Maxwell unit buys land in China for RM17.2m

KUALA LUMPUR (June 14): Maxwell International Holdings Bhd’s unit has successfully tendered a Land in Henan province in China for RM17.2 million as part of its plans build a new factory and expand its production capacity there.

In a filing to Bursa Malaysia on Thursday, Maxwell said its unit Jinjiang Zhenxing Shoes & Plastics Co Ltd had acquired the industrial vacant land measuring 171,576. 37 sq metres in Qixian City in the province.

It said the acquisition would be financed by internally-generated funds.

On the rationale for the acquisition, Maxwell said its current production facilities at Zhushuxia Industrial Zone, Jinjiang City were fully utilised and it had been outsourcing part of its production of sports shoes to third party external contract manufacturers to meet its production requirements over the past few years.

“Currently approximately 50% of production of sports shoes is being outsourced to third party external contract manufacturers and this may pose a risk to the Company as the dependency on external contract manufacturers might result in external contract manufacturers requesting for higher subcontracting fees,” it said.

Maxwell said the failure by any of the external contract manufacturers to perform or deliver quality products adequately may also have an adverse effect on its business operations.

Additionally the business operating costs have been on the rise especially in China’s coastal cities, thereby eroding the attractiveness of operating businesses there, it said.

“The acquisition will enable the company, through its subsidiary Zhenxing Shoes, to address these risks by building a new factory and thus enabling it to progressively expand its production capacities for meeting the current and future growing demand for its products,” said Maxwell.