Leweko Resources Bhd ... Aug 09

Leweko Resources Bhd, one of Peninsular Malaysia’s largest timber concessionaires, has deferred its upstream activities and will expand its downstream operations in product range and wood species via acquisitions of existing timber operations or establishing start-ups.

The group, upon completion of the disposal of its oil palm plantation units, would have cash-in-hand of about RM15mil for new investments. However, it would remain cautious and selective in its future acquisitions, especially during the current global economic slowdown.

The have decided to stay focused as a pure timber player.

In fact, it took the group two years to evaluate and observe its latest acquisition of Kuantan-based SCK Wooden Industries Sdn Bhd for RM7.9mil cash in March 2009. After SCK, Leweko will only start looking at new acquisitions or start-ups possibly next year (2010).

While it was tough to get out of the plantation business which the group started in 2004, Chung said: “We believe we have made the right move to sell the units for about RM35.7mil cash.

On its upstream operations, Leweko had opted to defer the harvesting of its timber concessions in Perak given the weak demand and low selling prices of tropical timber products globally. This move was similar to that of other timber concessionaires, whereby many are awaiting positive signs of a global economic recovery that may bring better demand and higher prices for tropical timber products.

The profitability of many timber-based companies had been affected by the disproportionate drop in raw materials (logs) cost and selling prices of their timber products. For example, the average domestic log price has dropped about 11% this year while the selling prices of timber products are down by 20% to 25% due to weak overseas demand.

For the financial year ended Dec 31, 2008, the group posted a net loss of RM5mil on revenue of RM92.3mil.

To address the drop in the volume of the group’s traditional products to Europe, it would be broadening its exports to non-traditional markets like the Gulf states, India and North Asia.

Leweko would also come out with new products and wood species to customers in Australia and the United States, apart from Europe.

It will also intensify efforts for more international certifications of our products as the prices of certified timber products are usually much higher than the uncertified ones.

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