Boustead to invest RM250mil to boost Sabah estates’ yield

Millers will collect the fresh oil palm fruits to extract palm oil in their factories.

KUALA LUMPUR: Boustead Plantations Bhd, which is buying 11,579ha of plantation land in Sandakan, Sabah, from Dutaland Bhd for RM750mil, will invest a further RM250mil to improve the productivity of the five plantation estates over 10 years.

In a filing with Bursa Malaysia, the oil palm plantation company said the measures to be implemented included progressive replanting of old and low-yielding fields with higher yielding planting materials and building a new palm oil mill at one of the estates.

Boustead Plantations, a 57.4% owned subsidiary of Boustead Holdings Bhd, said it would replant about 7,400ha out of 9,998ha plantable area of the estates.

As for the new mill that will be set up by 2020, it said the 60-tonnes-per-hour mill would boost the oil extraction rate of fresh fruit bunches (FFB), replacing the existing 40-tonnes-per-hour mill at Nak Estate.

Boustead Plantations will also introduce good agricultural practices and adequate fertiliser inputs based on site yield potential.

“The group has proven its ability to improve the FFB yield of its estates with its previous acquisition of G&G Estate in Sabah. The implementation of good agricultural practices and high fertiliser inputs on this estate have resulted in improved FFB yield of 21.1 tonnes per ha in 2016, compared with 17.54 tonnes per ha achieved before the group acquired the estate in December 2013,” it noted.

The average production of FFB at the five estates being acquired was only 7.82 tonnes per ha for the financial year ended June 30, 2017.

Boustead Plantations said the capital expenditure of RM250mil would be financed via internally generated funds and/or bank borrowings.

On Monday, its unit Boustead Rimba Nilai Sdn Bhd entered into an agreement with DutaLand and its units to acquire the five estates, sprawled over 42 parcels of land in Labuk and Sugut districts.

This was with a view of replacing some of the group’s lands in Peninsular Malaysia, disposed of in recent years, with sizeable plantation lands in Sabah at a lower cost, Boustead Plantations said.

On completion of the proposed acquisition, the total plantation land bank held by Boustead Plantations will increase by about 14.1%, from 81,838ha to 93,417ha.

This also represented an increase of 15.7% in total planted area of oil palm from 63,840ha to 73,838ha, it said.

The acquisition is expected to be completed by the second quarter of 2018.

Post-acquisition and the repayment of existing debt, the company expects its gearing level to reduce to 0.32 times as compared to 0.41 times at end-2016.

The company has indicated that the acquisition is not anticipated to have any material impact on its earnings and earnings per share for the current financial year ending Dec 31, 2017. 

“However, the proposed acquisition is expected to contribute positively to the future earnings of Boustead Plantations. It is also not expected to have any material impact on the net assets and net assets per share of the group,” it said.