PPB Oil Palms Bhd is eyeing the acquisition of an additional 30,000ha in Indonesia, especially in Central Kalimantan, this year as part of an ongoing expansion of its oil palm plantation, said executive chairman Tan Yew Jin.
He said that to achieve higher economies of scale, the group would try to acquire more land, especially in areas surrounding its existing plantations in Kalimantan.
To this end, the company was talking to several parties while awaiting offers from Indonesia on prospective land deals, Tan told reporters after the company's AGM in Kuala Lumpur yesterday.
“Our capital expenditure this year will be at least RM100mil, mainly for working capital, new land acquisitions and replanting,'' he said.
PPB Oil Palms has about 61,929ha of plantations in Indonesia, mainly in Central Kalimantan and West Sumatra.
“The ongoing development of oil palm plantations in Indonesia is progressing smoothly and will increase significantly in stages, whereby the planted and mature areas will drive higher economies of scale,” he added.
According to Tan, the Indonesian operations would play an increasingly important part in the future profitability of the group, especially with some 6,000ha of the earlier plantings now in production and more areas coming into maturity.
PPB Oil Palms, which can be considered a young player among the major plantation groups in Malaysia, has a total land-bank of 141,946ha, of which 56% is in east Malaysia and the balance in Indonesia.
The group owns and operates 13 oil palm plantations and seven palm oil mills in east Malaysia and Indonesia.
Tan said two new 40-tonne an hour mills were being built in Bintulu, Sarawak. The mills will begin operations in two months while one more in Sugut, Sabah is due for completion in mid-year.
On completion of the mills, he said, the group would have nine in total with a combined processing capacity of two million tonnes of fresh fruit bunches a year.
PPB Oil Palms, he said, aimed to be a cost-efficient producer of palm oil. “Our cost of production for CPO is now about RM650 per tonne compared with RM500–RM550 per tonne previously due to increasing labour and fertiliser costs.”
However, Tan said he believed the company's prospects looked bright because its rising crop production and good oil extraction rates would have a favourable impact on CPO output.
In addition, he said, its average CPO price this year was expected to be higher than last year's RM1,456 a tonne.
“For us, anything (the spot CPO price) above RM1,500 to RM1,600 per tonne is considered very good and will help translate into good returns for the group,” Tan said.
In another development, PPB Oil Palms has reported an unaudited pre-tax profit of RM47.7mil for its first quarter ended March 31, compared with RM46mil in the corresponding quarter a year ago. Its turnover also rose to RM117.6mil from RM98.9mil previously.
The company told Bursa Malaysia the improved performance was due to higher contribution from its refining associated company. However, the higher revenue arising from better palm product prices was moderated by an increase in operating expenditure, resulting in marginally lower plantation profits.