Palm Oil Planter IJM Plantations Confident Of Good Results

20 aug 2008

IJM Plantations confident of good results
IJM Plantations Bhd remains optimistic on its current financial year results, although crude palm oil (CPO) price has tapered from its record high of RM4,486 per tonne in March.

"The current price (level) is not a big concern for us and we remain confident in our outlook," IJM Plantations managing director and chief executive officer Velayuthan Tan told reporters after the company's annual general meeting and extraordinary general meeting in Selangor yesterday.

"Twelve months ago, the price was RM2,000 (per tonne) and yet we had a good year. So at RM2,400 (per tonne), we are still good," said IJM Plantations general manager for corporate affairs and finance Puru Kumaran.

The plantation arm of IJM Corp Bhd, a construction and property group, saw revenue grow 76 per cent to RM478 million for its financial year ended March 31 2008.

Tan expects fresh fruit bunches (FFB) production to increase nine to 10 per cent for this fiscal year to 600,000 tonnes. FFB output rose by 12 per cent to 567,324 tonnes for its previous financial year.

"We also expect the oil extraction rate of 21 per cent to be maintained," he said.

Tan added that the company could stomach the 15 per cent increase in its cost of production.

On its first quarter results due to be released next week, Tan said IJM Plantations' revenue would be better than the RM92 million made in the same quarter last year.

"This is based on the CPO price as it was roughly RM2,000 (per tonne) for the first quarter (ended June 30 2007), but it has since gone up during our current first quarter period, so we will definitely do better," he said.

According to a Bursa Malaysia filing, IJM Plantations' total FFB and CPO productions for the months April to June stood at 180,484 tonnes and 38,423 tonnes respectively.

As for its Indonesian oil palm plantation development, Tan said the company has allocated RM600 million over a period of six to seven years. "But it will be over a staggered basis because we're not going to develop in one go. We have spent less than RM50 million so far for the land acquisition," he added.

When asked on his outlook for CPO prices at year-end, Tan said traditionally October and November were viewed as the peak season with FFB and CPO productions increasing.

"But in December and January, that is when the monsoon hits so yields will start tapering off," he said.

"We expect the market to respond. If you look at the trend, when crop goes up, the price goes up."

Tan added that the company had deferred the installation of its palm oil-based biodiesel plant when CPO prices shot up to levels of RM3,000 per tonne.

"It's too premature for us to make a decision now. We have to wait for at least six to seven months after prices have stabilised before we decide," he added.