Harn Len Corp Bhd, a plantation company, which had slipped into the red for the last three quarters, is showing signs that it too is benefiting from current stellar crude palm oil (CPO) prices. Indications are that it could stem its losses by the end of the year.
“We are pleased that we have narrowed our losses in the first half of the year despite these challenging times.
“We are therefore cautiously optimistic that the subsequent quarters will be more positive for us,” managing director Low Quek Kiong tells StarBizWeek. For the second quarter (Q2) ended June 30, the Johor-based group posted a net loss of RM2.6mil, bringing the cumulative six months net loss to RM7.4mil – down by slightly more than half from the RM14mil losses a year ago.
Revenue for this six-month period, meanwhile, improved by 90% year-on-year to RM89mil.
According to Low, the company’s peak crop month had begun in September.
“It is typically expected to last three to four months and should put us in good stride to post more positive figures for the remainder of the year,” he explains, adding that with the re-opening of the economy, the company has seen a pick-up of its utilisation rate and is working hard to ensure the fresh fruit bunches (FFB) are properly harvested.
The group has a total 17,091 hectares of oil palm plantations situated mainly in Pahang and Sarawak.
It also owns a 60 tonne FFB per-hour oil mill in Sarawak.
Average seeing prices (ASPs) for CPO in Q2 was RM3,775 per tonne compared with RM2,509 per tonne in the previous corresponding quarter.
On the outlook of CPO prices, Low said that based on his observations, prices could settle in the region of RM4,000, which is slightly higher than the average prices in the second half of FY20.
Not unlike other peers, Harn Len was also not spared by the labour shortage facing the industry with the Covid-19 pandemic having made the issue more prevalent as international borders are still closed.
“Naturally, the lack of manpower had affected our output, but we are on the road to recovery as we have contracted more local workers to harvest its FFB,” says Low.
Another impact of the pandemic, according to Low, was it had delayed the group’s upgrading works based on its 2018 strategic transformation plan.
Harn Len initiated that transformation to boost its financial standing and future earnings potential.
“Our goal has been to divest our non-performing businesses to focus on strengthening the core business in plantation.
“Towards this end, we closed down our loss-making hotel in February 2019 and monetised our shophouses, industrial factories and leasehold properties to unlock value.
“And more recently, in Q2 of FY21, we disposed of two shophouses,” he shares.
According to Low, the cash generated from the sale of these properties will be invested in conducting research and analysis to improve operational initiatives in harvesting the FFB, production of CPO and palm kernel.
To conserve cash, Low says the the group is trimming non-priority spending and will conduct a “stringent cost versus benefit analysis” before carrying out any capital expenditure.
Citing an example, he says company’s frequent routine maintenance of its oil mill operations have paid off, resulting in higher extraction rates than the average of other oil millers in the region.
With life beginning to return to normalcy with the reopening of economic sectors, Harn Len has kick-started its transformation plan again.
“We will continue divesting our non-core assets in line with the plan. But we are in no hurry and will only divest if we receive an acceptable price for our assets.’ he asserts.
At the same time, it is on the lookout to acquire assets in the planation segment “if the pricing is right and contribute positively towards the balance sheet”.
Harn Len owns a 25-storey office building known as Johor Tower within the Iskandar Development Region in Johor.
It also owns six units of shophouses, three units of factory buildings and two pieces of vacant land within that economic corridor, plus a seven-storey office-cum-residential building in Kuching, Sarawak.
The group is 69% controlled by the Low family.
Its shares were last traded at 79.5 sen, giving the stock a market cap of RM167mil.