Korea’s Dongwha enters Thailand’s MDF market

Dongwha Enterprise, Korea's top wood materials manufacturer has extended its reach by acquiring a manufacturing unit in Thailand.

Dongwha announced last week it acquired Agro Fiber's medium-density fiberboard (MDF) manufacturing unit for 23 billion won ($20.5 million). MDF is an engineered wood product used for making furniture.

Established in 1998, Agro Fiber is a subsidiary of Thai-based copy paper maker Double A. Its MDF manufacturing facility is located in Prachiburi, about 100 kilometers northeast of Bangkok. The company produced around 100,000 cubic meters of MDF annually at the 88,000-square-meter facility.

Half of its MDF products have been sold to the domestic market in Thailand while the other half goes to overseas markets such as Japan, Vietnam, India and Sri Lanka.

With the acquisition, Dongwha now has five overseas production facilities. It already has MDF manufacturing facilities in Malaysia and Vietnam while its Finland facility produces tego film, an adhesive sheet used for concrete shuttering. Its Australia facility produces lumber products and versatile wood materials for industrial use.

The Thai company's MDF manufacturing unit can use up to 2 million tons of timber forested next to the facility so Dongwha can secure raw materials for producing the fiberboard easily. The deal gives Dongwha access to the local business networks of Agro Fiber as well.

Dongwha said the acquisition of the Thai company will help boost its profitability.

"In terms of raw material prices, Thailand has been stable with less fluctuation, compared with Vietnam and Malaysia," said Lee Si-joon, senior vice president of Dongwha. "We expect the acquisition can create synergy with our branches in Malaysia and Vietnam so we can raise our profitability."

The Southeast Asian fiberboard market is expected to continue its growth. Among Southeast Asian countries, Thailand is a core country of the fiberboard market as its market share in the region is around 50 percent.

Dongwha said the acquisition will help the company secure a favorable position in the Southeast Asian market as the company plans to explore more business opportunities in Thailand in addition to particle board (PB) and MDF businesses.

Thanks to increased demand for MDF and PB in Korea, Dongwha posted 383.1 billion won in sales in the first half of this year, a 5.6 percent increase from the same period of last year. Its operating profit was 48.4 billion won, a 7.2 percent increase compared to the same period last year.