TIMBER and sustainable forest management group Priceworth International Bhd, which is in the midst of acquiring the rights to a large sustainable forest management area in Sabah for the next 81 years, saw its full year net profit jump 409 percent to RM4.68 million.
This performance followed a 2 percent higher revenue of RM170.17 million for the year ended 30 June 2017.
For the fourth quarter, the Sabah-based group saw its revenue rise 21.4 percent to RM59.20 million, saying this improved performance followed an increase in production volume from Forest Management Units (FMUs) and concession areas currently under its management in Sabah. It also posted a quarterly net profit of RM3.03 million, ten times higher than the net profit of RM274,000 in the corresponding quarter last year.
Priceworth also benefitted from higher selling prices for timber due to the stronger US dollar exchange rate, said said executive director Richard Koo.
“The currency factor and the higher production from existing areas under our management continues to look promising. Barring any adverse changes, we are hopeful of continued improvement in the group’s quarterly financial performance, even without the impact of the proposed acquisition of FMU5,” he added.
“The outlook for Malaysian timber industry remains stable with stable selling price in Japan and China as well as in other Asian countries. The outlook for demand of timber from Japan and China, who are major purchasers of plywood and round logs respectively is promising with growth from various positive factors and a stabilising economy,” he said.
In October 2016, Priceworth proposed to acquire for RM260 million the rights to manage, replant and harvest the area known as FMU5 under a 100-year licence awarded in 1997. Under the Sustainable Forest Management Licence Agreement (SFMLA), FMU5 is be to planted, rehabilitated and harvested under the principles of sustainable forest management and environmental conservation for economic, environmental and social purposes.
With 81 years remaining, the 101,161 ha FMU is to be managed as Industrial Tree Plantation (ITP) and Natural Forest Management (NFM), with about 12,200 ha to be returned to the Forestry Department Sabah as conservation area and 9,152 ha set aside for forest reserves.
As part of the acquisition exercise, Priceworth is also planning to raise funds via a Singapore Exchange-listing for its subsidiary GSR Pte Ltd, the vehicle for acquiring FMU5. Aside from owning FMU5, GSR will also own Priceworth’s plywood manufacturing arm through acquiring sister company Sinora Sdn Bhd.
Recently, the Sabah Forestry Department gave its approval for operations to commence in Compartments 57 and 58 within FMU5. Priceworth through subsidiary Sinora Sdn Bhd, which also holds extraction rights over FMU5, is close to completing most of the major operational works required from road and bridge repair to the establishment of the main camp, and expects harvesting to begin in September.
Priceworth is hopeful that based on the timber industry’s ballpark benchmarks, the FMU5 operation may generate a profit of RM100 million per year.