PETALING JAYA: Kuala Lumpur Kepong Bhd (KLK) is targeting a 10% increase in fresh fruit bunch (FFB) output for this year.
It is also maintaining its goal to achieve crude palm oil (CPO) yield of six tonnes per hectare (+25% from 4.81 tonnes/ha in financial year (FY) 2020) via improved management and mechanisation efforts.
With higher output and CPO prices, its plantation earnings are likely to do well, said CGSCIMB in a report.
The report said there are also potential earnings upside from its plans to expand its refining, oleochemical and glove capacities in FY22/FY23.
The recovery is from a low base as the group posted flattish output due to slower than expected recovery in yields from its Sabah estates previously.
The report said KLK shared its concerns about the labour shortage issue at its Malaysian estates due to the freeze on intake of foreign workers as this has started to lead to crop losses.
The group plans to replant 10,000 ha of estates FY ending Sept 20,2021.
KLK indicated that it typically sells forward around 40% of its CPO output from Malaysia and is of the view that average CPO price could stay above RM3,000 per tonne in the first half of the current financial year.
The CPO price in Indonesia is currently at RM2,800-2,900 per tonne or at around RM1,000 per tonne discount to Malaysia’s CPO average selling price due to the higher CPO export levy, the report said.
It added that the revised export levy in Indonesia has improved refining margins in Indonesia. This resulted in a significant cost advantage for Indonesian oleochemical producers.
“This, coupled with concerns over rising raw material costs, has led KLK to take a more cautious view on earnings prospects for its oleochemical division, ’’ the house said.
It added that KLK is currently building a medical glove plant, which will have 15 production lines and can produce up to 4.5 billion pieces of gloves per annum with an estimated capital expenditure of RM200mil.
The production lines will come on stream progressively from end-2021.
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