KUALA LUMPUR (Dec 30): Xinghe Holdings Bhd’s wholly-owned unit is selling a 41.15% stake in a peanut oil trading and blending firm in China for 155 million yuan (RM91.5 million).

In a bourse filing, the group said Anyang Herun Oil Technical Service Co Ltd, which currently owns 91.14% of Henan Xinghe, is selling the 41.15% stake to a businessman named Huan Yunlin.

The group said Huang has vast experience in the Chinese edible oil industry.

Henan Xinghe’s other shareholder is Henan Agri-Industrial Investment Co Ltd, a state-owned entity in the Henan province.

Xinghe said it is selling the 41.15% stake to reduce its exposure to Henan Xinghe. This is because the peanut oil blending unit has been unable to produce enough to sustain its sales orders, since the local authorities in China have been issuing directives to industrial plants to improve air quality.

“These production curbs have resulted in Henan Xinghe not being able to accept new orders for its products and consequently, its revenue has been on a downtrend since August 2016,” it said.

Xinghe said proceeds of the sale would be used to strengthen its liquidity and can be utilised by Anyang Herun for future funding requirements and investments within China and abroad.

The group said the purchase consideration was reached on a willing buyer-willing seller basis, taking into account Henan Xinghe’s net assets of 384.5 million yuan (RM225.99 million) as of Sept 30, 2019.

The disposal will result in a RM128 million charge against Xinghe’s earnings for the financial year ending Dec 31, 2019 (FY19).

The group’s gearing would decline to 0.09 times, from the current 0.49 times.

Shares of Xinghe closed unchanged at 24 sen today, valuing the group at RM140.24 million.