Perak-based Leweko is involved in timber and oil palm plantation businesses. Leweko owns an integrated timber operation, with both upstream forest concessions and logging businesses, and downstream timber manufacturing and processing activities. On the plantation side, Leweko is involved in upstream oil palm cultivation and selling fresh fruit bunches (FFB) in the domestic market. The timber division was impacted by the industry downturn in 2007 Leweko’s forest concessions in Temengor Forest Reserve in Perak have about 2,000 hectares (ha) remaining. About 70% of logs harvested from its own concessions are for internal use and the rest sold in Peninsular Malaysia (logs from Peninsular Malaysia are not allowed to be exported). In addition, Leweko has a long-term agreement with other concession holders to purchase logs from their concessions of about 2,000 ha. These will assure supply of logs for its downstream operations for the next 5-7 years. The sawmilling, kiln-drying and timber moulding activities are carried out at Leweko’s 8.69 ha timber processing complex in Grik, Perak. Its main products are sawn timber and moulded timber, which include floor boards, decking boards, skirtings, casings and laminated woods. Initially, most of the timber products were sold locally but in the past three years, Leweko has aggressively expanded its exports. By 2007, export contribution to Leweko total revenue has grown to 41.5% or MYR50.8 mln compared with 6.7% of MYR8 mln in 2004. Europe is its major market, accounting for 83.3% of export revenue for 2007.
The timber industry, in general, performed poorly in 2007 as the real estates and construction industries (which are a good demand barometer for the timber industry) in major export markets cooled down. This was reflected in the 27.1% YoY decline in Leweko’s net profit for the year. The profit would have been much lower if not for increased earnings contribution from the plantation division. Following the very strong first half of 2007, the markets for timber products became oversupplied. Together with the housing sector weaknesses in Japan (largely attributed to the impact of the revised Building Standards Act, which caused housing starts to plummet), the U.S. (caused by the sub-prime mortgage crisis) and Europe (due to high interest rates), prices of timber products declined throughout 2H2007. Log prices, however, were quite resilient due to limited supply.
Leweko’s logs and timber products division recorded a 74.4% YoY drop in pre-tax profit in 2007 to MYR5.5 mln. Leweko was able to grow its export revenue by 46.9% YoY in 2007 (helped by the introduction of new products, such as laminated scantlings) but domestic sales faltered along with the industry’s weakness. Margins were squeezed to a single-digit level on high log prices and fuel costs. The strengthening of MYR against US$ also contributed to the low profitability.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Oliva
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Posted by Oliva > 2015-04-12 23:26 | Report Abuse
Monday ok