KUCHING:The plywood prices in Japan market are believed to have hit the bottom, according to Ta Ann Holdings Bhd.
The Sibu-based timber/plantation firm expects plywood demand, which is still low in Japan, to pick up in the months ahead.
“Given the low plywood inventory in Japan, the commencement of the new financial year and a stronger yen, plywood purchase to replenish the stock should be in the pipeline.
“Coupled with the infrastructure construction works for the upcoming Olympics games, plywood demand is expected to increase,” Ta Ann said in a quarterly review when releasing its January-March 2016 financial results.
Group’s pre-tax profit slumped to RM17.6mil,down from RM33.7mil in first quarter-2015. The profits of the timber products’ segment nosedived to RM9.5mil, down sharply from RM33mil but the profits of the oil palm segment soared to RM8mil from RM965,000 previously. Group revenue fell to RM218.5mil from RM222.2mil during the same period.
Ta Ann attributed the lower turnover and earnings to a 13% drop in plywood sales volume and 33% drop in export logs volume.
The timber products’ segment contributed the bulk or RM118.7mil to group revenue during the quarter under review (versus RM144.3mil in the first quarter of 2015) while the oil palm segment chipped in RM99.7mil (RM77.9mil). The reforestation segment contributed a marginal RM126,000.
Compared with the October-December 2015 quarter, Ta Ann said average selling price of plywood products and export logs declined by 11% and 10% respectively, while their sales volumes dipped by 7% and 5% respectively.
Last year, Ta Ann produced 193,442 cu m of plywood (207,441 cu m in 2014) and sold 180,625 cu m (203,274 cu m in 2014) of the value-added timber product. About 92% of the plywood products were exported to Japan, 6% to Australia and 1% each to Taiwan and Singapore.
Going forward, the company expects demand for tropical logs to remain stable, and it anticipates production volume to increase with the improving weather condition in the current quarter.
Last year, Ta Ann recorded a 6% hike in average selling price of export logs, compared with 2014. The company shipped 166,855 cu m of logs to overseas markets, down from 209,913 cu m in 2014. India absorbed 82% of the company’s total shipment, followed by Taiwan (9%),Japan (6%), China (2%) and others (1%).
On oil palm business, the company said fresh-fruit-bunch production had started to increase last month and this was anticipated to go up further with the approaching peak crop season.
“The better CPO (crude palm oil) price compared with 2015 and the projected rising trend of CPO price will raise contribution of the palm oil sector to the group revenue and profit in second quarter,” added Ta Ann in accompanying notes to the latest financial results.