Timber heavyweight, WTK, Third Qtr Pretax Profit Almost Double from A Year Ago

Quater 3 2010 review
 
For the quarter under review, the Group’s turnover was RM184.8 million as compared to RM150.7 million in the 3Q2009, representing an increase of RM34.1 million (22.6%), whilst its pre-tax profit was RM15.3 million compared to RM8.4 million in the 3Q2009, an increase of RM6.9 million (82.1%). This is mainly due to the timber division.

Quarter 3, 2010

Timber
For the current quarter, the Group’s timber division registered a turnover of RM152.0 million, representing an increase of 25.2% or RM30.6 million as compared with RM121.4 million in the 3Q2009. Pre-tax profits increased by 88.5% or RM6.9 million to RM14.7 million when compared to RM7.8 million registered in the 3Q2009.

On a year-to-date (YTD) basis, the timber division registered a turnover of RM458.4 million, representing an increase of 47.0%, as compared to the previous year corresponding period of RM311.9 million. Consequently, the division recorded a net profit of RM20.1 million, an increase of 361.0% when compared with RM7.7 million pre-tax losses registered in the previous corresponding period. This is due to the overall improvement in both volume and average selling prices experienced since the beginning of the year.

On a year-on-year (YOY) basis, average round log prices increased approximately 35.0% compared to prices registered in 3Q2009, with, sales volume up by 21.4%. On a YTD basis, average round log prices are higher by approximately 12.3%, whilst volume increased by 39.6%. The Group’s key export markets for round logs is India (75%), China (10%), Hong Kong (5%), Vietnam (5%) and the remaining 5% exported to Japan, Taiwan and other Asian countries.
As for the Group’s plywood division, sales volume for the quarter in review was up by 13.8% as compared to 3Q2009. Average selling prices were up by 21.0% as compared to 3Q2009. On a YTD basis, average plywood prices were higher by 17.0% and volume up by 43.4%. The Group’s key plywood markets for the quarter in review were Japan (85%), Taiwan (13%) and other Asian countries (2%).


Current Year Prospects
Quarter 3, 2010
Timber
The third quarter 2010 saw further improvement in selling prices for timber products. Japan, a major buyer for tropical hardwood plywood products, expanded her economy again in third quarter 2010. The gross domestic product (GDP) grew at an annualized rate of 0.9 percent, higher than second quarter 2010 of 0.4 percent. The third quarter growth relied heavily on domestic demand (60% of GDP), boosted by a stimulus package for the automotive industry that provided incentives for buyers of low-emission cars. Total housing starts in September 2010, although similar to August 2010, were higher than September 2009. Building permits, year-on-year, were approximately 15% higher. Despite the good results, the Japanese government cautioned that softening overseas demand and continued strong yen may hamper the growth in following months in the absence of further incentives to spur Japan’s local consumption. Capital spending is expected to shrink as orders for Japanese goods slow down as a result of the strong yen which makes Japanese good less competitive overseas. This is evident in September 2010 drop in machinery orders as businesses revise their spending plans.
The abnormal weather condition experienced in the third quarter 2010 coupled with the forth coming monsoon at year end is expected to further hamper log production. As such, the tight log supply situation in Sarawak which started during the second half of 2010 is expected to continue in the following months. Accordingly, despite the uncertainties in the future growth of the Japanese economy, average selling prices for tropical timber products are expected to remain firm.

The Group will conscientiously monitor the tight log supply to its plywood mills to ensure its supply of plywood to its buyers is not materially hampered by the shortages of logs. Despite the log situation, the Group will still continue its focus on the production of high quality plywood products, i.e. floorbase plywood products, and strive to maintain its position as a market leader in the Japanese market.

Notwithstanding the above, the Group will remain cautious as to the prospect of the timber industry given the renewed concerns on the world major economies and calls for further economic aids in Europe.