Current Year Prospects
Quarter 2, 2009
Timber
Japan, a major buyer for tropical hardwood timber products, returned to growth in the second quarter 2009, out of its longest recession since World War II. Growth in the world’s No. 2 economy is likely to continue in the coming quarters as companies restock inventories to meet a pick-up in demand at home and abroad. Notwithstanding this, going forward to the second half of 2009, the timber industry is projected to show improvement in both its demand and its selling prices. Selling price for round logs is expected to be firm given the dry weather condition in Sarawak. The low water level of rivers will mean a tighter supply of logs from Sarawak. Total plywood imported by Japan continued to drop during 2nd quarter 2009. This resulted in a significantly low inventory level in Japan and signs of tightening in the market are visible. Coupled with the expected improvement in housing starts, orders for plywood products are expected to increase during the second half of this year.
Given this, the Group remains cautiously optimistic of the industry and barring unforeseen circumstances, expects the Group’s results to improve second half of 2009. The group will also continue to monitor its various cost-cutting measures and its controls to conserve cash and focus on higher margin products.
Non-Timber Manufacturing & Trading
The current global economic downturn has affected the non-timber manufacturing and trading division, particularly with depressed demand in the primary export markets. With no sign of recovery in the near future, the division foresees the current weak market sentiment to continue until the end of 2009.
As the business outlook of the division remains challenging, the division shall endeavor to maintain its competitive advantage by streamlining its supply chain, focusing on its core products and strengthening branding to deliver differentiation to customers.
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