KUCHING: Eksons Corp Bhd
has exited its loss-making core plywood manufacturing operations.
The plywood operations were ceased in January this year due to the constant challenge in procuring the supply of logs and workers, according to group managing director Datuk Philip Chan Hon Keong.
In the financial year ended March 31, 2023 (FY23), he said Eksons’ plywood division revenue plunged 40% to RM22.1mil from RM37.1mil in FY22.
The division posted an after-tax loss of RM10.6mil in both FY23 and FY22.
“The plywood products experienced a decrease in demand due to weak sales from the export market while average pricing improved by a marginal 2%.
“The division’s operations are largely reliant on two major input components which are the supply of logs and also the supply of labour,” he added in the company’s 2023 annual report released last week.
Chan said the discontinuation of the plywood operations would result in cost savings for the company on direct labour of RM4mil, repairs and maintenance of RM600,000 per annum.
Eksons still had in its inventory about RM36.1mil of plywood products as at March 31, 2023.
“These inventories will continue to be sold into the foreseeable future, with expectations of beyond a one-year period.
“The price of plywood in now trading within a range of US$460 (RM2,094) to US$480 (RM2,185) per cubic metre (cu m),” he added.
Chan said with the cessation of the plywood operations, Eksons has leased out its factory in Tawau, Sabah, for a monthly base rent of RM25,000, with additional variable rent in excess of monthly production above 1,000 cu m.
Prolonged log and foreign labour shortages have forced many timber companies in both Sarawak and Sabah to either shut down their plywood plants or scale down their production outputs in recent years.
Jaya Tiasa Holdings Bhd, one of the leading plywood manufacturers in Sarawak with an annual production capacity of 420,000 cu m, faced a similar fate when it halted its loss-making plywood operations about three years ago.
Japan, which is Malaysia’s top plywood export market, has significantly cut its imports this year.
In the first five months of 2023, Japan imported 191,400 cu m of plywood from Malaysia (the bulk from Sarawak), down from 357,500 cu m in the same period last year, according to Japan Finance Ministry data reported by the International Tropical Timber Organisation (ITTO) in its bi-monthly tropical timber market report.
Based on Sarawak Timber Industry Development Corp (STIDC) monthly export figures, Sarawak exported about 153,592 cu m of plywood worth about RM416mil (free on board value) to Japan in the first five months of this year.
During the same period under review, Japan also slashed its shipments of plywood from Indonesia to 215,600 cu m from 347,800 cu m in the January-May 2022 period.
Malaysia and Indonesia are the traditional top plywood suppliers to Japan.
The ITTO report said the downward trend in the volume of Japan’s plywood imports began in mid-2022.
Eksons chairman Tan Sri Abdul Aziz Husain noted that ceasing the plywood operations was the result of the company’s business strategy review.
“Our investment portfolios were also reshuffled with a focus on higher fixed income returns while the property development division continues to contribute.
“The group will continue to identify key business opportunities and consolidate its financials,” added Abdul Aziz, who is also Sarawak State Economic Development Corp (SEDC) chairman.
In FY23, Eksons group net loss widened to nearly RM18mil (FY22: RM15.5mil) on declined revenue of RM57.3mil (RM90.8mil in FY22).
During the year under review, Chan said the property development division’s revenue fell by 35% to RM35.2mil from RM53.7mil in FY22.
The lower revenue was generated from the sales of commercial units at The Atmosphere Commercial Park and Viva Paradise Sdn Bhd’s Affiniti Residence project in Serdang, Selangor.
“The division will continue with its marketing efforts to complete its sales of the Affiniti Residence and to strengthen the position of The Atmosphere Commercial Park as an education, health and wellness hub and to serve the needs of the community living in the vicinity of the development,” he added.
