KUCHING: WTK Holdings Bhd expects its oil palm business to achieve improved performance this year with the expanded size of its oil palm estates.
The company’s proposed acquisition of an oil palm company, B.H.B. Sdn Bhd, for RM250 million cash is due for completion this month. B.H.B. owns about 5,043 hectares of land bank with total planted area of about 4,218 hectares, of which about 90 per cent of the palms are young mature and prime mature.
With the acquisition, WTK group will boost its oil palm area by 34.54 per cent to 16,428.5 hectares.
B.H.B. also owns the Batu Niah palm oil mill. After the acquisition of B.H.B., WTK group’s prime mature palms (9 to 14 years) area will be about 8,518 hectares (51.85 per cent), young mature (4 to 8 years) area 6,729 hectares (40.96 per cent).
Other include mature (15 to 18 years) area 802 hectares (4.88 per cent), old (19 to 25 years) area 373 hectares (2.27 per cent) and immature (0 to 3 years) area 6.39 hectares (0.04 per cent).
“With increasing palms entering high yielding age group and the proposed acquisition of B.H.B. Sdn Bhd, the plantation business is expecting to achieve an improved performance for the financial year ending Dec 31 2023,” WTK said when commenting on prospects in its 2022 annual report. The oil palm estate and palm oil mill were acquired for RM237.5 million and RM12.5 million respectively. WTK group reported a 15 per cent increase in the production of fresh fruit bunches (FFB) in financial year 2022 (FY2022) to 110,000 tonnes, up 14,000 tonnes as compared to FY2021, mainly attributed to more palms from the group’s estates entering prime age production cycle.
“In FY2022, the plantation segment registered a revenue of RM178.2 million, an increase of RM30.1 million or 20 per cent as compared to RM148.1 million in FY2021. The plantation segment recorded a profit before tax of RM20.9 million in FY2022, an increase of RM2 million or 11 per cent from RM18.9 million in FY2021.
“The surge in plantation segment revenue and profit before tax was mainly driven by improved production of FFB and higher selling price of crude palm oil (CPO) during the financial year,” the company said in a yearly review of its business operations.
The group produced 17,000 tonnes of CPO and 4,000 tonnes of palm kernel in FY2022. WTK said, however, that the palm oil industry is facing a more challenging environment in 2023 as the profitability of the company will be impacted by lower CPO prices and rising production costs due to labour shortages and increased fertiliser prices.
“To address these challenges, the group is pursuing on-going initiatives to achieve greater mechanisation and yield improvement wherever possible. These efforts are aimed at enhancing the operational efficiency to optimise costs and boost profitability,” it said. WTK also expects its newly acquired food business to do well in 2023.
The group ventured into the food business sector with the acquisition of Sing Chew Coldstorage Sdn Bhd (SCC) last June.
It said the acquisition provided the group an opportunity to diversify its business as a frozen food importer, wholesaler and retailer, which is expected to provide the group a long-term viable business with growth opportunity and a more diversified revenue stream to complement the group’s core business of timber, plantation and tapes.
SCC has more than 20 years of proven track record in the frozen food industry and specialises in the importation and distribution of quality frozen food products, such as meat, seafood, poultry, vegetables and processed food products as well as chilled dairy and non-dairy products to domestic markets throughout Sarawak.
“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 long time and longer shelf life as compared to fresh vegetables, fruits and meat.
“With anticipation of increasing demand for frozen foods, the group is expanding the capacity of the cold room and the scope of frozen products.
The food business is expected to perform satisfactorily for the financial year ending Dec 31 2023,” said WTK.
In March 2023, WTK’s whollyowned subsidiary, Kuching Plywood Bhd, entered into a share sale agreement with TMC Importer & Exporter Sdn Bhd (in liquidation) for the proposed acquisition of Interglobal Vision (Food Processing) Sdn Bhd for RM2.8 million in cash.
Interglobal is principally engaged in the business of an importer, wholesaler and retailer of frozen food. On its timber business, WTK said it continues to face challenges with logs and plywood production expected to slow down due to declining number of available natural logs, stricter operational requirement related to timber certification and softer demand from importing countries.
The company therefore remains cautious about the outlook of the timber business in FY2023.
In FY2022, WTK narrowed the pre-tax loss on its timber segment to RM25.7 million from RM32.5 million in FY2021 due to lower amortisation of timber rights as revenue grew to RM186.7 million from RM182 million in 2021.
“Despite lower sales volume for both logs and timber products, the timber segment registered a higher revenue in FY2022, mainly attributable to the higher selling price of timber products,” it explained.
In FY2022, the group recorded a five per cent drop in logs production to 188,000 cubic metres (cu m) (FY2021: 198,000 cu m) and three per cent fall in sales of logs to 188,000 cu m (191,000 cu m). Year-on-year, plywood production volume declined to 31,000 cu m (34,000 cu m) while sales volume plunged to 26,000 cu m (45,000 cu m) due to weaker demand from buyers in Japan and Taiwan, which absorbed 82 per cent and 18 per cent respectively of the group’s exports.
On the group’s tapes business (manufacturing and trading of various adhesive and masking tapes), WTK also expects the business to perform well in FY2023 despite the challenges due to market uncertainties, rise in raw material costs and higher labour cost.
“In anticipation of the challenges, the group is upgrading the plants and machineries to expand the products’ range and to improve operational efficiency and cost competitive advantages,” said WTK, which is Malaysia’s leading cellulose tape manufacturer, with its plant located in Penang.
In FY2022, the tapes segment saw its revenue rising by RM4.4 million or seven per cent to RM68.9 million from RM64.5 million in FY2021 as a result of higher demand. WTK, which has cash and bank balances of RM331 million as at Dec 31, 2022, expects the group to achieve satisfactory performance in FY2023.
