KUCHING: WTK Holdings Bhd group has posted bigger quarterly losses, dragged down by the dismal performance of its plantation business which has plunged into the red in the January-March 2023 period (Q12023).
In Q12023, WTK group net loss widened to RM9.2 million from RM1.44 million in Q12022 despite an increase in group revenue to RM108.3 million from RM104.2 million.
The company’s losses per share worsened to 1.97 sen from 0.31 sen.
In the current quarter under review, the timber segment reported higher pre-tax loss of RM6.77 million (Q12022: -RM5.61 million) as revenue shrank to RM42.8 million (RM44.5 million) as a result of lower production.
The plantation segment reported pre-tax loss of about RM7.1 million (+RM4.89 million) as revenue plunged to RM28.6 million (RM43.6 million) because of lower selling price of fresh fruit bunches (FFBs), WTK said in its financial results.
The tapes segment reported increase in pre-tax profit to RM1.73 million (RM1.33 million) in line with revenue growth to RM18.8 million (RM15.8 million) as a result of the recovery in demand for the tapes and related products and improved export sales.
The food segment contributed pre-tax profit of RM1.29 million on revenue of RM17.3 million. There was no comparison figure as WTK acquired Sing Chew Coldstorage Sdn Bhd only in June 2022 to venture into the frozen food business.
The Q12023 financial results were also weaker as compared to the immediate preceding quarter (Q42022) when WTK recorded smaller pre-tax loss of RM5.9 million (Q12023: -RM9.5 million) on higher revenue of RM110.7 million (RM108.3 million).
The timber segment has reported reduced pre-tax loss of RM6.77 million in the current quarter (Q42022: -RM15.7 million) on expanded revenue of RM42.8 million (RM39.7 million), thanks to stronger sales volume of plywood products.
However, the plantation segment saw its pre-tax loss worsened to RM7.1 million (-RM3.14 million) on lower revenue of RM28.6 million (RM34.6 million) due to lower production of FFBs during the non-peak production period in the first quarter.
The tapes segment saw its pre-tax profit rose to RM1.73 million (RM1.11 million) as sales grew to RM18.9 million (RM17.4 million) because of increased export volume on stronger demand for the tapes and related products.
The food segment registered significantly lower pre-tax profit of RM1.29 million (RM7.44 million) as revenue was down to RM17.3 million (RM18.3 million). In Q42022, there was a gain from a bargain purchase of a company that contributed to the higher pre-tax profit.
Commenting on prospects going forward, WTK said stricter requirements related to timber certifications and softer demand from importing countries will continue to weigh on the performance of the group’s timber business for the current financial year.
“While the group remains cautious on the timber business, we are nevertheless putting in concerted and on-going efforts to control costs and improve production efficiency.
On plantation business, the company said the group’s current profitability is impacted by lower crude palm oil (CPO) price and rising production costs due to higher spare parts and fertiliser costs.
“Nevertheless, the group is pursuing greater mechanisation and operational efficiency to optimise costs and boost profitability.
“With the acquisition of B.H.B. Sdn Bhd, the palms are in higher yielding age group, the group is optimistic of an overall improvement in the performance of plantation business in second half of financial year ending Dec 31 2023,” it added.
On May 8, 2023, WTK group completed the acquisition of plantation firm B.H.B. for RM237.5 million and palm oil mill for RM12.5 million.
On the prospects of the tapes business, WTK said increase in raw material and labour costs may likely impact the segment’s earnings.
“Notwithstanding this, with the effective marketing strategy and strong supply chain management, the tapes business is still able to sustain a healthy profit margin and is expecting to perform satisfactorily in current financial year.”
WTK said its newly acquired food business will provide the group with a long-term viable business and growth opportunity and a more diversified revenue stream to complement its core business of timber, plantation and tapes.
“The outbreak of COVID-19 pandemic across the globe has significantly surged the demand for frozen food owing to its property of keeping nutrition for a longer time and higher shelf life as compared to fresh vegetables, fruits and meat.
“With anticipation of increasing demand for frozen food, the group is expanding the capacity of the cold room and the scope of frozen products. The food business is expecting to perform satisfactorily for the current financial year,” it added.
On March 9, 2023, WTK’s wholly-owned subsidiary, Kuching Plywood Bhd, entered into a share sale agreement with TMC Importer & Exporter Sdn Bhd (in liquidation) for the proposed acquisition of 100% equity interest in Interglobal Vision (Food Processing) Sdn Bhd for RM2.8 million in cash. The proposed acquisition is expected to be completed in the current quarter.
WTK said the group is consistently on the lookout for growth opportunities to enhance shareholders’ value.
