KUCHING: WTK Holdings Bhd ventures into the frozen food business as a new source of income.
The timber and plantation company has, through its wholly owned subsidiary Kuching Plywood Bhd, acquired the entire stake in Sing Chew Coldstorage Sdn Bhd (SCCS) for RM20 million in cash.
WTK Group, which has a cash balance of approximately RM386 million as of December 31, 2021, paid for the acquisition from internally generated funds. The transaction closed on June 15.
SCCS is an importer, wholesaler and retailer of frozen foods. For the financial year ended September 30, 2021 (FY21), it reported net profit of RM1.85 million on revenue of RM69.1 million, compared to RM1.27 million and RM73 respectively. RM.4 million in FY20.
“With more than 20 years in business, SCCS has a proven track record in the frozen food industry. SCCS holds various agencies for well-known brands of food products and has its own brand, i.e. burgers, nuggets, sausages frankfurters and crab sticks,” according to WTK.
WTK said SCCS becoming its wholly owned subsidiary provides the group with an opportunity to diversify into the frozen food importer, wholesaler and retailer business and with a viable long-term business with opportunities for growth.
WTK is among the top five forestry companies in Sarawak and is involved in upstream logging operations, reforestation and downstream wood processing activities including plywood manufacturing.
Due to weak plywood market and protracted log shortage, the group’s timber business has been in the red for three consecutive years, posting pre-tax losses of RM67.6 million (2019), 154, RM9 million (2020) and RM32. 5 million (2021) while revenue increased from RM 453 million (2019) to RM 209 million (2020) and then to RM 179.9 million (2021).
Going forward, WTK expects its timber business to continue to face challenges with the anticipation of a slowdown in log production, due to declining natural logs and more stringent operational requirements. arising from timber certification.
In Japan, the company said in its 2021 annual report that logistical disruptions and escalating freight rates have led to more customers sourcing plywood locally.
However, with the robust palm oil market, the group’s oil palm plantation business has seen a turnaround with a pre-tax profit of RM18.9m in 2021 after suffering losses of RM29m. of RM and RM38.9 million in 2019 and 2020 respectively.
High selling prices of Crude Palm Oil (CPO) and Palm Kernel drove revenue up to RM150 million in 2021 from RM86.1 million (2020) and RM64.1 million (2019 ).
Regarding the outlook, WTK expects a satisfactory performance from its plantation business in fiscal 2022, given the firm price of the CPO and the fact that more of the group’s palms have reached maturity in the peak age production cycle.
WTK is also in the manufacture and sale of adhesive and gummed tapes.