Priceworth is looking to reduce losses

PETALING JAYA: Priceworth International Bhd is confident of reducing its losses as its newly acquired concession company, which has 20,000ha of harvestable area, is expected to contribute to earnings for the financial year ending June 30, 2015.
"We have put in place various measures to improve performance and grow our turnover, for instance, Beta Bumi Sdn Bhd that was acquired early this year will contribute to our future earnings," its executive director Richard Koo told SunBiz in an email interview.
He said harvesting in the newly acquired area started last February and production will gradually increase in the coming months, and is expected to make up about half of total log supply for downstream timber manufacturing for the next three years.
Koo said the Sabah-based timber player is actively strengthening its balance sheet and has moved into forest replanting and sustainable timber practices to produce legal and certified logs in order to meet the stringent global requirements and conservation policies in Sabah.
"We have replanted 4,000ha, which will be ready for harvesting in 2017," he said.
Priceworth currently holds a total timber concession area of 28,000ha with a tenure of 50 years for forest replanting, where 4,000ha are fully replanted and the balance area to be replanted within four years.
The company is one of the few fully integrated timber operators in Malaysia – from upstream operations such as forest management and rehabilitation and timber extraction to downstream operations such as plywood, sawn timber and veneer production, moulding products manufacturing, logs trading, and shipping and logistics.
Priceworth has been involved in the Malaysian timber industry since 1992 and was listed on Bursa Malaysia in 2001.
Since June 2011, it has been working together with the Sabah Forest Department and international Forest Stewardship Council (FSC) to certify that the logs produced are renewable timber.
For the six months ended Dec 31, 2013, Priceworth posted a net loss of RM12.15 million, significantly lower than the RM27.62 million net loss for the previous corresponding period, due to a 12% increase in the average selling price of plywood.
Koo believes that having sustainable growth as its business model and achieving FSC certification would be the factors differentiating Priceworth from its competitors. "We see renewable timber as a long-term game and we reinvented our business model as a player in sustainable, renewal timber supply through our forest replanting models."
He said the company will have a sustainable supply of logs due to having a continuous replanting and harvesting cycle in its area, and is conducting research and trials on planting the eucalyptus tree species, which has a shorter harvestable cycle of four to five years.
"We are also in the midst of developing research on tissue culture and greenhouse to ensure we have a sufficient and continuous supply of quality seedlings for our forest replanting activities," he added.
Koo expects the timber industry to remain stable with the improving economic outlook in Japan and the US, and the average selling price of timber to stay at current levels for this year with a gradual increase in the coming years.
He said a shortage in the supply of renewable logs had been the main challenge for the past two years, thus the acquisition of Beta Bumi Sdn Bhd and the replanting of over 28,000ha were necessary to address the issue.
The company will be looking to secure more forest replanting areas from the Sabah Forest Department.
Besides its core timber business, Priceworth ventured into the dockyard and engineering business in 2012 as assets such as tugboats and barges are needed for timber delivery.
Following the capital reduction exercise, Koo said, the company may consider raising more funds in the future to expedite forest replanting activities, but at the moment it still has sufficient funds for its operations and repayment of borrowings.
Last year, Priceworth announced a capital reduction exercise, cancelling 40 sen of the par value in its share to 10 sen, which gave it a credit of RM74.51 million. It was used to facilitate the issuance of new shares to acquire Beta Bumi, and the issuance of redeemable convertible notes amounting to RM50 million.