KUCHING: Jaya Tiasa Holdings Bhd expects its logging business to be hit by weakening demand and increased competition from other timber producing regions.
According to its chief executive officer Datuk Wong Sie Young, the ongoing trade war between US and China would affect timber price and demand.
Already, the Sibu-based timber and plantation company has reported a 21 percent drop in average export price of logs to US$217 per cu metre in the 12-month period to June 30,
2019 (FY2019).
“Log price is expected to remain weak impacted by ongoing trade wars between the economic giants.
“The timber business will remain subdued with regards to export log price,” Wong said in the company’s 2019 annual report.
He said weaker demand from its key market segments, reduced production output and an increase in labour cost had impacted the performance of the company’s logging business.
In FY2019, Jaya Tiasa’s log production volume plunged by 26 percent to 232,792 cu m from 314,193 cu m in FY2018 following selective harvesting of profitable species and sizes amidst ongoing sustainable forest management certification’s implementation.
“We encountered operational challenges, such as appointment of a new contractor, mobilisation of machineries and transportation of timber during transitional period which affect log production,” said Wong.
Log sales fell to RM71.9 million from RM130.1 million year-on-year.
The group exported 43 percent of its logs to India while other export markets are Taiwan (37 percent), Japan (11 percent) and Asean countries (9 percent).
“We will continue to prioritise the export of logs in the coming financial year as the US dollar against the Malaysian ringgit is expected to remain strong in the near future which is favourable to our export sales in terms of currency exchange.
“To better manage our forest, we will continue to select profitable species and log sizes for harvesting and maintain vigilant control on the cost of production.
“Increased attention will also be given to logistical planning to ensure that logs extracted are delivered within the shortest time frame possible to preserve their freshness and maintain their quality for premium prices.”
On wood manufacturing business, Wong said the segment contributed about 20 percent to the group’s total revenue of RM637.7 million in FY2019.
Plywood sales volume was down by 39 percent to RM47.3 million from RM77.2 million in FY2018 despite a two percent increase in average selling prices.
Similarly, veneer sales volume fell by 29 percent to about RM9.5 million from RM13.4 million year-on-year while the average selling price dipped by three percent.
Japan is Jaya Tiasa’s largest export market, absorbing 35 percent of the total plywood shipments, followed by China and Taiwan. The group also exported to Korea, the Middle East, Australia and other Asean
countries.
“The market for plywood and veneer has been challenging ever since the economic downturn. To maximise our revenue and retain our existing markets, we maintained our strategy in producing more high value products mix.
“The downsizing of our plywood manufacturing facility was in response to market conditions and limited timber resources,” said Wong.
Since 2017, the group has downsized its plywood production capacity to 180,000 cu m per annum from 420,000 cu m per year previously due to decrease in logs supply.
Wong said the group’s focus would be on large importing countries, such as South Korea, Japan, China/Hong Kong.
“The group will adopt a dynamic strategic approach in an increasingly competitive global environment, taking into account the decreasing resources, the volatility of foreign exchange rates and crude oil prices.
“The group will strengthen its current measures to maintain and enhance its competitive edge. These include harnessing its existing production technology towards improving operational efficiency and product quality, and being innovative in producing more value-added products for niche markets to enhance performance.”
On reforestation, Wong said the group has planted 35,596 hectares of forest plantation. During the year under review, more than 1.86 million seedlings were planted under the industrial tree planting method and the new chemical weed control regime.
The average survival rate of the E.Pelita seedlings at one month is above 90 percent, according to him. Planted forest has a gestation period of 11 to 14 years before it can be ready for commercial harvesting.
“The challenge of the group is to improvise silviculture practices, better wood properties, pest and disease control and recruitment of field workers.
“We place great emphasis on stringent quality control over new plantings and their maintenance so as to improve the survival rate and optimum growth of planted trees,” said Wong.
