29-04-2002: Latitude Tree vindicated with robust industry growth

Furniture maker Latitude Tree Holdings Bhd pushed ahead with its expansion plans two years ago, despite being warned by analysts that it was a "sunset industry." The company is now relieved that it had made the right decision.

At times, the company, which is one of the few profitable furniture makers in the country, finds it difficult to keep up with orders and expects growth of the industry to continue for the next few years.

"We are fortunate we did not listen to the predictions. If we did not push ahead with our expansion plan, we would now have a difficult time," Latitude Tree corporate strategist Chua Gim Hoa tells theedgedaily.com after an analysts' briefing on April 29.

For the half-year period ended Dec 31, 2001, the company made a net profit of RM8.05 million against RM7.31 million a year before. Its second quarter net profit jumped to RM4.12 million compared with RM3.43 million a year before.

Latitude now has two furniture-making plants in Kapar and Kuala Selangor as well as a kiln drying and component making plant in Terengganu. An RM8 million new plant in Kapar will be ready in May.

The first phase of another new plant, in Vietnam, has started on a test run with the production of the company's first ever bedroom and dining sets to cater to demand from the United States. The second phase will complete in July.

The Vietnam plant will focus on medium and high-end furniture. Orders have started to come in and it is expected to start its first shipment next month.

At full production capacity, the new Kapar plant can add another US$800,000 (RM3.04 million) per month to turnover, while the plant in Vietnam could sell up to US$2 million (RM7.6 million) per month.

The new plants are expected to operate at full capacity by the second half of next year. "The orders have been tremendous and the new factories will be ready to deliver," says Latitude Tree managing director and controlling shareholder Lin Tzu Ken.

On how Latitude Tree has managed to be successful when so many other furniture makers are failing, Lin attributes it to good management and R&D, good quality and competitive products as well as prompt delivery.

He foresees a strong increase of demand for furniture from the United States, where many furniture makers are planning to close down due to high costs. He expects demand for furniture in the US to grow by 30 per cent in 2003. Currently, less than five per cent of its requirements come from Malaysia.

Lin said Malaysia's rubber wood furniture had gained worldwide acceptance. "In Europe, they do not call it rubber wood, they call it Malaysian oak."

The company exports 100 per cent of its products with the United States accounting for 60 to 70 per cent, Europe 25 per cent and the rest to the Middle East, Australia and Africa. Lin said the company ensured that no one buyer took up more than 15 per cent of its production.

"At this point in time, we do not have the resources to cater to domestic demand even though we intend to do so. Our overseas orders have been too huge," says Lin.