KUCHING: Ta Ann Holdings Bhd is working to utilise its plantation logs to produce other value-added timber products aside from plywood.
Group managing director and CEO Datuk Wong Kuo Hea said Ta Ann’s timber business is going through a challenging period due mainly to rising production cost, emergence of substitute products and stiff competition from timber producing countries, like Indonesia and Vietnam.
“The group will continue to review its product mix with the usage of plantation logs to produce other value-added products,” he added in the company’s 2018 annual report.
Wong said the group’s reforestation division would increase harvesting of first rotation acacia (a fast growing commercial tree species) to gradually replace the raw material for its own plywood production.
As at December 2018, Ta Ann group has reforested 28,637 hectares (first rotation), out of which 27,228 hectares are planted with acacia, 1,319 hectares planted with other tree species, such as kelampayan, sawi, benuang and engkabang while the remaining 90 hectares cultivated with kelampayan under zebra planting.
Under second rotation, another 2,159 hectares have been planted with acacia. In addition, the group has planted 195,548 kelampayan trees in its oil palm estates.
On the age profile of the planted trees, Wong said the matured areas cover 22,900 hectares or 75 percent of the total number. Some 6,268 hectares or 20 percent are immature (four to nine years old) while the remaining 1,628 hectares or five percent are considered young area (one to 3 years old).
On 2019 action plans for reforestation programme, he said second rotation planting would be stepped up for consistent sustainable planted timber supply.
Other action plans are:
* to enhance research and development (R&D) on second rotation plant nutrition, growth performance and pests and disease for acacia replanting;
* to continue kelampayan enrichment and rehabilitation in post-logging blocks in the natural forest (forest management units);
* to increase kelampayan inter-cropping in peatland oil palm plantations in Ta Ann group, and
* to enhance R&D on planting kelampayan on peatland.
Reviewing the performance of the group’s logging business in 2018, Wong said the consolidation of its forest timber licences had affected log production volume and export sales which fell by 10 percent and 29 percent respectively as compared with that of 2017.
The consolidation of the timber licences is to ensure that all the group’s produced timber exports meet the international sustainability standards.
In 2019, he said Ta Ann’s logging division would expedite the certification processes for the remaining two forest management units (FMUs) – Raplex and Pasin – against the Malaysian Timber Certification Scheme (MTCS), and to complete the exercise this year. The two FMUs have total area of 196,187 hectares.
Last year, Ta Ann obtained MTCS-PEFC endorsed forest management certificate on a total area of 149,756 hectares in Kapit FMU.
Wong said the long-term economic outlook in India, Ta Ann’s key log market, is promising on the back of growing affluence and demand is expected to rebound this year.
On the group’s plywood business, Wong said production volume in FY2018 had fallen by 14 percent to 127,661 cu m from 149,087 cu m in FY2017 and that sales volume had declined by 17 percent year-on-year.
But the impact in the drop in sales volume had been offset by the higher average selling price by 14 percent to RM2,240 per cu m.
“In view of the increase in minimum wage which took effect this year, the group has innovated a semi-automated processing system to reduce workers dependency while maintaining the existing productivity level, like veneer grading line and plywood sanding line.
“Stringent quality control and immediate remedial actions on daily basis are continuing to maintain mill production efficiency.
“Marketing division is focusing and promoting MTCS PEFC floor base to our buyers. We expect minimal impact on our demand from Japan even though their market is facing an oversupply due to increasing volume of export from
Indonesia.
“The management is prudent in managing cost and able to maintain competitiveness of our products in the Japan market.”
Wong said as production of timber from natural forests is being consolidated, it had been highlighted that innovation is key to the sustainability of the timber industry.
He said in 2019, the plywood division’s action plans include to automate and innovate processes to increase productivity while reducing labour cost and to enhance cost saving measures and recovery rate.
Another action plan is to maximise utilisation of PEFC logs to further penetrate PEFC products into the Japan market in order to increase its market share. Wong said the sawmilling division is promoting hardwood sawn timber to India market.
Ta Ann’s other core business is in oil palm and the group has 13 estates which comprises a total mature area of 44,179 hectares or 92 percent of the total planted areas. The group presently has two palm oil mills, and the third new mill is expected to be operational this year.
He said the 2019 action plans for the oil palm division include to invest in machinery fleet to promote mechanisation for harvesting, manuring, weeding and pest and disease activities in plantations, with the aim to raise workers’ productivity.
Others include to recruit more landowners to participate in the on-going native customary rights (NCR) projects, provide better living and working environment for the workers as well as to continue fine-tuning of oil mill processes for optimum oil extraction rate performance.
On 2019 prospects, Wong said the group has anticipated a stable and sustainable logs production and better timber selling price, increasing demand for certified plywood product in Japan.
The sawmilling division is concentrating on markets which appreciate the value of hardwood and aiming to increase market share in Japan, Australia and India. It also focuses to explore new products for new markets.
Ta Ann executive chairman Datuk Amar Abdul Hamed Sepawi said the group’s oil palm business prospects appear positive in 2019 in anticipation of increased fresh fruit bunches (FFB) production as more palms attain maturity.
“With the current consolidation in timber production in tandem with sustainable forest management certification, strategies to improve the production yield, creative solutions in developing and promoting value-added products in downstream activities in line with government initiatives will remain a main focus,” he added.
In FY2018, Hamed said Ta Ann recorded group revenue of RM967.2 million and net profit of RM88.2 million.
