KUALA LUMPUR (March 1): Heveaboard Bhd, which is currently in net cash position, plans to spend RM20 million in financial year 2016, to upgrade its factories and expects an increase of capacity by 10-15% by the end of this year.

Heveaboard group managing director Yoong Hau Chun said RM20 million capital expenditure (capex) would be used to upgrade the existing line, in this financial year ending Dec 31, 2016 (FY16).

From that amount, RM8 million would be used for Heveaboard to upgrade its production line for particleboard, while the other RM12 million would be allocated to its wholly-subsidiary HeveaPac Sdn Bhd for its ready-to-assemble (RTA) furniture products.

“The main objective is to further distinguish ourselves in the market. We will carry out upgrades to the existing line to further improve of quality level. We are looking at capacity increase of about 10-15%, by end of this year or beginning of next year,” Yoong said in a briefing to media and analysts here today.

He added that the group would continue to spend on upgrading in two years to come.

Yoong said the group will also introduce a new product, which is the health, environment and children friendly “KREA Kids” under its RTA segment this year.

Heveaboard’s main revenue streams come from its particle board production, of which 80% of total production is exported overseas; and RTA of which 90% are exported and 10% sold in the local market.

For the particle board, the group mainly exports to China (43.85%), Japan (12.28%), Korea (11.74%), India (10.56%) and other countries (8.21%), the remaining 13.36% being for the local market.

Under the RTA segment, the main importers of its products are Japan (62.46%), Europe (11.45%), Australia (11.86%) and United States (2.69%).

As at Dec 31, 2015, Heveaboard was in a net cash position, first time since the group was set up since 1993. The group has a cash and equivalence of RM124.97 million, and a long term borrowing and long term liabilities of RM38.89 million.

Yoong said the group would use the cash to settle its loan ahead of schedule.    

“We plan to have it (the loan) settle very soon, before second half of 2016 (2H16),” he added.

The group had declared 0.75 sen interim dividend per ordinary share of 25 sen each, in respect of the FY15, which would go ex on March 8.

Although the group was in a net cash position, Yoong said the group would adopt a “prudent” strategy in spending its cash, to cater to some unexpected capex expenses.

He said it was difficult to give guidance on the dividend payout in FY16 now.

As at 12.30pm, Heveaboard traded unchanged at RM1.34, with a market capitalisation of RM595.43 million.