KUCHING: WTK Holdings Bhd’s traditional core timber business has been struggling with prolonged poor performance, incurring significant annual losses that offset profits from its oil palm business.
For the financial year ended December 31, 2024 (FY2024), WTK’s timber segment recorded a pre-tax loss of RM40.4 million, an improvement from the RM50.4 million loss in FY2023, as revenue increased to RM203.9 million from RM184.4 million.
“The timber segment has experienced declining revenue contributions in recent financial years due to several factors, including weak market demand and stricter operational requirements related to timber certification. These challenges have reduced the segment’s financial viability, making it less strategic for the group’s future growth,” WTK stated in its annual financial results.
The group is involved in the extraction and sale of timber (logs), while its downstream processing activities include the manufacture and sale of plywood, veneer, and sawn timber, as well as reforestation.
In FY2024, WTK’s group net loss widened to RM43.22 million (FY2023:- RM19.42 million), an increase of RM23.8 million, despite a sharp rise in group revenue to RM671.9 million from RM560.8 million. Loss per share rose to 9.24 sen from 4.15 sen year-on-year.
Year-on-year, the plantation segment posted a lower pre-tax profit of RM18.75 million (FY2023: RM22.32 million) despite a significant increase in revenue to RM295.3 million (FY2023: RM225.9 million).
The tapes segment also reported a lower pre-tax profit of RM3.75 million (RM4.81 million), in line with reduced revenue of RM65 million (RM69.2 million).
The food segment, however, provided a bright spot, with pre-tax profit rising to approximately RM6 million (RM4.74 million) as revenue grew substantially to RM103.7 million (RM78.8 million). The group is involved in the sale of frozen, chilled, and consumer products.
The financial results for 4Q2024 were disappointing, with group net loss widening to RM51.4 million (4Q2023:- RM28.57 million) despite a 7 per cent increase in group revenue to RM171 million (RM160.2 million), driven by higher sales from the plantation and food segments.
“Timber revenue for 4Q2024 was RM49.5 million, an increase of RM2.0 million compared to RM47.5 million in 4Q2023, mainly due to higher sales volume. The pre-tax loss for 4Q2024 was RM33.3 million, a reduction of RM1.1 million from RM34.4 million in 4Q2023. The loss was mainly attributed to a RM7.4 million change in the fair value of biological assets due to weak timber market prices and an RM8.4 million impairment of property, plant, and equipment following the cessation of the plywood business,” WTK stated in its financial report.
For the plantation segment, WTK reported an increase in revenue to RM76.83 million (RM71.75 million), driven by higher fresh fruit bunch (FFB) production and contributions from newly acquired oil palm estates, along with favourable FFB selling prices.
However, the segment’s results were impacted by a RM19.8 million impairment and write-off of property, plant, and equipment from a hilly oil palm estate with lower-than-expected FFB yields due to soil erosion. As a result, the segment fell into the red, posting a pre-tax loss of RM9.2 million (4Q2023: +RM2.8 million).
The tapes segment posted lower revenue of RM15.1 million (RM17.59 million), while its pre-tax profit shrank to RM232,000 (RM731,000), mainly due to additional depreciation and finance costs associated with upgraded machinery.
On January 17, 2025, a fire damaged WTK’s tape manufacturing plant in Penang, operated by its wholly-owned subsidiary Loytape Industries Sdn Bhd. The estimated impairment loss of RM11.4 million is expected to be recognised later, while refurbishment costs are projected to exceed RM14.3 million. WTK stated that insurance claims for the fire have been filed.
Meanwhile, the food segment recorded higher revenue of RM28.75 million (RM22.65 million) but reported a lower pre-tax profit of RM1.17 million (RM1.53 million) due to higher administrative expenses.
The “Others” segment reduced its pre-tax loss to RM10.2 million (-RM18.2 million) as revenue increased to RM870,000 (RM656,000). This segment includes amusement and recreation activities, rental income, and interest income.
Compared to the immediate preceding quarter (3Q2024), WTK delivered weaker financial results in 4Q2024, posting a group pre-tax loss of RM49 million, a sharp decline from the pre-tax profit of RM2.64 million in 3Q2024. However, quarter-on-quarter revenue rose slightly to RM171 million from RM167.6 million. In 3Q2024, the timber segment recorded a small pre-tax loss of RM2.48 million (4Q2024: -RM33.3 million).
WTK remains cautious about the outlook for its timber business.
However, the company is optimistic about the performance of its oil palm segment, expecting it to act as a growth catalyst in 2025.
“Crude palm oil (CPO) prices may be influenced by various market factors, including global supply and demand, biodiesel market trends, and production of substitute crops.
“Despite uncertainties in external factors, the group remains focused on optimising operational efficiency through mechanisation, improving production yields, and prioritising effective cost-control measures. With steady demand for CPO and increased production from the newly acquired BHB and Durafarm plantations, the plantation business is expected to perform satisfactorily in FY2025,” the company stated.
Regarding its tape business, WTK acknowledged disruptions caused by the recent fire incident. Management has taken immediate actions to minimise operational disruptions and is in the process of claiming insurance for the losses.
“Given the competitive nature of the business and the impact of the fire incident, the group remains cautious about the outlook for the tape segment in FY2025.”
On the outlook for its food business, WTK highlighted its recent expansion of cold room capacity, the opening of new retail outlets, and a diversified range of frozen products, positioning it to meet growing market demand.
WTK also noted a strategic shift toward more sustainable and profitable business segments.
“Given the challenges faced by the timber and tape segments, the group aims to prioritise its plantation and food businesses, which have demonstrated stronger growth potential and profitability in recent years,” it added.
