20-12-2004: Latitude Tree sees Vietnam plant boosting performance

Rubberwood furniture manufacturer Latitude Tree Holdings Bhd expects its new production facility in Vietnam to boost the company's performance when it comes onstream in the first half next year.

Its corporate finance manager Yeoh Joe Son said the second factory in Vietnam would have a production capacity of US$1.5 million (RM5.7 million) in turnover per month, in addition to US$2 million per month by the existing first plant.

"We plan to increase the capacity (of the second factory) to US$2 million within two years to meet stronger demand for our products," he told reporters after Latitude Tree's AGM in Subang on Dec 20.

But Yeoh said the company would not shift its main operations to Vietnam as the bulk of its raw material was still sourced locally.

He said Malaysia would still be the main hub producing most of the company's furniture while Vietnam would be tasked with value-added bedroom and dining sets.

"We ship our semi-finished components from here to Vietnam because their labour cost is competitive and we can put more carvings and features to the furniture and fetch higher prices abroad," he said.

He said Latitude Tree would continue to upgrade its Malaysian operations, as seen in the continuous increase of the production capacity at its four factories in Selangor and Terengganu, which currently produce US$5 million worth of furniture every month.

All Latitude Tree products are for export, with over 80% of it absorbed by the United States. For financial year ended June 30, 2004, its net profit rose to RM11.27 million from RM7.95 million a year before, while revenue improved to RM236.21 million from RM185.82 million.

Meanwhile, Latitude Tree managing director Lin Tzu Keng said the company was facing three major challenges in FY2005.

He said the company would have to realign and optimise its operational facilities in order to reduce wastage since rubberwood prices could be volatile due to short supply and low harvest.

He said shortage of workers could be worsened by the ongoing repatriation exercise of foreign workers but the company had somewhat prepared for this by shifting part of its operations to Vietnam.

He also said any move by the government to re-peg or de-peg the ringgit could have adverse impact on the company, as it was an exporter and a substantial chunk of its borrowings was in US dollar.

Yeoh said the stable supply of rubberwood would not pose any problem to the company's operations in the medium term.

"We have good understanding with the contractors and we are also turning to alternative sources such as Southern Thailand. We have kept stock that could last for two to three months," he said.