Borneo Bulletin (02/01/2021) - THE STAR – The current crude palm oil (CPO) prices of above MYR3,000 per tonne bodes well for plantation companies although volatility remains.
Amid this scenario, Kuala Lumpur Kepong Bhd (KLK) will continue to prioritise operational efficiencies to drive performance for its plantations.
Chief Executive Officer Tan Sri Lee Oi Hian said the plantation group has made good progress towards achieving the fresh fruit bunches (FFB) yield target of 20 mt/ha in the first year of harvesting, with more and more areas achieving the target.
“But we have yet to fully achieve our true potential,” he said in the company’s 2020 annual report that was released yesterday.
According to him, KLK would be placing greater emphasis on good agricultural practices, especially for its replanting processes “to achieve high standards of replants”.
He believes the group would eventually be able to achieve its target of six mt/ha of CPO with more mechanisation being introduced through existing and future collaboration.
“In efforts to further enhance the productivity of our processing plants and capture better value for the palm products produced, we will be increasing capacity through a joint-venture project with IJM Plantations Bhd to construct a new refinery, kernel crushing plant and jetty in East Kalimantan.
“Construction work had started in late FY2020 and these facilities are expected to be completed within the next two years, ” Lee said on the group’s outlook and strategies.
On expansion opportunities, Lee said the group would focus on brownfield oil palm plantations, with evaluations based on the principles of our commitment towards the policy of No Deforestation, Peat and Exploitation.
It currently has two conditional agreements for brownfield areas in Indonesia pending, he added.
CPO prices had fallen to below MYR2,000/mt in April 2020 to May 2020 during the peak of the Covid-19 pandemic. With demand returning in the second half of 2020 and replenishing of stockpiles by key consuming countries, prices have since recovered to above MYR3,000/mt.
“The outlook for 2021 will depend on the development of La Nina and its impact on the soybean complex in South America. This, combined with a limited supply of sunflower and rapeseed oil from the Black Sea region, would result in higher vegetable oil prices,” said Lee.
According to him, export and levy duty differentials between refined products (against CPO) and between Malaysia and Indonesia will also continue to present uncertainties to palm prices and refining margins.
Both countries will need to compete for market share and strive to balance oil inventories with their respective biodiesel mandates against price.
The recent rally of palm products prices, however, may pose a challenge for its oleochemical division as “it has led to cautious buying on a hand-to-mouth basis”.
“The Indonesia levy structure will also see the business outside Indonesia operating at a disadvantage.
“Diversification into the specialties businesses may assist to mitigate some of these uncertainties as the world economies recover,” he added.
KLK posted a net profit of MYR772.6 million for the financial year ended September 30, 2020, which came in 25 per cent higher than the previous year due to higher palm products prices.
Read more at https://borneobulletin.com.bn/2021/01/klk-to-prioritise-operational-efficiencies/