SHAH ALAM: CB Industrial Product Holding Bhd (CBIP) expects its plantation business to break even next year.
Managing director Datuk Lim Chai Beng told StarBiz that yields from the oil palm trees are increasing steadily.
“For our plantation segment, the trees are growing and they are all very young now. We will see a breakeven in the financial year ending Dec 31, 2020 (FY20) while in FY21, we will make a profit in this segment. But for this year, there will still be some startup losses,” Lim said.
“All these are young oil palm plants of about five to seven years of age. We have planted the trees from 2015 to 2017 and it is still too early to talk about projections and profit expected. We just have to let the trees grow,” he added.
Lim said the trees are already fruiting, with the trees that were planted in the earlier years already yielding quite well.
“The fruits are yielding more and more. We have also set up a mill and the mill utilisation up to today is about 40%-50%.
“This year, we expect the mill to reach about 60% utilisation because it had just begun operations. This part of the business just started and we have to build it up,” he said.
According to CBIP’s 2018 annual report, its oil palm plantation and milling segment posted a loss of RM8.8mil in FY18 as compared to a loss of RM9.2mil in FY17.
“This segment was still incurring losses because the age profile of the palm trees are relatively young, thereby generating low revenue. However, losses have been narrowed as the oil palm trees mature,” CBIP said.
The company also said profitability should improve in the coming years following the commencement of its palm oil mill in April.
Lim said the company had no plans to expand its plantation land bank, noting that it wanted to consolidate what it had at the moment.
Meanwhile, he expects the outlook for CBIP’s special-purpose vehicle contracts to improve from next year.
“For this business segment, we are mostly dealing with the ministries. The Pakatan Harapan government is currently consolidating the nation’s finances to a stronger position. This is already coming into the second year and I don’t think they can continue holding off spending for too long,” he said.
CBIP’s special-purpose vehicle segment under AVP Engineering (M) Sdn Bhd retrofits and sells ambulances and fire engines to the government.
“It is the Health, Defense and Local Government Ministries. I believe they will need to replenish soon since we have not been having any orders for almost two years,” Lim said.
“But we are also expanding into the commercial sector in the private sector. In the many years of this business, we have built up the brand. We believe we are competitive to participate in these government contracts,” he added.
Lim also expects CBIP’s two biodiesel plants to be fully up and running next year.
“It will only be partial this year. We have two (palm oil) factories and three biodiesel plants. The planned supply will be sent straight to the petroleum companies.
“Once the mandate is fixed by the government, we will then supply to these companies. We should get our quota when our plant begins operations,” he said.
Lim said CBIP had spent RM70mil to acquire the two factories and this included the debt which it is servicing now.
“Another RM30mil was spent to upgrade and clean up the plant. So it costs us RM100mil. The factory, with a throughput of 120,000 tonnes a year, costs us a total of RM40mil while the other one, with a throughput of 350,000 tonnes a year, costs about RM60mil,” he said.