KUCHING: India’s aggressive purchase of logs from other major log producers in the world has resulted in firm average selling prices for tropical logs, which is a boon for Sarawakian timber producers such as Ta Ann Holdings Bhd (Ta Ann).
Analysts from Affin Investment Bank Bhd’s research arm (Affin Research) observed this, adding it continued to see rising demand from India due to its ‘on-going needs for construction and renovation activities’.
“As such, we believe the average selling prices for logs will likely to remain firm at US$250 to US$260 per cubic meter for 2014, underpinned by tight global supply of logs and sustained demand.”
Affin Research also explained that Ta Ann’s palm oil division remains a key earnings contributor to the group, at 70 per cent of the Group’s total profit before tax (PBT) in 2014-2016 earnings.
The research house said this should be underpinned by two factors namely, increasing maturity of its plantation estates; and rising fresh fruit bunch (FFB) and crude palm oil (CPO) production as well as yield.
As at end-May 2014, Ta Ann’s FFB and CPO production increased by 14.9 per cent year on year (y-o-y) and 55.5 per cent y-o-y to 197,307 metric tonnes (MT) and 43,592 MT respectively.
To recap, Ta Ann Tasmania Pty Ltd has entered into an agreement with the Australian Government in June 2013 to reduce its peeler wood supply entitlement held under the contract with Forestry Tasmania.
In return, the Australian Government had agreed to compensate Ta Ann with A$28.6 million.
The first tranche of A$22.3 million was already paid in 2013 while the second tranche of A$6.3 million is expected to be paid by September 1, 2014 and this will be a boost to third quarter 2014 earnings.