Monday November 20, 2006
20/11/06 (The Star) - IJM Plantations Bhd is banking on its maiden venture in biodiesel as well as oil palm related operations in Indonesia and India to strengthen its foothold as a successful plantation player in the Asia-Pacific region.
The group is one of the smallest listed plantation companies in Malaysia in terms of oil palm land bank estimated at 30,000ha in Sandakan, Sabah.
Managing director and chief executive officer Velayuthan Tan told StarBiz that the group was eyeing to be a successful “boutique” plantation player - small but highly-efficient with strong growth in productivity and sustainable agriculture management.
“Although we rank 15th or 20th in the industry, we believe IJM Plantations is comparable to many other major plantations in terms of productivity and sustainable management,” he said.
Tan said IJM Plantations was in the right business at the right time given the current solid fundamentals in the oil palm industry.
The plantation business has always been considered a good long-term investment due to its resilient nature, he added.
“Just look at the big boys who have survived over the past 80 to 100 years. Many are still growing from strength to strength,” he added.
IJM Plantations plans to double its oil palm land bank to 60,000ha within the next five years in an effort to be a strong, efficient and sustainable oil palm player in the region, according to Tan.
He said the group would invest about RM200mil for land bank expansion in Malaysia as well as Indonesia.
“We are focusing on east Kalimantan where good agricultural land is still available and near our existing plantations in Sabah for efficient management,”
Tan said the expansion into Indonesia would give IJM Plantations the economies of scale and sustained steady growth in production in the future.
However, he does not rule out potential land bank mergers and acquisitions in Sabah “if there is good fit and a reasonable price.”
IJM Plantations started its oil palm operation in 1985 with about 4,000ha in Sandakan.
To date, it has some 24,600ha of oil palm in 11 estates with three palm oil processing mills and a palm kernel crushing plant.
According to Tan, the rapid expansion over the past 10 years has resulted in strong double-digit annual production growth in the last five years.
He said the group's fresh fruit bunches (FFB) production has increased significantly to 452,000 tonnes last year from 237,000 tonnes in 2001.
“We are happy with the strong performance and confident of further growth in the coming years,” Tan said.
He said IJM Plantations was set to increase its FFB production by next year as more young areas come into maturity.
For this year, FFB output is expected to hit 550,000 tonnes from 450,000 tonnes last year.
Tan said: “The Sugut plantation is our latest frontier with a significant area of young and immature planting.”
It has one of the best performing oil extraction rate (OER) at 24.7% last year - which is higher than the national average of 21%.
On biodiesel, he said the group planned to invest about RM80mil for the construction of a biodiesel plant in Sandakan to be installed on a modular basis to achieve initial production capacity of 90,000 tonnes per annum.
“This plant is expected to come on stream later next year or early-2008,” he added. The group is believed to have earmarked one-third of its total annual CPO production as feedstock for biodiesel production. It received the biodiesel operating licence from Malaysian Industrial Development Authority in April this year.
“Although we have secured buyers for the biodiesel, the group will continuously explore other potential export markets,” Tan pointed out.
“So far, we have no definite plan to set up additional biodiesel plants in Malaysia or overseas,” he said adding that IJM Plantations however intend to grow the business into a strong and profitable unit within the group.
On India, Tan said IJM Plantations had signed a memorandum of understanding with Godrej Agrovet Ltd to explore a potential joint venture (JV) to develop oil palm businesses in that country.
“We are interested to get involved in processing of FFB crop, procuring and supplying of oil palm planting materials and provision of agronomic assistance to Indian oil palm growers,” he added.
He stressed that it would be the group's intention to form a JV company with Godrej Agrovet to buy and process oil palm crop.
Godrej Agrovet group, which posted a revenue close to US$200mil last year, is involved in compound animal feeds, agricultural inputs, integrated poultry, oil palm plantations, plant biotech, retailing of fresh farm produce in urban areas, and rural retailing of a wide range of products including Agricultural inputs.