KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) expects its palm oil exports to China to double to 600,000 tonnes annually after its recent deal with China-based Sinograin Oils Corp.
FGV group president and chief executive officer Datuk Zakaria Arshad said the deal is worth several hundred million ringgit and “we hope to see its impact on FGV’s bottom line immediately.”
China is also poised to be FGV’s biggest export market surpassing India and Pakistan, he told reporters after attending the AGM of FGV’s subsidiary MSM Malaysia Holdings Bhd yesterday.
Last year, China was FGV’s third-biggest palm oil products market with 308,040 tonnes exported there. FGV recently signed a memorandum of understanding with Sinograin with the aim of exploring the feasibility of supplying and distributing palm oil products to China’s midstream and downstream market.
“We want to expand our business in China and we believe FGV and Sinograin can complement each other. While Sinograin has access to soft oils such as soybean and rapeseed, FGV has access to over three million tonnes of palm oil,” he said.
“Sinograin also has world-class facilities in the edible oil and oil seeds storage, processing and distribution network in China, while FGV has world-class facilities in the cultivation of palm oil, mills, refineries and bulking facilities in Malaysia and Indonesia,” he added.
Zakaria said FGV also hoped to explore the opportunity to integrate its existing subsidiary, FGV China Oils Ltd in Dongguan, Guangdong, with Sinograin’s domestic operations to bring value and cost savings to both parties.
“This collaboration will also allow FGV to explore its downstream expansion in the supply, processing, packaging and distribution of blended oils, shortenings and specialty fats together with Sinograin,” he added. Currently, Sinograin imports 700,000 tonnes of palm oil products annually.
Meanwhile, MSM president and group CEO Mohamad Amri Sahari said the country’s leading sugar refiner is expecting a challenging year ahead despite a hike in refined sugar prices in March.
He said the price of raw sugar was quite high in the first quarter of this year, ranging from 20 cents to 22 cents per pound on the back of unfavourable US dollar-ringgit exchange rate of 4.45 against 4.1 last year.
“Despite the sugar price whichhas come down to 15.5 cents per pound at an exchange rate of 4.35, it is still difficult to predict the outlook.
“Every 10 cent-movement in US dollar would cost us more than RM30mil,” explained Amri.
Effective March 1, the maximum wholesale price for coarse grain white refined sugar has been increased by 7% to RM2.87 per kg, while its retail price is up 3.8% to RM2.95 per kg.
While the hike is a good move by the government, Amri said “it is still not enough to cover the fluctuations in the raw sugar prices and exchange rates”.
“We would be comfortable with a 40 sen hike but for now, this will do. The price of refined sugar in Malaysia is among the cheapest in the region,” he added.
In Thailand, for example, refined sugar is sold at RM4 per kg.
On MSM’s newly integrated sugar refinery at Tanjung Langsat, Amri said about 45% was completed and slated to be operational by May 1 next year. The facility is targeted to have a production capacity of one million tonnes of refined sugar yearly, effectively enabling MSM to increase its annual production capacity to 2.25 million tonnes.
According to Amri, MSM’s initiatives to venture into strategic alliances will be based on an opportunistic basis in South-East Asia, focusing on cost-effective and asset-light investment that would yield synergetic benefits.
With the right foundation entering 2017 and greater consumer demand for the “Gula Prai” brand, he said MSM remained optimistic that the performance of its sugar and trading business will be satisfactory this year.