Jaya Tiasa to better manage forest by selecting quality timber for harvesting

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  • Friday, 08 Nov 2013

KUCHING: Jaya Tiasa Holdings Bhd, which contributed more than 10% of Sarawak’s log production last year, will select good quality timber species with high market value for harvesting.

Chairman Tan Sri Abdul Rahman Abdul Hamid said the move was to better manage the state forest.

“We will export all available logs within the permitted quota and maintain vigilant controls on the cost of production.

“Increased attention will also be given to logistical planning to ensure that logs extracted are delivered within the shortest time frame possible to preserve their freshness and maintain their quality for premium prices,” he added in the newly released company 2013 annual report.

Sibu-based Jaya Tiasa under the stable of the diversified Rimbunan Hijau group has one of the largest timber assets among Malaysian listed companies.

The group has forest concessions covering 713,211ha (gross area), and a monthly log extraction quota of 94,500 cu m.

Abdul Rahman said with higher export quota, the group’s logs sales should increase in the new financial year.

“We forsee the market demand for tropical logs to remain robust despite an expected slower global growth, with prices that are likely to be sustained due to supply constraint.

“In particular, demand for logs in India is expected to continue to be maintained, driven by their needs for afforable timber for building and renovation. Its economy and construction activities are still growing since late-2012, albeit at a slower pace.”

India remained the largest export market for Jaya Tiasa, with sales accounting for 62% of the group’s total logs export sales in US dollar last year.

According to Abdul Rahman, although the rupee had depreciated sharply against the dollar coupled with economic slowdown, India’s heavy dependence on imports due to inadequate domestic supply had helped to sustain demand, especially for Sarawak logs.

The logging division contributed about 38% to Jaya Tiasa group revenue of RM1.05bil for financial year ended June 30, 2013 (FY2013). Log production volume, however, fell by 7% from a year ago due to several factors.

“Apart from the unfavourale weather conditions as well as the impoundment of the Bakun hydroelectric dam which continued to impede the transportation of logs for processing mills and exports, scarcity of log supply has made our logging operation a bigger challenge,” said Abdul Rahman.

During the year under review, average log export price stabilised at US$220 per cu m largely due to the tightening supply and sustained demand from India and Taiwan.

On reforestation, Abdul Rahman said the group currently managed more than 235,800ha of areas and that the planted forest area had been expanding and would continue to trend up steadily. Its total forest plantations now stands at nearly 31,000ha.

“We perceive planted forest as an investment for the future viability of the group, and in keeping with the world’s move towards conservation of natural forests.

“The challenge of the group is to improve silvicultural practices and place greater emphasis on stringent quality control over new plantings and their maintenance so as to improve the survival rate and optimium growth of the planted trees.”

He said the fast-growing species cultivated by the group had a gestation period of 12-15 years before they could be commercially harvested.

On the group’s plywood operations, Abdul Rahman said the segment contributed about 30% to group revenue for FY2013. Export volume grew by 9% year-on-year but average selling prices dipped by 6%.

Taiwan and South Korea were Jaya Tiasa’s largest plywood buyers, absorbing 28% and 27% respectively of the group’s total export volume. Other major export markets were China/Hong Kong, Japan, US and the Middle East.

“Taiwan became our leading market for plywood. Despite the structural change in consumption pattern in Taiwan, we managed to fend off our competitors by selling good quality products with various sizes tailored to the market demand,” said Abdul Rahman.

Jaya Tiasa had earlier made a strategic move to produce higher value plywood products to maximise profits.

Abdul Rahman said the demand for plywood was expected to improve gradually in line with the economic recovery in the group’s key markets, particularly Japan.

“The aggressively easing to reflate the Japanese economy has led to higher government spending,monetary easing and structural reforms. Tokyo’s winning bids to host the 2020 Olympics will certainly have positive impact on Japan’s economy.

“The announced increase in Japan’s consumption tax from 5% currently to 8% by 2014 is anticipated to bring forward housing demand. June housing starts in Japan totalled 83,704 (units) and were up by 15% compared to June-2012. This is an encouraging note for plywood business as it will have a positive effect on the potential plywood demand as well as its selling prices,” he added.

Besides logging and plywood manufacturing, Jaya Tiasa group’s other main business is in oil palm cultivation.

In FY2013, the group registered a 85% drop in net profit to RM22.3mil from RM146.3mil in FY2012, largely due to the lower selling prices and higher operating costs for oil palm business.

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