Oriental plans RM600m plantation expansion

27-06-2008: Oriental plans RM600m plantation expansion
by Regina William
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PENANG: Oriental Holdings Bhd is planning to restructure and expand its plantation sector, involving an expenditure of an estimated RM600 million, as part of its long-term strategy to boost its oil palm acreage. The group is also considering listing its plantation arm in the next few years.

Its chairman Datuk Loh Cheng Yean said plans included increasing the present 40,000ha, located in Malaysia and Indonesia, to 60,000ha within the next two to three years. It is expected to involve investments of RM600 million.

“Most of our expansion will be focused in Indonesia. We are going to increase our acreage for oil palm both in Malaysia and Indonesia as we are doing very well in this sector. Our intention is not only to leverage on the high prices of the raw commodity now but also our expansion is part of our business strategy.

“As a group, this business is ideal for us and since we are also involved in development projects, it augurs well for us,” said Loh after the company’s AGM. He added the company had identified several sites both in Malaysia and Indonesia and negotiations were still underway.

“We are also looking at investing in the plantation industry in other countries in the region as part of our expansion plans in the next few years. Due to our performance in this sector, the group is also contemplating to list the plantation division within the next few years,” Loh added.

The plantation subsidiaries of the group enjoyed a highly profitable year with the Indonesian plantations producing a record crop of 512,378 tonnes in 2007 compared to 399,990 tonnes in 2006. However, in Peninsula Malaysia, total yield for the year amounted to 92,956 tonnes in 2007 compared to 104,691 tonnes in 2006.

The decrease was attributed to the palms suffering stress due to the high yields in 2006 but it was compensated by the higher commodity price averaging RM514 per tonne compared to RM290 in 2006.

The plantation sector is also expected to boost the group’s earnings this year while the push for biofuel as an alternative energy source by goverments coupled with higher soybean oil prices were also expected to benefit this sector.

The group recorded RM4.5 billion revenue in 2007, an increase of 13.9% from RM3.9 billion in 2006 while pre-tax profit was at RM500 million, a 16.6% rise from RM334.1 million in 2006.