KUALA LUMPUR: Kuala Lumpur Kepong Bhd (KLK) is confident of its capacity to grow, backed by the group’s sound fundamentals and a favourable oil palm tree ageing profile.
“KLK’s capacity for investment is still there,” said Tan Sri Lee Oi Hian, the plantation group’s CEO. “We have low gearing and good cash flow. It all depends on opportunity,” he told a media briefing last Friday.
Currently, 55% or 139,126ha of KLK’s plantation land is concentrated in Indonesia, with the remaining 45% or 111,959ha is in Peninsular Malaysia and Sabah. Growth of its landbank in Malaysia has been mostly flat as there were missed and limited opportunities, according to group plantations director, Roy KC Lim.
The group’s planted area as at June was 205,259ha with 20,000ha planted with rubber. The group targets new oil palm plantings of about 10,000ha a year, mainly in Kalimantan, Indonesia, subject to approvals by the Indonesian authorities.
“KLK has a short-term target [to expand its landbank] to 300,000ha with a focus on Indonesia,” said Lim.
“Opportunities to acquire land in Malaysia are fewer as the prices of brownfield [land] are quite high. We would like to have land here too but [our options] are limited,” said Lee. “There is also a lot of interest in Africa and other parts of the Asia-Pacific, like Papua New Guinea where land is more available,” he said.
No time line has been set and the group is actively seeking opportunities as and when they come. Currently the group is evaluating plans, conducting internal studies and feasibility studies on what other countries could have potential.
“lt is a relatively slow process, so our focus is productivity,” Lee said.
Under the Economic Transformation Programme (ETP), KLK has committed RM700 million to develop downstream production as well as research and development facilities together with the Malaysian Palm Oil Board (MPOB).
The MPOB had earlier approved a RM134 million grant for KLK to set up three production plants which would use excess capacity of basic oleochemicals to venture further downstream.
These ventures include the development of surfactants and vitamin E analysis. It also collaborated with MPOB via the Malaysia Oleochemical Manufacturing Group in response to global concerns on environmental and sustainability issues.
The RM700 million under the ETP has been invested in building and expanding KLK’s integrated methyl ester sulfonate and fatty alcohol plant, a plant to produce high grade tocotrienol and isomers as well as a world-class research centre. All of these projects are currently ongoing and will be ready in 2012 and 2013.
Profit contribution from downstream activities accounts for only 20% of KLK’s operating profit and Malaysia is still a small market for oleochemicals as key users are overseas. As such, the group does not want to be totally dependent on upstream activities, which is highly dependent on commodity prices, said Lee.
He believes improvements in the productivity of workers and higher wages will be the catalysts to boost Malaysia up the value chain from upstream (production) to downstream.
He noted that for a long time oil extraction rates (OER) in Malaysia were very low, but with Indonesian competition, the general industry average has improved. “No competition, no improvement,” he said.
Although Malaysia lacks land, Lee said the country still has better infrastructure and capabilities to compete with Indonesia; the key is efficiency.
Indonesia’s recently revised export duty structure will result in a gross oversupply of oleochemicals in the market, Lee said.
To take advantage of Indonesia’s competitive export duty on palm oil products, the group is currently building three new oil mills in East Kalimantan with two more to be built in the next few years and a RM120 million fatty acids plant due to commence operations in 2013.
Lee is confident about KLK’s future growth as 47% of its oil palm trees are less than 10 years old with 42% of them 10 to 18 years and the balance 19 years and above.
The group expects an average fresh fruit bunchs (FFB) yield per mature hectare of 22 to 24 tonnes. FFB production is expected to grow at a rate of 8% to 10% per year as a result of better planting materials, new planting and better productivity, said Lee.
This article appeared in The Edge Financial Daily, November 21, 2011.
“KLK’s capacity for investment is still there,” said Tan Sri Lee Oi Hian, the plantation group’s CEO. “We have low gearing and good cash flow. It all depends on opportunity,” he told a media briefing last Friday.
Currently, 55% or 139,126ha of KLK’s plantation land is concentrated in Indonesia, with the remaining 45% or 111,959ha is in Peninsular Malaysia and Sabah. Growth of its landbank in Malaysia has been mostly flat as there were missed and limited opportunities, according to group plantations director, Roy KC Lim.
The group’s planted area as at June was 205,259ha with 20,000ha planted with rubber. The group targets new oil palm plantings of about 10,000ha a year, mainly in Kalimantan, Indonesia, subject to approvals by the Indonesian authorities.
“KLK has a short-term target [to expand its landbank] to 300,000ha with a focus on Indonesia,” said Lim.
“Opportunities to acquire land in Malaysia are fewer as the prices of brownfield [land] are quite high. We would like to have land here too but [our options] are limited,” said Lee. “There is also a lot of interest in Africa and other parts of the Asia-Pacific, like Papua New Guinea where land is more available,” he said.
No time line has been set and the group is actively seeking opportunities as and when they come. Currently the group is evaluating plans, conducting internal studies and feasibility studies on what other countries could have potential.
“lt is a relatively slow process, so our focus is productivity,” Lee said.
Under the Economic Transformation Programme (ETP), KLK has committed RM700 million to develop downstream production as well as research and development facilities together with the Malaysian Palm Oil Board (MPOB).
The MPOB had earlier approved a RM134 million grant for KLK to set up three production plants which would use excess capacity of basic oleochemicals to venture further downstream.
These ventures include the development of surfactants and vitamin E analysis. It also collaborated with MPOB via the Malaysia Oleochemical Manufacturing Group in response to global concerns on environmental and sustainability issues.
The RM700 million under the ETP has been invested in building and expanding KLK’s integrated methyl ester sulfonate and fatty alcohol plant, a plant to produce high grade tocotrienol and isomers as well as a world-class research centre. All of these projects are currently ongoing and will be ready in 2012 and 2013.
Profit contribution from downstream activities accounts for only 20% of KLK’s operating profit and Malaysia is still a small market for oleochemicals as key users are overseas. As such, the group does not want to be totally dependent on upstream activities, which is highly dependent on commodity prices, said Lee.
He believes improvements in the productivity of workers and higher wages will be the catalysts to boost Malaysia up the value chain from upstream (production) to downstream.
He noted that for a long time oil extraction rates (OER) in Malaysia were very low, but with Indonesian competition, the general industry average has improved. “No competition, no improvement,” he said.
Although Malaysia lacks land, Lee said the country still has better infrastructure and capabilities to compete with Indonesia; the key is efficiency.
Indonesia’s recently revised export duty structure will result in a gross oversupply of oleochemicals in the market, Lee said.
To take advantage of Indonesia’s competitive export duty on palm oil products, the group is currently building three new oil mills in East Kalimantan with two more to be built in the next few years and a RM120 million fatty acids plant due to commence operations in 2013.
Lee is confident about KLK’s future growth as 47% of its oil palm trees are less than 10 years old with 42% of them 10 to 18 years and the balance 19 years and above.
The group expects an average fresh fruit bunchs (FFB) yield per mature hectare of 22 to 24 tonnes. FFB production is expected to grow at a rate of 8% to 10% per year as a result of better planting materials, new planting and better productivity, said Lee.
This article appeared in The Edge Financial Daily, November 21, 2011.
