ON the back of improving perception and acceptance towards the Modipalm continuous sterilisation mills as well as new foray, CB Industrial Product Holding Bhd (CBIP) is upbeat on the company’s prospects.
The palm oil mill manufacturer and engineering services provider have some of the renowned plantation players including PT Astra Agro Lestari Tbk, Wilmar International Ltd, Felda Group, TH Plantations Bhd, Tradewinds Corp Bhd and Sime Darby Bhd under its belt but is hoping to clinch contracts from other big names.
“More big boys are starting to take note of our products now and we are in talks with them. We notice the change of market perception regarding our product,” CBIP founder and managing director Lim Chai Beng tells StarBizWeek.
Some of its new clients include the Rimbunan Hijau group, TDM Bhd, Kemabong Sdn Bhd, Bumitama Agri Ltd and some African players.
The company successfully ventured out of Indonesia and Malaysia, which constitute for most of its revenue previously, at the beginning of 2012.
In 2013, 15% of its contracts were from new markets like Guatemala (Central America), Papua New Guinea (Oceania), Liberia and Nigeria (Africa), he says.
Notably, its new clientele base has expanded from 29% in 2011 to 62% in 2013.
Its orderbook grew RM91.04mil or 26% for the fourth quarter of its financial year ended Dec 31, 2013 compared with the same quarter a year ago.
Due to its reputation for serving the bigger planters, some of the small and medium-sized players have also knocked on its doors as they seek for a reliable palm oil mill supplier.
“As the big guys like Sime Darby and Rimbunan Hijau expand into new markets, we are also able to tap into those regions,” he explains, adding that new markets will contribute more to its income in the years to come.
In a report released on April 3, Hong Leong Investment Bank (HLIB) Research estimated that its oil mill engineering division has an orderbook of some RM486mil.
As a company that emphasises on innovation, it is at the final stage of developing its zero-discharge technology.
Previously, it developed floating mills in Riau, Indonesia due to the logistic issues the planters face there.
Lim hopes that it will be able to commercialise the new product once it is satisfied with the results from the pilot test.
According to him, the company has spent eight years and invested substantially to develop the product.
“We hope to launch the new mill soon but we want to ensure that it has minimal flaws before taking it to the market,” he says.
HLIB Research notes that the zero-waste management technology will extend Modipalm continuous Sterilisation technology’s tax-free status, which is expiring by 2015, once it is patented and commercialised.
In a separate note, RHB Research says CBIP will have to pay about RM20mil in taxes, which will reduce its net profit by 20% without the pioneer tax status.
An analyst tells StarBizWeek that the new product may enhance its earnings in the longer-term as it takes time for the market to accept the new product.
All the mill components are manufactured at its plant so that it would enable to have better control over the quality and cost of its products, Lim says.
Foreseeing rising overhead costs going forward, he adds that the company is moving towards automation gradually.
“We hope to reduce manual work by 20% in two years time through automation and it will be done segment-by-segment.”
As the automation systems are built internally, it does not require big capital expenditure (capex), he notes.
Its plantation segment is probably one that requires a higher capex, estimated at RM100mil per annum.
With its greenfield landbank in Indonesia registering at 65,041ha, it plans to plant between 6,000ha to 8,000ha each year. So far, 6,000ha have been planted.
In a joint venture, its planted area of about 7,000ha in Sarawak contributed RM7mil or some 8% to the group’s profit after tax and minority interest last year.
Although only in his mid-50s, Lim has already planned for the company’s succession.
According him, there are six family members working for the company, in which three of them are of the second generation.
He also emphasises on getting a breath of fresh air from new talents in the company. “We want to ensure that our employees are able to offer new ideas and perspectives.”