By ALIFAH ZAINUDDIN / Pic By BLOOMBERG
Priceworth International Bhd has acquired a RM120 million contract to supply 60,000 cu m of container flooring on a yearly basis to Chinese manufacturer Foshan Zhengsen Woodworking Co Ltd.
In a filing to Bursa Malaysia yesterday, Sandakan-based Priceworth noted that its plywood manufacturing arm, Sinora Sdn Bhd, will be constructing a new container flooring production line to fulfil the demand from the contract.
Foshan Zhensen, a pioneer and manufacturer in the Chinese container flooring market in Foshan City, Guangdong, will pay four million yuan (RM2.48 million) in advance to fund the new production line. A balance of RM8 million in capital expenditure will by funded through hire-purchase financing.
The two parties are expected to sign a definitive five-year supply agreement within six months.
Priceworth ED Richard Koo expects the demand for container flooring to grow significantly over the next few years, as the new product opens up a huge market for the market.
“At the agreed price and volume of 60,000 cu m a year, the contribution margin is about 20%. With a consistent supply of timber from our harvesting operations, the Priceworth group will be able to fully utilise and increase the production efficiency of its production assets once we finalise this contract,” Koo said in a statement.
Within the past two months, the timber and forest management group has seen a jump in monthly log production with better harvests due to contributions from its Forest Management Unit 5 (FMU5) operations in Sabah. February recorded the highest production volume since July 2012, up 57% from a year ago.
“Over the last five months, our log production has stayed consistently above 14,000 cu m and we expect our log production to further increase with improvements to our harvesting efficiency,” Koo said.
Priceworth has been operating in two compartments within FMU5, which it proposed to acquire in 2016, and was recently given the approval to begin harvesting in two other compartments. The group also has several other timber concession areas covering 27,900ha.
In October 2016, Priceworth proposed to acquire FMU5 for RM260 million through its subsidiary, GSR Pte Ltd. It had also planned for GSR to be listed on the Singapore Exchange.