UP to get earnings boost from union with UIEM, says chairman

  • Business
  • Thursday, 09 Jan 2003

THE merger of United Plantations Bhd (UP) and United International Enterprises (M) Bhd (UIEM), two of the most efficient plantation companies in the country, is expected to contribute significantly to UP’s profit this year. 

UP chairman Tan Sri Dr Johari Mat said both companies were well established and the merger would help UP sustain its turnover for the next eight to 10 years. 

“This will be the best year for us,” he said after UP's EGM in Teluk Intan, near Ipoh, yesterday. 

Johari said both companies were among the most efficient producers in the local palm oil industry, with UP’s fresh fruit bunches (FFB) yield average of 31.3 tonnes per hectare and UIEM's FFB yield average of 29.08 tonnes per hectare well above the national average of 20 tonnes per hectare. 

Following the acquisition of UIEM for RM440.92mil, UP is expected to register an increase of 56% in annual crude palm oil (CPO) production to 150,000 tonnes, from about 96,000 tonnes, in the current financial year ending Dec 31. 

The acquisition of UIEM, which is involved in oil palm and coconut cultivation and processing of palm oil and palm kernel extracts, was approved by UP shareholders at yesterday's EGM. 

The deal involves the acquisition of 10% of UIEM shares held by Perbadanan Pembangunan Pertanian Perak for RM44.094mil, 89.93% stake held by Maximum Vista Sdn Bhd for RM396.54mil, 0.068% held by UIEM minority shareholders for RM281,370, and 0.002% held by Martin Bek-Nielsen for RM6,780. 

UIEM owns a 10,392ha plantation in Manjung district and a palm oil mill with a processing capacity of 100 tonnes. 

Johari said the acquisition represented a further extension of UP’s existing business and would enhance its earnings profile as UIEM’s estates were sited about 70km from UP estates. 

Due to the proximity of the two companies and the high-quality infrastructure already in place, UP was expected to realise significant cost savings from improved co-ordination of resources, he added. 

Johari said the acquisition would help UP sustain its growth and profit margin even if it undertook a replanting exercise. 

“When we undertake our replanting exercise, our production and turnover will not be affected as we can depend on UIEM’s estates. This is the best synergy,” he said. 

Meanwhile, UP senior executive director and managing director Tan Sri B. Bek Nielsen said the company was expecting higher profit for its financial year ended Dec 31, 2002, but declined to reveal the percentage. 

He said the high price for CPO would contribute significantly to the company's profit margin. UP had sold forward well into this year, he said. 

“Even with an average price of RM1,150, we can still have high earnings. The acquisition will certainly enhance earnings per share,” he added. 

The company saw an almost three-fold increase in net profit to RM34.9mil for the nine months to September 2002 from RM12mil in the comparable period of 2001. – Bernama 

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