Company sees decent growth in furniture business

By YEOW POOI LING

KUALA LUMPUR: Jaycorp Bhd is optimistic its furniture business will continue to post “decent growth”, executive deputy chairman Datuk Jema Khan said. 

The company’s overseas markets such as India, South Africa, Russia, Central Asia and the Middle East would be the growth catalyst, he told StarBiz yesterday. 


“The US market is expected to be flat although some of our clients are still growing despite the subprime mortgage issue,” he said, adding that Jaycorp was currently in discussions with two potential partners. 

“We’re looking for someone with a strong distribution network,” Jema said. 

Executive director Lim Poh Teot said India’s middle class was one of the fastest growing in the world and that Jaycorp’s products suited them. 

South Africa, which will host World Cup 2017, was seeing a lot of development and enquiries were coming from there, he said. 

In Russia and Central Asia, Jaycorp had established a mixed container programme for small to medium-sized retailers via a local partner to distribute the products, Lim added. 

Jema said India and South Africa would contribute more substantially over the next two years. 

While other furniture companies struggled to maintain margins, Jaycorp saw a 6.2% improvement in pre-tax margin for the year ended July 31 (FY07) from 4.7% in FY06. 

Pre-tax profit jumped 55.8% to RM17.6mil from RM11.3mil in FY06 while revenue rose to RM282.9mil against RM238.1mil previously. Earnings per share improved to 9.05 sen from 6.42 sen. 

Jema attributed the improved margins to the group’s ability to source for rubberwood from Malaysia, Thailand and Indonesia, which collectively account for 80% of the world’s supply. 

Last year, Jaycorp bought 60% of Digital Furniture Sdn Bhd, which has a strong sourcing base of rubberwood from Thailand. 

Three years ago, it formed a joint venture with PT Perkebunan Nusantara III and PT Innex Tripanca Corp of Indonesia to form PT Tiga Mutiara Nusantara. 

PT Perkebunan has agreed to supply at least 60,000 cu m of rubberwood every year to PT Tiga Mutiara for 75 years. 

On currency fluctuations, Jema said the group had an effective hedging system that could mitigate the volatility. 

Lim said Jaycorp was able to win the confidence of major US retailers like Wal-Mart and Target owing to its ability to deliver quality products on time. 

Jema said while the furniture business was competitive, the company had a niche, and as such, was not concerned over China as manufacturers there were facing changes in duty structure and were being affected by the high prices of imported raw materials. 

Jaycorp expects its two subsidiaries, Winshine Industries Sdn Bhd and PT Tiga Mutiara, to perform better in the coming two financial years. 

Winshine makes and sells rubberwood furniture while the Indonesian unit is in pressure treatment and kiln-drying of rubberwood. 

“They haven’t performed within expectation. If they do, we should see decent growth,” Jema said. 

Given the group’s healthy balance sheet, Jaycorp is also seeking opportunities to diversify its earnings. 

Jema said the group was exploring the oil and gas industry. “We’re looking at a small segment of the industry like fabrication,” he said.