Auro Holdings Berhad, formerly known as NWP Holdings Bhd, plans to diversify its business operations by entering the food and beverage (F&B) sector.
The move comes as the company seeks to mitigate losses incurred in its existing wood-based and sand mining businesses, which have faced challenges such as supply chain disruptions and the impact of prolonged movement control orders.
In light of Auro's recent financial challenges, particularly its losses in the nine-month period ending on November 30, 2023, the company is positioning its F&B venture, primarily through the expansion of additional Heytea stores.
Its board foresees that this diversification could potentially contribute 25% or more of the group's net profits and may redirect over 25% of its net assets towards the new F&B business activities
Presently, Auro is primarily engaged in the wood-based industry, encompassing the manufacturing of wood products, sand mining, and trading.
However, adverse market conditions have led to losses over the past few years, prompting the need for a strategic shift towards more stable revenue streams.
Auro Capital Sdn Bhd, a subsidiary of Auro, signed a franchise agreement with HK Heycha Limited to operate Heytea retail stores specialising in various beverages and snacks under the brand name Heytea on November 29, 2023. The company's foray into the F&B industry will be facilitated through the franchise agreements, allowing it to launch Heytea stores and establish a foothold in this lucrative market segment.
Heytea, known for its premium tea-based beverages, presents a promising opportunity for revenue diversification and business expansion.
The decision to diversify into the F&B sector aligns with Auro's long-term strategy to broaden its income streams and reduce dependence on its existing business segments.
Unlike the seasonal nature of wood-based and sand mining activities, the F&B industry offers more consistent demand throughout the year, providing a stable foundation for growth.
Pending approval from shareholders, the proposed diversification is expected to enhance the financial performance and overall business portfolio of Auro.
The company aims to complete the diversification process by the second quarter of 2024, with UOB Kay Hian Securities (M) Sdn Bhd appointed as the adviser for this strategic initiative.