KUCHING: Jaya Tiasa Holdings Bhd’s priority is to sell logs before processing them in view of the weak demand for timber products.
According to chief executive officer Datuk Wong Sie Young, the current global market demand for plywood and veneer is expected to remain depressed.
“Hence our priority is to sell logs before processing them in order to maximise our revenue and retain existing markets, ” he said.
In the financial year ended June 30,2020 (FY20), Jaya Tiasa’s log sales more than doubled to 168,465 cubic meters (cu m) from 71,894 cu m in FY19. Log production volume increased by more than 5% to 244,511 cu m from 232,792 cu m year-on-year (y-o-y).
However, the average log export price fell by 11% y-o-y to US$193 per cu m due to weaker demand from key market segment.
“Hopefully, the log prices can pick up after the (Covid-19) pandemic with more demand arising from the normalisation of economic activities, ” Wong said in a yearly review of the company’s performance in its 2020 annual report.
Sales of logs contributed about 14% to Jaya Tiasa’s group revenue of RM701.9mil in FY20. India remained the largest log export market, accounting for 58% of the company’s sales, followed by Japan (15%), Taiwan (10%) and Asean and Korea (7% each).
Wong said Jaya Tiasa is set to obtain forest management certification for its timber licences by 2022 to meet the Sarawak government’s timeline.
“Under the sustainable forest management exercise, the log supply is expected to improve in tandem with the progress of implementation.
“We will continue to export logs in the coming financial year, as we foresee the market demand for tropical logs to pick up and timber prices to sustain.
“The value of the US dollar against the ringgit is expected to remain strong in the near future, which is favourable to our export sales in terms of currency exchange, ” he added.
To better manage its forest concession, Wong said Jaya Tiasa will select timber species with higher value for harvesting and maintain vigilant controls on the cost of production, and greater attention will be given to logistical planning to ensure that logs extracted are delivered to the buyers within the shortest time-frame possible to preserve their freshness and maintain their quality for premium prices.
On reforestation, he said the group has cultivated 42,254ha of forest plantations which have a gestation period of 12 to 15 years before the trees are ready for commercial harvesting.
On the group’s wood manufacturing business, Wong said it contributed about 13% to group revenue in the year under review. Plywood sales volume was down by 7% to 43,863 cu m from 47,340 cu m in FY19 while average selling prices plunged by 25% y-o-y.
Jaya Tiasa group has an installed plywood production capacity of 180,000 cu m per annum but produced merely 37,406 cu m representing an utilisation rate of 21% in FY20, down from 46,538 cu m or 26% in FY19.
Similarly, the group’s utilisation rate of veneer production capacity (162,000 cu m per annum) recorded in FY20 was at the low level of 29% (46,715 cu m) but higher than 24% (38,942 cu m in FY19). Y-o-y, veneer sales jumped 34% but its average selling price was down by a hefty 35%.
“The production volume of plywood and veneer decreased primarily due to log supply constraints. This coupled with the rising cost of operation had resulted in the increase in our unit of cost of production, ” said Wong.
The Middle East is Jaya Tiasa group’s largest export market for plywood, accounting for 32%, followed by China (29%) and Taiwan (18%). As for veneer, Taiwan is the group’s largest export destination, absorbing the bulk or 86% of its total export volume, followed by China/Hong Kong (11%) and Korea (3%).