PPB to start bread business in Q3

KUALA LUMPUR: Expanding on its downstream business, PPB Group Bhd will start its own bread business in the third quarter of this year and will leverage on its existing 36,000 retailers to distribute its bread.

PPB Group chairman Datuk Oh Siew Nam said there were eventual plans to build more bakeries in other parts of Malaysia, although he cannot ascertain the timing yet. Currently the group has invested some RM100mil for its bakery in Pulau Indah.

“We will be producing commercial bread that is meant for local consumption. For frozen dough, if there is potential, we will consider it,” said FFM Bhd managing director, Ong Hung Hock. FFM is a wholly owned subsidiary of PPB Group.

While flour milling is PPB's core business, it also produces chicken, frozen food and cooking oil.

PPB is now in the process of conducting a due dilligence for the acquisition of a 20% stake in select flour mills in China owned by associate company Wilmar International Ltd.

PPB Group owns an 18.4% stake in Wilmar, which has at least 14 flour mills in China - each with a capacity in excess of 1,000 tonnes a day.

This forms part of a deal to sell a 20% stake in PPB Group flour milling arm, FFM, to Wilmar.

In turn, FFM signed a memorandum of understanding (MoU) with Wilmar for a potential acquisition of 20% equity interest in selected subsidiaries of Wilmar in China via its wholly owned subsidiary Waikari Sdn Bhd.

PPB had sold a 20% stake of its company to Wilmar for RM378mil, however PPB has yet to buy into Wilmar's flour mills.

“We are past the valuations process. The valuations are simple, as Wilmar's flour mills are new. This should be completed by year-end,” said Oh.

Both PPB and Wilmar are controlled by Malaysia's richest man Robert Kuok.

Singapore-based Wilmar is the worlds largest listed plantation company, headed by Kuok's nephew Kuok Khoon Hong.

As for PPB's Indonesian operations, the group intends to double its milling capacity in Indonesia from 1,000 tonnes to 2,000 tonnes over the next two years. Due to the competitive nature of Indonesia, its market share is still less than 5%.

“The potential is great. In Indonesia, the flour consumption per capita is only 18kg per year, while in Malaysia, it is 35kg per year,” said Ong.

As for Vietnam, PPB has just submitted the papers to expand its flour mill there. Ong expects the approvals and agreements on the mill to be ready over the next two months. Then it will take some 14 months to start constructing the factory.

PPB currently has two 400-tonne mills in Vietnam and Thailand.

PPB Group's total milling capacity in Malaysia is about 2,330 tonnes a day, and it supplies about 40% of the country's wheat flour requirement.

Meanwhile, PPB Group has also allocated some RM100mil to open eight new Golden Screen Cinema (GSC) outlets in major townships over the next two years.

It recently opened one cinema in AEON Jusco Malacca and will open another one in Mentakab, Pahang in the third quarter.

“We will open another six locations next year. We are moving out of the Klang Valley, and going to places like Kuching and smaller towns. It costs about RM1mil to RM1.5mil for one screen. By end-2012, we should have 260 screens in 30 locations,” said GSC chief executive Koh Mei Lee.

For PPB's financial year ended Dec 31, 2010, the film division generated a revenue of RM230mil and made some RM40mil in profit.

Koh said 2010 was a record year, and expected 2011 to be even better, especially with the increase of 3D movies.

“With the increase in Hollywood blockbuster movies and 3D films, more people are going back to the cinema. For those with an iPhone, they can purchase their tickets using a tickletless system,” she said.

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