WTK Holdings Berhad - Bursa Malaysia

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22 Chairman’s Statement Dear Shareholders, On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements of the Group for the financial year ended 31 December, 2003. FINANCIAL PERFORMANCE Riding upon the gradual improvement in global timber prices particularly towards the second half of 2003, the Group achieved a higher turnover and profitability for the year. The Group’s turnover rose 12.4% to RM557 million and profit after tax improved 4.3% to reach RM44 million as compared with FY2002. Consequently, the Group’s earnings per share (EPS) improved 5.8% to approximately 30 sen. REVIEW OF OPERATIONS Timber Generally for 2003, the tropical timber industry saw a gradual recovery in timber prices and demand towards the second half of the year. It became apparent then that the Indonesian Government intensified its level of enforcement to curb illegal logging and over-production to meet sustainable forestry targets. This effort gave rise to a supply crunch as Indonesia is a major producer of tropical timber, contributing about 20% of the world’s supply. On the demand side, the improving economic outlook in Japan and strong growth in China and India also led to a rise in demand for timber, reinforcing the positive impact on timber prices. For the Group, the year started on a grim note owing to a flat outlook in the Japanese housing starts, a traditional indicator of the industry’s direction for the year and also its price leader. However, the continued strong demand for timber products from alternative markets like China and India and in the second half, an improved Japanese economy saw a pickup in housing starts and rising business sentiment and confidence led to timber prices firming up gradually. Additionally, on the demand side, Japan also reinforced a new standard on its existing JAS, raising the bar on allowable formaldehyde emission level in plywood in July 2003. This negatively affected producers that were not yet JAS-complied and benefited those whom have complied earlier. The revised JAS requirement effectively narrowed the supply of plywood for the medium term and as was expected, plywood prices firmed up. W T K HOLDINGS BERHAD (10141-M)
Chairman’s Statement (Cont’d) In addition to the steady demand from China, India, South Korea and other Asian countries, a revival in demand from Japan became visible from the third quarter of the year onwards. Japan’s upward revision of its wood demand forecast for 2004 augurs well for the industry and buyers spooked by the inconsistency of timber supply from Indonesia resorted to Malaysian producers. The above has benefited our Group owing to our focus on the production of floor-based plywood, a high value-added product. Floor-based plywood commands a higher premium due to more stringent production and quality control processes and the provision of a product warranty. These products are ultimately endorsed with the buyer’s brandname, hence the emphasis placed on its quality. WTK is now the largest producer of floor-based plywood to Japan from Malaysia. Plywood shipments to Japan account for about 80% of the Group’s plywood sales. An additional line to the Group’s main plywood mill in Bintulu is expected to be fully commissioned by the 3rd quarter of 2004 and this would expand our production capacity by approximately 25%. The Group’s round logs markets remain predominantly India, Japan and China. Sales to India account for 35%, Japan 30% and China 20% of the Group’s round logs turnover, reflecting the overall trend of log shipments from Sarawak where India have surpassed both Japan and China in round logs consumption. The balance 15% of round logs sales goes to various Asian countries. India was an alternative market the Group first nurtured in 1998-1999 when Japan slowed down in its wood consumption. From a sales level of about 5% then and a preference for only one type of timber specie, Selangan Batu, the Group is proud that its diversification effort has expanded to about 35% contribution from India presently. Also, India has started buying a range of timber species that includes Meranti, a specie most abundantly found in Sarawak’s forests. For a year where the buildup of activity was seen mainly in the last quarter, the Group’s average logs and plywood prices for the year is a reasonable improvement of about 4% and 6% respectively as compared with FY2002. The production volume of logs and plywood consequently rose 25% and 5% respectively. The year also ended on a positive note for the industry where players could reasonably expect a strong price recovery in both logs and plywood in 2004. A N N U A L R E P O R T 2 0 0 3 23
Page 1 and 2: 03 ANNUAL REPORT
Page 3 and 4: CONTENTS 2 Corporate Information 3
Page 5 and 6: Directors’ Profile Yg Bhg Datuk W
Page 7 and 8: Directors’ Profile (Cont’d) Won
Page 9 and 10: Directors’ Profile (Cont’d) Tha
Page 11 and 12: Directors’ Statement on Corporate
Page 17 and 18: Audit Committee Report COMPOSITION
Page 19 and 20: Audit Committee Report (Cont’d) 5
Page 21 and 22: Directors’ Statement on Internal
Page 23: Directors’ Statement on Internal
Page 27 and 28: Chairman’s Statement (Cont’d) i
Page 29 and 30: FINANCIAL STATEMENTS 28 Directors
Page 31 and 32: Directors’ Report (Cont’d) DIRE
Page 33 and 34: Directors’ Report (Cont’d) EMPL
Page 35 and 36: Directors’ Report (Cont’d) SIGN
Page 37 and 38: Directors’ Report (Cont’d) (f)
Page 39 and 40: Report of the Auditors to the Membe
Page 41 and 42: Balance Sheets as at 31 December 20
Page 43 and 44: Consolidated Statement of Changes i
Page 45 and 46: Cash Flow Statements for the year e
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List of Properties (Cont’d) DATE
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Statistic on Shareholdings (Cont’
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Notice of Annual General Meeting NO
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Notice of Annual General Meeting (C
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Form of Proxy W T K HOLDINGS BERHAD
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