BRDB ... Mar10

It is mulling revisiting the option of selling its stake in chipboard maker Mieco
Chipboard Bhd.

BRDB has 56.8 per cent stake in Mieco, a pioneer in particle board manufacturing using rubber wood.

The developer has been wanting to dispose of its stake in Mieco for the past four years. It spoke to several local and foreign firms but no firm deal was entered into.

Despite being optimistic of prospects for Mieco as furniture manufacturing and the audio segment is improving in tandem with economic and industry growth, BRDB wants to sell its share in the company as it is dragging down its profit. By doing that, BRDB can also focus more on property development and investment, as chipboard and manufacturing is not its expertise.

Mieco posted a loss of RM36.3 million in 2008. It may be in the red in 2009 after posting a loss of RM18.2 million for the first nine months of the year.

Mieco has been in the red because of supply and demand issues, price war, foreign exchange losses and higher operating costs. Mieco is consolidating its operations, allowing it to repay part of its RM150 million debt and save cost.

Some 40 per cent of Mieco's chipboards are sold in the domestic market. The rest are sold in Asia Pacific, the US and Europe. Mieco's most important markets are Malaysia, India, Indonesia, Vietnam and China.

It has three plants in Pahang, which has the capacity to produce 900,000 m3 of chipboards per annum. But the plants are producing three times less now because of slow demand. Mieco has since closed one plant to save on operational cost. It is not clear if Mieco will sell the plant. The replacement value for the three plants is RM700 million.