PLYWOOD manufacturer Cymao Holdings Bhd plans to obtain international standard certifications to expand further in the competitive overseas plywood market.
The Sabah-based plywood manufacturer is now discussing with some relevant foreign authorities on international certifications for its products.
Executive director Lin Kai Min said Cymao was targeting to secure the prestigious European CE certification standard by the fourth quarter of this year.
CE is a French abbreviation for Conformite Europeene or European Conformity in English. The CE mark is a trade passport to Europe for non-European Union products.
“Obtaining this certification will further facilitate the company's expansion into the European market. We are already exporting there, but not in a big way. There is a good demand for plywood products, especially in countries in Eastern Europe like Poland, Hungary and the Czech Republic in view of the booming reconstruction works.
“We have received the Forest Stewardship Council (FSC) certification from Switzerland a couple of years back and it was a passport for our entry into the European market. The FSC certification is issued for products that are sourced from legal and sustainable forest and, at the same time, produced using processes that are environmentally friendly,'' he said during an interview.
Lin, who is the son of the company's founder and current managing director Lin Tsai Rong, said Cymao also hoped to clinch the Japan Agriculture Standards (JAS) certification by the third quarter of next year, which will pave the way for its products into Japan.
At present, about 80% of the company's products are exported, mainly to the United States and to a lesser extent, Europe and the Middle East.
In the above markets, Cymao's products are used in a variety of industries such as construction/housing, mobile homes, furniture, auto, yacht, and musical instruments.
Financial controller Chin Yoong Foo said Cymao did not believe in putting all its eggs into one basket but would look for new markets to mitigate the risk of over-dependence on a single country.
Chin added that the Middle East was another region that it would increase its exports to in the next few years, given the construction boom in some of these countries, such as the United Arab Emirates.
Cymao's market share in the plywood segment in Sabah is close to 10% and it is one of the leading players there. Including the peninsula, its overall market share in the country currently stands at close to 3%.
Continuing to look for new markets, acquisition of other similar businesses which the company is in and investment in research and development (R&D) are some of the key areas Cymao would be concentrating on.
Last month, the company acquired the entire stake in Inovwood Sdn Bhd, a plywood manufacturer in Sandakan, for RM16mil. The acquisition of Inovwood is expected to be completed by the end of the year and is anticipated to contribute significantly to the company's future earnings.
Chin added that the proposed acquisition would expand the company's plywood production capacity from the existing 120,000 cu m per year to 180,000 cu m per year.
The company has earmarked RM17mil as capital expenditure to improve the production facilities, which would eventually increase the production capacity to 216,000 cu m per year by year-end.
It would also allow Cymao to meet increasing demand due to its expansion into Britain, Europe and West Asia.
Lin said the manufacturing site of Inovwood was situated in the vicinity of the company's plant in Sandakan and would further facilitate the management of both plants, resulting in synergistic benefits in terms of production efficiency.
According to him, there are plans for similar acquisitions in the future. He said Cymao was currently talking to a few plywood makers in the country for possible acquisitions but it was only preliminary discussions.
Lin said the company's competitive edge lay in its strong R&D capability.
Cymao undertook R&D in all aspects, ranging from product development and process enhancement to waste recycling.
“My brothers, including my father, are qualified and experienced foresters. My father has a degree in plant pathology and has vast working experience of more than 40 years in the wood-based industry.
“My brother Lin Kai Hsuan has a Masters of Science in Forest Science and has extensive working experience in R&D. On average, the company spends about 1% of its turnover per annum on R&D.”
Cymao's venture into downstream higher value-added products, which demands skill and technology know-how, has also helped the company to weather steep competition from both hardwood and softwood producers.
Asked on the market for plywood, Lin said he expected an improvement in sales growth for timber products this year compared with last year.
Chin forecast a 10% growth in timber products this year from the estimated RM17bil sales in 2004.
He said the demand was expected to be high in countries where there was a construction boom such as the UAE, among others, and also where there are reconstruction works being carried out in Eastern Europe.
In addition, Lin said, growth would be coming from the value-added timber products, which contributed about 40% of the total timber products produced in Malaysia for 2003.
Total plywood exports from Malaysia in 2004 was 4.3 million cu m, valued at RM5.6bil. Total plywood exports from Sabah during the period stood at 1.3 million cu m, valued at RM1.6bil.
During the period, Cymao's total plywood exports totalled 125,000 cu m worth RM177mil.
On the company's financial performance, Lin said he expected a better set of results this year.
For the year ended Dec 31, 2004, Cymao posted profit after tax of RM21mil compared with RM17mil in 2003.
Turnover also improved, touching RM195mil last year compared with RM155mil in 2003.
Cymao was listed on the main board of Bursa Malaysia in March last year, and has a paid-up capital of RM60mil.