Fire at Homeritz factory sparks speculation over insurance lapse

Accidents can happen at any time. Hence, it is important to be insured in the event of untoward incidences.

We often read about companies’ plants or factories catching fire, or being unable to operate due to floods.

More often than not, they can claim damages from their insurance policies.

Unfortunately, this was not the case for upholstery furniture manufacturer Homeritz Corp Bhd.

One of its production facilities in Muar, Johor, recently caught fire.

To make matters worse, the affected assets were not covered by insurance at the time of the incident, as the fire insurance policy had expired on Oct 12, 2024.

Homeritz explained that the renewal process was delayed due to a change in the factory’s operational purpose, which required additional assessment by the insurance company.

On the surface, it seems strange for the fire to break out at a time when the insurance had lapsed, sparking speculation of sabotage. This, of course, remains just speculation.

What is certain is that the minority shareholders would be fuming as – due to the lapse in renewing the policy – it was expected to cost them RM3mil.

Even more strange is that the company only informed shareholders about the incident – via a Bursa Malaysia announcement – a month after the fire took place.

In its Jan 17 filing, Homeritz stated that the fire, which occurred the previous month, was caused by a spark from a switch at the duct conveyor spray booth.

The affected facility, owned by its wholly owned subsidiary Embrace Industries Sdn Bhd, had been repurposed as a temporary spraying line in 2024 after previously being used for storage.

While the fire was confined to a single block, Homeritz reassured that disruptions are mitigated by redirecting production to another spraying line in the same district.

Production activities at its other facilities remain unaffected.

Thankfully, Homeritz has remained profitable and achieved commendable growth, benefiting from the strengthening of the US dollar.

The counter rose as much as 3.4%, or two sen, to 60.5 sen on July 29, its highest since June 18, 2024, buoyed by the furniture manufacturer’s better-than-expected third-quarter results.

However, analysts remain cautious about the company’s near-term trajectory due to prevailing high interest rates and persistent inflationary pressures.

Granted that the damages from the fire incident will not be a major dent on its financials, it is crucial that the company strengthens its processes to prevent a recurrence.