PPB Group Bhd
, the flagship company of the Kuok family in Malaysia, will spend RM275mil this year to expand and enhance earnings growth.
The group would allocate RM105mil in the flour and animal feed division, which would raise its wheat flour production capacity to 2,780 tonnes per day, and RM101mil in its oil palm plantation division, said group executive chairman Ong Ie Cheong.
The two divisions are the main income earners for the group, accounting for 48% of total operating profit last year.
Another RM14mil would be spent in its cinema business and RM5mil in sugar refining, Ong told a press conference in Kuala Lumpur yesterday.
PPB Group's interest in oil palm is held via its 58.2% stake in PPB Palm Oil Bhd and in flour milling through its 53.8% stake in Federal Flour Mill Bhd (FFM). It also owns Malayan Sugar Manufacturing Co Bhd and Golden Screen Cinemas Sdn Bhd.
The conglomerate's plans include a new flourmill and feedmill totalling RM62mil in Pulau Indah and the relocation of FFM's existing facilities from South Port in Port Klang to Pulau Indah. The relocation exercise is expected to be completed by early 2005,
Ong said the new flourmill would have a production capacity of 500 tonnes per day and the feedmill, 50 tonnes per hour.
This month, FFM will also start operating a flourmill with capacity of 220 tonnes per day in Kuching.
Another subsidiary, Suburmas Plantations Sdn Bhd, is in a joint venture to build a palm oil mill in Sarawak costing RM24mil. The mill has a production capacity of 40 tonnes per day.
The group also plans to open a new 12-screen cineplex in Gurney Plaza, Penang.
Ong said PPB group should be able to match last year's performance, given the firm crude palm oil (CPO) prices. The group has forecast an average CPO price of RM1,300 per tonne or slightly higher this year.
“The current CPO price of RM1,600 will weaken because of competition from soyoil,'' said PPB director Tan Yew Jin, who was also at the conference.
Tan, who is also PPB Oil Palms Bhd executive chairman, said CPO prices would be traded between RM1,400 and RM1,600 per tonne in the first half of the year. The outlook for the second half, however, was uncertain, he added.
The group exports CPO to China, India, Pakistan and Bangladesh.
Tan said the move by China to raise import quota of CPO to 2.5 million tonnes has brought about hope for the group to increase its exports to China. But it has to face competition from Indonesia, which had a competitive edge due to lower production costs.
“We are now working on forming a consortium to explore the possibility of raising exports to China through barter trade,'' he added.
PPB Group achieved a record pre-tax profit of RM508.9mil for the financial year ended Dec 31 last year, an increase of 58% from RM321.6mil previously. Turnover rose nearly 40% to RM7.86bil last year from RM5.63bil the year before.
PPB Oil Palm's pre-tax profit increased almost 4 times to RM169mil from RM47mil in the previous year while FFM's pre-tax profit rose to RM216.5mil last year from RM177mil previously.
On the group's flour operation, FFM managing director Tan Gee Sooi said the growth of the flour business was very much in tandem with population growth. Tan is looking for a “natural growth” of 3%.
However, he expects better growth potential in Vietnam where FFM has a flourmill, given the relatively low flour consumption per capita there. Flour consumption per capita in Malaysia is 33 kg, while in Vietnam it is only a third of this.
Faced with limited opportunities to secure public projects in waste management, the group's 55% owned unit Chemquest Sdn Bhd would seek opportunities overseas to expand earnings, said Ong. Meanwhile, the group's cinema operation had returned to the black with an operating profit of RM5.6mil last year.
The Kuok family is the single largest shareholder in PPB Group. Kuok Brothers Sdn Bhd holds 41.2% equity interest, while Kerry Group Ltd and Kerry Holdings Ltd own 7.5% each as at March last year.
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