WTK Holdings chairman Tan Sri Sulong Matjeraie
KUCHING: Diversified group WTK Holdings Bhd
is expanding its oil palm plantation business via a second acquisition that will reduce its reliance on the traditional timber business, which is currently facing tough times.
Its chairman Tan Sri Sulong Matjeraie said the group is set to raise its oil palm planted area by 34.54% to 16,429ha upon the completion of its latest proposed acquisitions of plantation firm B.H.B Sdn Bhd for RM237.5mil and a palm oil mill in Miri division for RM12.5mil.
The cash acquisitions of B.H.B, which owned 4,217.6ha of oil palm estate and a palm oil mill, is expected to be completed in early May this year, he noted.
This is following the approval for the deal was obtained from WTK’s shareholders at an EGM held last Thursday.
WTK is principally involved in timber, plantation and adhesive tapes businesses.
Sulong said in a recent circular to shareholders that the proposed acquisitions of B.H.B and palm oil mill were in line with the group’s long term strategy to further expand its oil palm plantation business by buying new land banks.
“This is to gain larger foothold in the future production of fresh fruit bunch (FFB) in view of the scarcity of sizeable and suitable oil palm plantation land in Malaysia,” he pointed out.
In addition, the latest proposed acquisition will expedite WTK group’s strategic shift to become a more dominant plantation player with an enhanced publicly-listed profile.
Thus providing WTK group with an additional stream of income that will reduce its reliance on the timber business, which is currently facing headwinds.
Back in 2020, WTK made its first major acquisition of plantation land along Batang Baram in northern Sarawak from Rimbunan Sawit Bhd’s wholly-owned subsidiary Lumiera Enterprise Sdn Bhd for RM85mil cash.
About 3,390ha out of the 4,698ha of the land, which is strategically located adjacent to WTK group plantation estate, had been planted with oil palm.
The said acquisition has increased the group’s oil palm planted area by 39% to 12,052ha from 8,662ha.
According to Sulong, the group’s traditional timber business continues to face challenges with the log production anticipated to slow down due to declining number of available natural logs and stricter operational requirements relating to timber certification.
The group’s timber business comprises mainly upstream logging operation, reforestation and downstream timber processing activities such as plywood, sawn timber and veneer manufacturing.
In financial year 2021 (FY21), WTK’s timber segment narrowed its pre-tax loss to RM32.5mil from RM154.9mil in FY20 on the back of a lower revenue at RM179.9mil from RM209mil previously.
Year-on-year, plywood production volume shrank to 34,000 cubic metres (cu m) in 2021 from 59,000 cu m in 2020 while sales volume dropped to 45,000 cu m from 81,000 cu m.
However, its log production increased to 198,000 cu m in 2021 from 144,000 cu m in 2020, while logs sales grew to 191,000 cu m in 2021 compared with 111,000 cu m in 2020.
In the first nine months of FY22 (9M22), the group’s timber segment further reduced its pre-tax loss to RM9.3mil from RM20mil in 9M21 with a revenue of RM147mil. For the period under review, WTK’s plantation segment pre-tax profit grew to RM18.1mil on sharply higher revenue of RM143.6mil.
In FY2021, Sulong noted WTK’s plantation segment posted a pre-tax profit of RM18.9mil, a reversal from a pre-tax loss of RM38.9mil in FY2020.
It is worth to point out that all the group’s palm oil estates and palm oil mill are Malaysian Sustainable Palm Oil-certified.
“It should also be highlighted that the oil palm age profile of B.H.B is relatively young.
“Accordingly, as the oil palms enter into maturity and move into higher yielding age bracket, B.H.B oil palm yields are poised to further improve and the growth momentum in B.H.B’s earnings is expected to continue in the future financial years,” he further explained.
The B.H.B plantation increased its FFB production volume to 55,625 tonnes in 2021 from 48,304 tonnes in 2020 and 38,327 tonnes in 2019 respectively.
Of the group’s existing 12,210ha oil palm estates, Sulong pointed out that 7,493ha or 61.36% are prime mature with nine to 14 years tree age profile, 3,909ha or 32% young mature and 802ha or 6.57% matured with 15 to 18 years tree age profile.
Upon completion of the proposed B.H.B plantations acquisition, the group’s palms in prime mature category will increase to 8,518ha or 51.85% of the group’s expanded 16,429ha, 6,729ha (40.96%) young mature, 802ha (4.88%) mature and 373ha (2.27%) extended over 25 years.
Back in June last year, cash rich WTK group has also acquired a 100% equity interest in Sing Chew Coldstorage Sdn Bhd for RM20mil cash to diversify into the business of an importer, wholesaler and retailer of frozen food.
