KUALA LUMPUR (Oct 7): Car component and carpet maker Paragon Union Bhd has proposed to diversify its existing core business to include recycling business, focusing on metal initially, to broaden its revenue stream and earnings base and reduce its dependency on its existing core business.

The group is currently involved in the manufacturing and sale of car carpets, car components and commercial carpets.

"The board of directors is cognisant of the group’s loss-making performance and has been seeking opportunities to diversify its income stream and improve its revenue and profitability. Towards this end, the board has identified the recycling business as an appropriate business to be pursued," it said in a filing with Bursa Malaysia on Friday.

"Taking into consideration the group’s net loss of RM15.4 million for its existing business for the financial year ended Dec 31, 2021, the recycling business’ profit could contribute 25% or more to the group’s net profit going forward," it added.

For starters, the group plans to have its subsidiary Paragon Metal Sdn Bhd start off by trading metal whereby it will buy metal scrap materials mainly copper and aluminium from designated vendors, after which the metal scrap materials will be outsourced to be sorted out and treated.

"Once treated and sorted, Paragon Metal will sell these semi-finished materials to smelter plants locally. The smelter will then re-melt the materials into copper/aluminum ingots as a finished product for exports.

"The group believes that this initial stage of trading metal is more cost effective and will help to improve the group’s financial performance and position within a shorter timeframe with less risk," Paragon said.

Paragon said it plans to subsequently venture into the metal recycling industry by going upstream either through acquisition or joint venture with existing vendors to value-add on the materials and further enhance its presence throughout the supply chain.

It said it intends to leverage the experience and network of Koon Hoi Chun, who is the executive chairman and a major shareholder of Paragon, in this industry. To kick-start the recycling business, Paragon proposes to secure contracts with the companies related to Koon as well as other scrap metal providers.

At the same time, Paragon managing director Wong Ee-Coln will be involved in the strategic planning, direction and development of the recycling business.

Besides Koon and Wong, Paragon said it will also be recruiting a team of approximately five personnel to operate the recycling business.

The proposal is subject to Paragon shareholders' approval, but the board expects it to be completed by the fourth quarter of 2022.

AmInvestment Bank Bhd has been appointed as the principal adviser for the proposal.

Paragon shares closed down 5 sen or 3.38% at RM1.43 on Friday, bringing it a market capitalisation of RM119.88 million. Its share price has declined by 1.38% year to date.