KUCHING: WTK Holdings Bhd
is currently undertaking a major upgrading project for its tapes manufacturing plant in Penang.
The upgrading of the plants and machineries is to expand the product range and improve operational efficiency and cost competitive advantage.
“Those (upgraded) plants and machineries are expected to be fully operational by early 2024,” according to the Sarawak-based timber and plantation company.
The plant produces various adhesive and masking tapes, including cellulose tape, high temperature masking tape, acrylic form tape, UV resistant masking tape, double sided tissue tape and soft PVC insulating tapes, for the domestic and export markets.
WTK also trades these tapes and have marketing offices in Kuala Lumpur, Ipoh, Johor Baru and Singapore. The company serves a wide market base including homes, offices and industrial users.
In 2022, the export sales of the tapes accounted for 68% of total sales amounting to RM68.9mil, up 7% from RM64.6mil in 2021.
The major export destinations are Australia, Singapore, India, Hong Kong, Canada, Thailand and the United States.
In the third quarter to Sept 30, 2023 (3Q23), the tapes revenue, however, fell by RM2.5mil to RM16.5mil.
“The decrease in revenue was mainly due to lower export sales resulted from weak market demand for tapes products.
“The decrease in profit before tax (to RM998,000 from RM2.44mil) was mainly attributed to compressed margin due to rising material costs and higher financing costs incurred for the upgrading of plants and machineries,” said WTK when releasing the latest quarterly results recently.
The group expects the tapes business, one of its main business after timber and plantation, to perform satisfactory in 2023.
To reduce its reliance on the loss-making traditional core timber business (logging and manufacturing of plywood and other products), WTK has of late made major investments to acquire oil palm plantations and palm oil mill .
In May 2023, WTK completed the acquisition of BHB Sdn Bhd, which owns an oil palm estate and palm oil mill in the Miri division for RM250mil in cash.
The acquisition raised the group’s oil palm plantation area by 4,218 ha to 16,429 ha.
Last month, shareholders gave their nod to WTK group to acquire a 70% stake in plantation firm Durafarm Sdn Bhd for RM132.2mil cash. The deal is expected to be completed in 1Q24.
On completion of the Durafarm stake, WTK group’s oil palm area will be further increased to 20,439 ha, and serve as the group’s earning growth catalyst.
According to WTK, the acquisitions are in line with the group’s long-term strategy to expand its oil palm business by acquiring new land banks to gain a larger foothold in the country’s oil palm industry.
This will expedite the strategic shift for the group to become a more dominant plantation player while reducing its reliance on the timber business, which has been affected by reduced log production and stricter operational requirement related to timber certification.
In 3Q23, the plantation segment’s expanded revenue of RM74.7mil has overtaken the timber segment revenue of RM46.7mil and emerged the key profit contributor to the group.
The plantation segment recorded a pre-tax profit of RM12.2mil versus pre-tax loss of RM5.2mil incurred by the timber segment in 3Q23.
Cash-rich WTK has also diversified into the frozen food business as an importer, wholesaler and retailer with the acquisition of Sing Chew Coldstorage Sdn Bhd (SCC) for RM20mil cash last year.
SCC has more than 20 years of proven track record in the frozen food industry and specialises in the importation and distribution of quality frozen food products, such as meat, seafood, poultry, vegetables and processed food products as well as chilled dairy and non-dairy products to domestic markets throughout Sarawak.
In May 2023, WTK completed the acquisition of a second frozen food firm – Interglobal Vision (Food Processing) Sdn Bhd – for RM2.8mil to further expand the new business.
To cater for the fast-growing food business, the group has recently built a new cold room with a capacity of 650 tonnes, adding to its existing 2,000-tonne capacity cold room.
In 3Q23, the food segment generated about RM19.3mil in sales (3Q22: RM13.4mil) and posted a pre-tax profit of RM788,000.
“The frozen food business prospects are positive and promising attributed to several factors, including the convenience, long shelf life, innovation and diversification of frozen products. Frozen food has seen a significant increase in demand since the outbreak of the Covid-19 pandemic,” said WTK, expecting the food business to perform well in this financial year.
As at Sept 30, 2023, WTK had cash and bank balances of RM270.5mil.
