Luster secures EPCC contract for glove production lines in the US
KUALA LUMPUR: Main Marketlisted company Luster Industries Bhd (Luster) announced that Glovconcept Sdn Bhd (GSB), a 60 per cent owned subsidiary of Glovmaster Sdn Bhd (Glovmaster), entered into an agreement with American Nitrile LLC (AN) to provide engineering, procurement, construction and commissioning (EPCC) services as well as Glove Technology Solutions for up to 12 glove production lines and a further forecasted 72 glove production lines in the US.
The contract, which is valued at more than RM1 billion (based on the total forecasted of 84 lines), marks Luster’s maiden foray into North America.
Glovmaster is a 56 per centowned subsidiary of Luster, with the remaining equity interest held by Fortune Tac Sdn Bhd (Fortune Tac), a company that specialises in the glove business, from setting up to operating glove production lines.
Luster is also among the first Malaysian companies to offer EPCC works for a glove manufacturing plant in the US, reaffirming the market’s confidence in the Group to undertake a high-tech production facility.
GSB will undertake the designing, building and delivery of a glove manufacturing factory on a turnkey basis, with glove output of not less than 38,000 to 40,000 per line, per hour.
Meanwhile, AN is responsible for the sourcing and procurement of the plant, machineries and infrastructure such as electricity and water, raw materials, workers and utility.
The glove production facility will be located at 3500 Southwest Blvd / Grove City in Ohio, US.
Luster deputy managing director Liang Wooi Gee said:
“The group has taken the opportunity to tap into the US market, following the rising interest in the country to reduce its reliance on Asia’s personal protective equipment (PPE), including masks, gloves and ventilators. Currently, about 68 per cent of the world’s gloves supply come from Malaysia.”
This is in line with US President Joe Biden’s administration’s direction to reduce the dependency and reliance on imports of PPE. Biden has signed an executive order in late February that will result in a 100-day review of supply chains by the executive branch. This is following reports of PPE shortage that has caused doctors to reuse and recycle some of these PPE, amidst the fight against the Covid-19 pandemic.
The estimated cost to be borne by AN in building the glove production plant is around USD3.6 million or RM14.9 million per line. A minimum of 12 production lines shall be placed into two separate orders which works out to RM178.8 million in value. AN aspires to purchase from GSB up to 72 additional production lines within the first 24 months from the date of the Agreement.
Upon commencement of the production lines, GSB shall be entitled to a percentage of the sale proceeds generated by all the production lines, with a minimum entitlement of US$2 million per annum, and capped at US$50 million for every 12 lines.
Once all the 84 production lines are running at full capacity, Luster could see earnings of up to US$350 million coming from the sales proceeds of gloves by AN.