palmoilhq March 10, 2009 8:01 GMT+8
United Malacca Bhd has aborted its maiden oil palm plantation joint venture in Indonesia after about one year of negotiations.
The company’s chief executive officer Dr Leong Tat Thim said the group decided not to venture into Indonesia “for the time being” after encountering many difficulties with its Indonesian partners.
“We decided to allow the MoU (memorandum of understanding) to develop 20,000ha oil palm plantations and operate oil palm businesses in East Kalimantan to lapse,” Leong told StarBiz via email.
He said United Malacca planned instead to actively explore opportunities in acquiring more landbank and newly established plantations in Malaysia, especially in Sabah.
“For financial year 2009, the major growth area is to develop 809.4ha of heavily logged land in Sabah which will enhance United Malacca’s future earnings prospect,” he said.
Going forward, about 1,619ha of young palms will come into maturity that will increase United Malacca’s crop production, according to Leong.
Main board-listed United Malacca may be a small plantation group given its 14,026ha landbank size, but it has RM400mil in cash.
Of its total landbank, some 6,849ha are located in Sabah while the remaining are in Negri Sembilan, Pahang, Johor and Malacca.
Leong expects some RM30mil in capital expenditure to be allocated this year for land acquisitions, development, upgrading and replacement of machines and vehicles. On its dividend payout, he said “historically, United Malacca has been paying interim and final dividends annually.”
“I believe this tradition will be continued by our board of directors even for financial year ending April 30, 2009 as United Malacca is still making profits,” he added.
United Malacca is among the palm oil producers with lower costs, but prevailing high fertiliser prices will increase its production cost by 10% to 20%. For example, its current crude palm oil (CPO) production cost is about RM900 per tonne but going forward the production cost is expected to range between RM1,000 and RM1,200 per tonne.
The current major challenges facing United Malacca are maintaining the cost of production, increasing productivity and producing palm oil in a sustainable manner, according to Leong.
Other major issues faced by United Malacca and the oil palm industry as a whole, are the heavy taxes and cess payments.
On the CPO price outlook this year, he said: “Should the high CPO stockpile be reduced substantially, then there is the possibility that CPO price can trade above RM2,000 per tonne.”
Leong said the local CPO production this year was expected to be reduced as “more old and unproductive palms are felled to take advantage of the government’s replanting subsidy of RM1,000 per hectare.”
In addition, the effect of local planters delaying fertiliser application and to reduce the rate of fertiliser use per palm tree could result in lower fresh fruit bunches production in the third and fourth quarters, he added.
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