An improvement in demand was quite evident in 2Q following a steep climb in MDF selling prices from the month of March to June. EFB’s 2.5mm MDF prices went up by 10.8% while 18mm MDF prices rose 12.8%.
Indicative average selling prices for medium-density fibreboard (MDF) have jumped 16% to US$240 (RM842.40) per cubic metre (cu m) in 3Q2009 versus US$204/cu m in 2Q2009, despite management’s initial belief that average selling prices were likely to be capped at US$220 to US$230 levels, due to pick-up of demand in 2H2009.
Following the higher demand, Evergreen’s management highlighted that the company’s capacity utilisation in July 2009 was at 68% versus 64% in 2Q2009. August and September’s utilisation would be higher or close to July’s capacity utilisation rate, based on existing contracts in hand. For 2H2009, the estimated utilisation rate should average 76% versus 60% in 1H2009.Risks include a sharp drop in MDF prices, a sharp increase in log costs, further escalation in crude oil related glue and logistics costs, and strengthening of the ringgit which could reduce the company’s export competitiveness. Well-positioned to benefit from economic recovery given that EFB is one of the biggest MDF players in the world. EFB is known to be the 5th largest MDF producer (by production capacity) in the world and they are likely to be the biggest in the region.
2010 (e) / 56m
Considering that the stock got hammered from RM2.00 down to below RM1.00 owing to the global financial crisis, its noteworthy that the company still managed to eke out a decent net profit in 2009. Things on the improve and should bring them back towards the RM1.40-RM1.50 level in the medium term.
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p/s photo: Karena Lam Kar Yan