4 million to be received by KVSB upon termination of the JV agreement," said Karyon.

It added that the cessation is not expected to have any material operational impact on the group.

KJAM recorded a net loss of RM70,930 for the cumulative six months ended Sept 30, 2018, in which Karyon shared two-thirds of the loss, which amounted to RM47,286. This loss has reduced 1.06% of Karyon Group's pre-tax profit tax for the same financial period.

KJAM contributed only 4.03% of Karyon’s unaudited consolidated total assets as at Sept 30, 2018.

Karyon shares closed up 0.5 sen or 4% at 13 sen today, with 213,800 shares done, bringing a market capitalisation of RM61.84 million.