By IZWAN IDRIS

PETALING JAYA: Rubberwood furniture makers saw mixed performance in the quarter ended June 30, as the industry grappled with rising raw material costs and weakening demand from the US, the main export market for most manufacturers. 

“Prices of rubberwood logs have seen a nearly 30% increase since January this year and this had significantly eroded margins for furniture makers,” OSK Investment Bank analyst Choy Sun Jen said yesterday. 


And while log prices had stabilised at about RM1,300 per tonne in the past weeks, it is still more than double compared with two years ago. 

Despite these challenges, Malacca-based DPS Resources Bhd reported an improved performance in the three-month period, albeit by a slightly reduced profit margin. 

Net profit in the second quarter ended June 30 rose 23% to RM3.3mil, or 2.5 sen per share, while revenue jumped 28% to RM36.5mil from the previous corresponding period.  

Cumulative six-month net earnings stood at RM6.6mil, or 4.96 sen per share. OSK predicted that earnings would expand in the second half to meet its full-year forecast of RM17.4mil, or 13.2 sen per share. 

DPS Resources will hold its EGM on Thursday to seek shareholders’ approval on a plan to sell rights shares to raise RM76mil for expansion. The capacity-enhancing programme was expected to accelerate the group’s growth over the next two to three years. 

The stock ended at 50 sen yesterday, up 0.5 sen on volume of 357,000 shares. 

While DPS Resources appeared to be virtually unscathed by the tough operating condition, two of its competitors were hit hard. 

Rubberwood cost accounted for about two-thirds of production costs for Latitude Tree Holdings Bhd, one the bigger listed furniture makers with turnover of RM410mil for the year ended June 30 (FY07). 

The higher log prices had halved its net profit from a year earlier to RM10.3mil, or 16 sen per share. Revenue in FY07 had improved from RM357mil recorded in FY06. 

The decline in earnings was also partly contributed by the closure of a plant in Ijok, Selangor, in March, which brought down Latitude Tree’s local operation from three plants to two. 

OSK, however, sees improved sales and margins for Latitude Tree in FY08 and FY09, with a third plant in Vietnam coming on stream. The company is also putting more emphasis on higher-end products to boost profitability. 

Sern Kou Resources Bhd, meanwhile, managed to squeeze an after-tax profit of RM752,000 on revenue of RM29.67mil in the second quarter ended June 30.  

To compare, the company made a net profit of RM1.45mil on sales of RM37.5mil in the previous corresponding period. Sern Kou said the declines were due to lower demand for wooden furniture during the period.

For latest Bursa Malaysia indices, charts and other information click here