Monday, Jan 24, 2005
The rating upgrade to AID / MARC-2 ID reflects Priceworth Wood Products Berhad (Priceworth) Group’s improving financials underpinned by growing timber extraction activity/contracting services coupled with high operational integration pertaining to its manufacturing activities. The Group’s vulnerability to cyclical developments affecting the timber/wood-based industry remains a moderating factor to the rating.
Recently promoted to the main board of Bursa Malaysia, Priceworth’s principal activities are manufacturing and sale of processed wood products (including sawn timber, barecore board, moulded timber and timber flooring) and timber contracting services. Its timber complex is located at an 81-acre site in Kuala Seguntor, about 16 km from Sandakan, Sabah. Around 95% of its total sales are exported to international markets including Japan, China, Hong Kong, South Korea and the Philippines.
To mitigate supply risk and ensure a constant and reliable supply of logs as raw materials for its downstream activities, Priceworth is in the process of completing the acquisition of Teras Selasih Sdn Bhd (TSSB) and Cergas Kenari Sdn Bhd (CKSB), both previously suppliers of logs to the Group. Other than the synergistic effects, post acquisition the Group will secure a supply of 418,000 cubic metres of logs p.a. or 2.09 million cubic metres over five years which are more than sufficient to meet the current requirement of 180,000 cubic metres p.a. Consequently, the Group plans to gradually increase its production capacity to 400,000 cubic metres p.a. by the end of financial year 2005.
Priceworth’s revenue rose by 39% to RM175.13 million in fiscal year 2004 from RM125.73 million previously. However, its operating profit margin declined from 14% to 6% as rising raw material and selling costs outpaced increases in prices of its manufactured products. This partly contributed to Priceworth’s decision to venture upstream by acquiring CKSB and TSSB. Debt leverage remains manageable at 0.53 times, aided by growing profit retention over the past several years. Cashflow has improved and is expected to be boosted by contributions from the acquired companies.
Recently promoted to the main board of Bursa Malaysia, Priceworth’s principal activities are manufacturing and sale of processed wood products (including sawn timber, barecore board, moulded timber and timber flooring) and timber contracting services. Its timber complex is located at an 81-acre site in Kuala Seguntor, about 16 km from Sandakan, Sabah. Around 95% of its total sales are exported to international markets including Japan, China, Hong Kong, South Korea and the Philippines.
To mitigate supply risk and ensure a constant and reliable supply of logs as raw materials for its downstream activities, Priceworth is in the process of completing the acquisition of Teras Selasih Sdn Bhd (TSSB) and Cergas Kenari Sdn Bhd (CKSB), both previously suppliers of logs to the Group. Other than the synergistic effects, post acquisition the Group will secure a supply of 418,000 cubic metres of logs p.a. or 2.09 million cubic metres over five years which are more than sufficient to meet the current requirement of 180,000 cubic metres p.a. Consequently, the Group plans to gradually increase its production capacity to 400,000 cubic metres p.a. by the end of financial year 2005.
Priceworth’s revenue rose by 39% to RM175.13 million in fiscal year 2004 from RM125.73 million previously. However, its operating profit margin declined from 14% to 6% as rising raw material and selling costs outpaced increases in prices of its manufactured products. This partly contributed to Priceworth’s decision to venture upstream by acquiring CKSB and TSSB. Debt leverage remains manageable at 0.53 times, aided by growing profit retention over the past several years. Cashflow has improved and is expected to be boosted by contributions from the acquired companies.