KUALA LUMPUR: IOI Corp Bhd plans to invest RM130 million to expand its downstream oleochemical operation.
Tan Sri Lee Shin Cheng, IOI Corp group executive chairman, said the group is committed to the palm oil industry and is now moving to grow its downstream section.
“A few years ago we managed to achieve six tonnes of oil per hectare for upstream which is a record. And now we are going towards downstream. One is for oleochemicals and the other is for food ingredients,” Lee said on the sidelines of the ninth Economic Transformation Programme (ETP) update yesterday.
The new production facility will be built at the Prai Industrial Complex where the country’s second largest palm oil company has already invested about RM1 billion in its facilities.
The new facility will have two plants to produce glycerol derivatives, bio-lubricant and other speciality fatty esters. It will source most of its feedstock from IOI Oleochemical Industries Bhd’s existing 450,000 tonne capacity oleochemical production clusters in the vicinity.
Lee said the investment will be internally funded, while the company has also received a RM43.6 million grant, equivalent to 33% of the project cost, to subsidise the project.
The project is expected to generate a return on investment of 13% to 15% once the plant is operational in mid-2013.
Tan Kean Hua, executive director of IOI Oleochemical, said margins for the project are much better than basic oleochemical products.
“For downstream derivatives, we are talking about even up to four to five times difference in gross margins compared with basic oleochemicals,” said Tan.
Presently, IOI’s downstream activities contribute about 20% to group revenue annually.
Tan said IOI will collaborate with the Malaysian Palm Oil Board (MPOB) to commercialise some of the products that MPOB has developed in the food, pharmaceutical and cosmetic areas.
“We are taking some of the products they have developed and commercialising them,” he said.
Asked to comment on the crude palm oil price, Lee said he expects the price to reach RM3,300 per tonne in the first half of next year due to demand from China, India and Pakistan, while unpredictable weather will affect production.
This article appeared in The Edge Financial Daily, November 11, 2011.
Tan Sri Lee Shin Cheng, IOI Corp group executive chairman, said the group is committed to the palm oil industry and is now moving to grow its downstream section.
“A few years ago we managed to achieve six tonnes of oil per hectare for upstream which is a record. And now we are going towards downstream. One is for oleochemicals and the other is for food ingredients,” Lee said on the sidelines of the ninth Economic Transformation Programme (ETP) update yesterday.
The new production facility will be built at the Prai Industrial Complex where the country’s second largest palm oil company has already invested about RM1 billion in its facilities.
The new facility will have two plants to produce glycerol derivatives, bio-lubricant and other speciality fatty esters. It will source most of its feedstock from IOI Oleochemical Industries Bhd’s existing 450,000 tonne capacity oleochemical production clusters in the vicinity.
Lee said the investment will be internally funded, while the company has also received a RM43.6 million grant, equivalent to 33% of the project cost, to subsidise the project.
The project is expected to generate a return on investment of 13% to 15% once the plant is operational in mid-2013.
Tan Kean Hua, executive director of IOI Oleochemical, said margins for the project are much better than basic oleochemical products.
“For downstream derivatives, we are talking about even up to four to five times difference in gross margins compared with basic oleochemicals,” said Tan.
Presently, IOI’s downstream activities contribute about 20% to group revenue annually.
Tan said IOI will collaborate with the Malaysian Palm Oil Board (MPOB) to commercialise some of the products that MPOB has developed in the food, pharmaceutical and cosmetic areas.
“We are taking some of the products they have developed and commercialising them,” he said.
Asked to comment on the crude palm oil price, Lee said he expects the price to reach RM3,300 per tonne in the first half of next year due to demand from China, India and Pakistan, while unpredictable weather will affect production.
This article appeared in The Edge Financial Daily, November 11, 2011.
