HEVEA ... Feb11

It is out of the woods now that it has found its way into the China market.

The company has been focusing on selling its particle board in China’s domestic market for the last two years. Its efforts have produced results, particularly after Jan 1, 2010 when China joined the Asean Free Trade Area.

China accounted for 30% of its total sales in 2010 and is its biggest market.

That development has enabled the company to utilize its plant at almost full capacity. In addition it expects an upturn in particle board prices when Australia begins rebuilding after the devastating floods.

The company has sizeable bank debts that are partly denominated in US dollars, and that gives it a hedge of about 50% of its export revenue. Thus, if the US dollars weaken, it may lose rm10 million when it converts its dollars revenue into ringgit, but it would have a translation gain of about gain of about rm5 million from the US dollar denominated loans.

It aims to reduce its debts. Its financial position has improved from 2006.

It has bank borrowings of rm170 million while its equity was rm182 million as at end Sept 2010, a gearing of about 90%.

The group’s borrowings can continue to be trimmed as the company is profitable and its provision for depreciation, a non cash item, is about rm24 million a year.