This article first appeared in The Edge Financial Daily on April 24, 2018

KUALA LUMPUR: Priceworth International Bhd is close to clinching a 192 million yuan (RM120 million) deal to supply 60,000 cu m per year of container flooring to Guangdong-based manufacturer Foshan Zhengsen Woodworking Co.

In a statement yesterday, Priceworth said its subsidiary Sinora Sdn Bhd signed a memorandum of understanding on

Saturday with Foshan Zhengsen for the intended supply of container flooring.

“To cater for this supply contract once finalised, Sinora will be constructing a new container flooring production line which will complement Sinora’s existing production lines and capabilities,” it added.

A million yuan advance payment from Foshan Zhengsen will go towards funding this new production line. The balance of the capital expenditure will be funded by hire purchase financing of about RM8 million.

Priceworth said it and Foshan expect to sign a definitive five-year supply agreement within six months.

“This development represents an exciting opportunity for Priceworth as we are looking at a five-year contract,” said Priceworth executive director Richard Koo.

“This new product opens up a huge market to Priceworth. With China’s One Belt, One Road initiative, we expect demand for container flooring to grow significantly,” he added.

Koo estimates that at the agreed price and volume of 60,000 cu m a year, the contribution margin is about 20%.

“With a consistent supply of timber from our harvesting operations, the Priceworth group will be able to fully utilise and increase the production efficiency of its production assets once we finalise this contract,” he said.