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Malaysia’s bond market to remain buoyant

KUALA LUMPUR: Malaysia’s bond market is likely to remain vibrant but will see lower issuance on moderation in overall economic activity.

“2012 was a bumper year. In the first half of the year, private debt issuance amounted to RM29.9 billion. The bulk of it comes from the power generation sector, followed by real estate, plantation and financial services,“ said Maybank Investment Bank Bhd vice president and head of fixed income research Tan Chee Wee. 

He noted that the current ratio of government to corporate bonds stands at 55:45.

“There should be more bond issuance in the second half of this year, given the current low-yield environment,” he told reporters on the sidelines of “The Asean Fixed Income Roadshow” organised by Bloomberg LLP here yesterday.

“By year end we expect this figure to pick up pace and possibly hit the range of RM70 billion to RM80 billion. Malaysia’s resilient domestic demand and sustained fiscal support will underpin the growth of Malaysia’s bond market, which is currently the biggest in Asean,” he added.

This forecast is good, considering from 2008 to 2011 the average annual gross issuance was RM60.1 billion. 

When asked to forecast performance of bond market, he said: “The market is very vibrant and liquid. We think the 5-year bond yield still has room to rise from 3.32 per cent by another 5 to 10 basis points,” he said. 

Yesterday, Malaysian Rating Corp Bhd’s (MARC) in its “2H2013 Malaysia Bond Market Outlook” revised its earlier projection of gross corporate bond issuance to RM70 billion-RM85 billion for 2013 from between RM75 billion and RM90 billion initially.

This is due to lower issuance in the first half of this year, slower growth in private investment and the moderation in overall economic activity.

Last year, Malaysia’s bond market posted a record when corporate bond issuance more than doubled to RM124.6 billion from RM55 billion posted in 2011.

MARC report also said in view of the government’s debt-to-GDP ratio amounting to 53 per cent, which is close to the self-imposed debt ceiling of 55 per cent, it expects the Malaysian Government Securities (MGS) and Government Investment Issues (GII) bond issuance to total between about RM90 billion and RM95 billion for 2013. 

After excluding MGS/GII that have been redeemed in the first half of the year and maturing over the next six months, MARC expects the net issuance to be in the range of RM39.4 billion to RM44.4 billion.

Last week, five banks in Southeast Asia took the initiative to spur more active bond trading by quoting and distributing bond prices in their domestic markets via Bloomberg terminals.

They are Malaysia’s Malayan Banking Bhd (Maybank), PT Bank Negara Indonesia, Security Bank of the Philippines, Thailand’s Kasikornbank and Singapore’s Overseas Chinese Banking Corp (OCBC).

The bond trading portal, facilitated by Bloomberg terminals, will help to create transparency and integrate southeast Asia’s capital markets. 

Nitin Jaiswal, head of Asean sales for Bloomberg, said there are plenty of local banks in Asean countries with strong balance sheets that were looking to “step out of their own market” when it comes to putting money into bonds.

“We felt we should start a portal where banks can go and find out which markets they should be investing in. Now, they will be able to find those names, see the indicative price and negotiate trade from there,” Jaiswal said.

Keep soil moist, for peat’s sake

PROPER MANAGEMENT: Is peat fire uncontrollable? Experts tell Ooi Tee Ching that fire does not spread if the peatland had been compacted and is kept moisturised with canals of water

IN the last two weeks, there had been considerable news on how much Singapore and Malaysia suffered from the haze that emanated from Indonesia due to peat fires there. Does this mean people in the Riau province of Sumatera are not weepy-eyed and choking from the blaze and haze?

Understandably, Indonesian Coordinating Minister for People’s Welfare Agung Laksono and Environment Minister Balthasar Kambuaya slammed critics from Singapore and Malaysia who were quick to blame and offer unsolicited advice. 

It is unfortunate that many took to the “I’m more worthy than you” attitude via the media and Internet and claimed global demand for palm oil is fuelling forest fires while the Indonesian government dispatched water bombing planes and helicopters to battle the peat fires.

The Indonesian Palm Oil Association had also responded positively when secretary-general Joko Supriyono reportedly said his team prepared 26 fire-fighting units to help put out the flames.

But like the years before, such positive efforts often go unnoticed because the truth is not sexy when pit against damning rumours. Inevitably, those who are more skilful at spreading rumours and attracting media attention continue to influence public perception.

This is seen when the Association of Plantation Investors of Malaysia in Indonesia testified that Malaysian companies are not at fault in clearing land using fire. Indonesia’s Kementerian Lingkungan Hidup & Kepolisian and other local authorities, too, confirmed they had visited TH Plantations Bhd’s estates there and found no evidence of open burning.

Although these testimonies reflect reality on ground zero, bad news spreads faster than the peat fires. The damage was also just as immediate. 

Share prices of Sime Darby Bhd, TH Plantations and Kuala Lumpur Kepong Bhd (KLK) on the Bursa Malaysia fell victim to this unfortunate blame game.

When asked to comment on the spate of media reports on peat fires in Sumatera, Incorporated Society of Planters (ISP) chief executive officer Azizan Abdullah said: “Oil palm planters who carry out proper peatland development and water management at their estates should be given a pat on the back for stemming the spread of peat fire. Instead, what we see is a stab in the back. 

“This is very unfortunate. If not for optimal water table management and infield perimeter drains throughout the peat plantations there, the haze could have been worse,” he told Business Times on the sidelines of a recent conference organised by ISP in Sibu, Sarawak.

“Do you know that plantation companies invest a lot of money in heavy machinery to clear the land, compact the peat soil and dig up a maze of canals? 

“This is to compress the peat soil and keep it moist so that the oil palms can grow properly and yield to their potential. Incidentally, this process makes the soil less flammable and hinders fire from spreading,” he said.

Most of the oil palm plantations in Riau are at a mature stage and as such there is not much room for new plantings there. “So, by logic, allegations of plantation companies carrying out slash and burn jobs at their estates just does not hold water,” he said.

He praised Indonesian President Susilo Bambang Yudhoyono for having the wisdom to set the record straight with government officials who reacted badly to emotional pressure and unjustifiably subjected plantation companies to media prosecution. 

When asked to comment on satellite pictures showing many hotspots across Sumatera as indicative of fiery blaze within the plantation companies’ land bank, Azizan replied, “we must take note that in Indonesia, 20 per cent of the land bank is under the plasma scheme, of which smallholders occupy scattered enclaves within the plantations.” 

He noted that the fires may have been started by the local communities for their own cash crop cultivation in these enclaves.

“In the last 15 years or so, Malaysian plantation companies, especially Sime Darby Plantation which pioneered the concept, have adopted a zero burning approach and use heavy machinery to clear land and carry out soil compaction. So, why would they behave any differently when they invest in Indonesia?” he asked.

Kuching-based Tropical Peat Research Laboratory director Dr Lulie Melling concurred with Azizan that such misunderstandings continue to recur because the communication of facts and figures on the differences between a well-managed peatland and one that is not, is still very much lacking. 

“There has to be more public awareness on this topic because decision makers need to be able to differentiate facts from mistaken assumptions about peat soil and peat fire,” she said when met on the sidelines of the ISP seminar.

In her usual attention-grabbing way of explaining scientific concepts, she said: “Peat soil is actually very sexy. It’s always soft and wet. 

“I tell farmers to treat the peatland like their wife. If you love her but leave her high and dry, you would have unwittingly set off a ticking time bomb of contempt. 

“Beneath her calm surface of grassland is a dried up layer of angry debris … just waiting to ignite into a raging fury when there’s a spark of fire.”

She reiterated that good peat soil management is the basis for sustainable food production and a preventive measure against the spread of fire. “We need to differentiate between managed and unmanaged peat. If you spot patches of grassland, it is most likely unmanaged peat where the top layer of debris is dry and highly flammable,” she said.

So, when a uninformed or poor farmer who cannot afford heavy machinery for land clearing, torches up the grassland, he unsuspectingly sets off a fire that smoulders underground for weeks and months.

In explaining the difference between unmanaged and managed peat, she drew an analogy of comparing the cross-section profiles of a sponge cake and that of the Sarawak layer cake, her favourite dessert.

She pointed to a sponge cake and asked, “Can you see the big holes? This is the profile of unmanaged peat.”

She then used a rolling pin and flattened the sponge cake. “When there is considerable soil compaction by heavy machinery, the big holes in the peat become small holes and the top layer of debris become densed like a layer cake. The compaction enhances capillary rise, resulting in higher water-filled pore space in the peat,” she said. 

She took two candles and stuck one on the sponge cake and the other on the dense layer cake. “Can you see which one is standing erect?” she asked, tilting her head with a smile.

“I tell this to planters at my workshop sessions … it pays to be romantic … it’s satisfaction guaranteed for those who spend time on foreplay before they sow their seeds. I always remind planters that peat soil requires a lot of tender, loving caressing,” she added.

In her next demonstration, Melling lit a candle and tried to burn the dry sponge cake and the layer cake that is soaked in water. The dry sponge cake caught fire while the moist layer cake remained relatively intact. 

“See … fire is not likely to spread in peat that had been compacted and is constantly moisturised,” she concluded.

Indeed, land compaction and establishment of a canal system is a prerequisite to any oil palm plantings in Sarawak’s peatland. Melling noted a lot of effort goes to ensuring water levels in the canal system is at 50cm to 75cm from the surface. This is achieved through a series of stops, weirs and water gates.

Palm oil exports to Vietnam climbed 20%

KUCHING: Malaysia’s palm oil exports to Vietnam stood at 173,732 tonnes in the first five months of this year, 20 per cent more than a year ago, Plantation Industries and Commodities Minister Datuk Seri Douglas Uggah Embas said yesterday.

He expressed optimism on the commodity’s future growth potential, in line with the improved economic and living standards in Vietnam.

He said this while officiating at the first Malaysia-Vietnam Palm Oil Trade Fair and Seminar 2013 (POTS) in Ho Chi Minh City, Vietnam.

“Malaysian and Vietnamese oils and fats players are encouraged to embark on collaborative initiatives to further enhance trade relationships in the commodity. 

“This is so as to meet the increasingly sophisticated demands of Vietnamese consumers,” he said in a statement issued by his ministry here.

Last year, Vietnam bought 468,722 tonnes of palm oil from Malaysia, 12 per cent more than 420,104 tonnes in 2011.

He said the Malaysia-Vietnam seminar, which attracted over 200 participants from both countries, was the 30th edition in this POTS series, since its introduction in 2006. 

It is being organised in Vietnam for the first time to promote consumption of the nutritious palm cooking oil and oleochemicals that goes to production of soaps and detergent.

Speakers at the seminar include head honchos of oil palm plantation companies and international experts of the oils and fats trade. — Bernama

Sarawak plunged into darkness

We were driving from Rinwood Pelita Estate in Mukah to Sibu when Adrian Wong noticed that a few sets of traffic lights at crossroads were out.

After a few phone calls and texts via whatsapp, we realised the whole of Sarawak was experiencing a blackout.

We slowed down and carefully navigate through the chaos at traffic light crossroads. We finally reached Kingwood Hotel in Sibu at 7pm. It was pitch black except for car lights at the streets.

The lobby was crowded with hotel guests as the rooms became hot and stuffy. Finding a place to eat proved to be a problem as most restaurants were closed and the handful that were opened, had long queues.

So, our last resort was “romantic candle light dinner” at the pasar malam. The hawkers there enjoyed brisk business.

It turned out to be quite good as there were so many finger foods to pick and choose from. Adrian bought a whole bagful of Sibu “kong piah”, which was lip-smacking delicious. It distracted me from feeling sweaty and tired — for a while.

After 5 hours of anxious worry and chatter, we all decided to go back to our hotel rooms and try to get some sleep even though it was stuffy. After settling into bed, the lights and air-cond suddenly came back on. Hooray!

This was a memorable assignment … I will remember this for a long, long while.

Multi-faceted barriers to trade

AT A CROSSROAD: The bigger the palm oil industry becomes, the easier it is a target for smear campaigns by rivals via political means. Planters urge the government to tackle barriers to palm oil exports in Malaysia’s free trade agreement talks with the European Union. OOI TEE CHING writes.

WELL-FUNDED environmental activist groups like World Wildlife Fund, Friends of the Earth, Greenpeace and Sawit Watch of Indonesia, have in the last 15 years or so, launched many campaigns alleging the expansion of oil palm plantations have destroyed forests in Indonesia, threatened many endangered wildlife and robbed indigenous peoples of their land.

A manipulative but favourite ploy used by environmental activists to discredit palm oil-producing countries like Malaysia and Indonesia, is to take satellite imagery of a small part of the country and magnify it as logged-over areas in a cynical and deliberate attempt to create the impression that the entire rainforest system is destroyed.

To put things in perspective, the oil palm industry in Malaysia accounts for 15.5 per cent of total land area and only 4.5 per cent that of Indonesia. 

Unknown to many, the environmental activists’ strident criticisms have created trade barriers to the global palm oil trade under the pretext of environmental activism. Indeed, this sits oddly with the fact that oil palm is one of the world’s most sustainable crops. 

Oil World, a Hamburg-based trade journal, noted that the oil palm tree is the world’s most efficient oil crop because one can harvest five tonnes of oil per hectare. This is 10 times more productive than soyabean planted in the United States and five times more than rapeseed, Europe’s main oil crop. 

Should alternatives to oil palms be grown, more land would be needed to produce an equivalent volume of oil to replace palm oil, likely resulting in further deforestation. 

In giving a better insight to the terminology “deforestation”, Sarawak Plantation Bhd chairman Datuk Amar Abdul Hamed Sepawi who studied forestry and was trained as a forester, cited the United Nation’s Framework Convention on Climate Change defined a forest as an area of 0.5 to one hectare having more than 30 per cent canopy cover and having a potential height of two to five metres.

“So, how can it be said there is deforestation when oil palms fit the United Nation’s definition of forest plantations like fir and cone trees in Europe? 

“How can it be said that planting oil palms is highly polluting when these trees, like any other forest species, produce oxygen for us to breathe?” he said in his keynote address before 1,003 delegates at a conference organised by the Incorporated Society of Planters (ISP) in Sibu, Sarawak, recently.

Last year, the Rainforest Foundation of Norway made sensational headlines when it alleged Norwegian Government Pension Fund Global (GPFG)’s investments in Malaysian and Indonesian plantation counters causes wanton deforestation.

GPFG sold off their shareholdings and in their annual report noted: “In the first quarter of 2012, we sold our stakes in 23 companies which by our reckoning, produced palm oil in an unsustainable manner…” 

Abdul Hamed caused a stir among the ISP delegates when he pointed out the elephant in the room. 

GPFG, which was previously known as The Petroleum Fund of Norway and derives its seed money from selling depleting fossil fuels, is throwing dirt at farmers who plant trees that sequester carbon dioxide. 

“We have two groups of people. One digs oil from the ground and the other harvests edible oil from above the ground. Yet, it’s the group that contributes to fossil fuel burning that is blaming environmental pollution on the other group who plants trees that clean up the air,” he smirked. 

Abdul Hamed moved on to highlight that the western environmental activists’ campaign against oil palm plantation expansion, in the name of “saving rainforests”, is actually a blatant violation of international norms and Malaysia’s sovereignty.

“Many people unsuspectingly believe Greenpeace, Friends of the Earth and Wetlands International are protectors of the world’s forests but … let me ask you … are they bringing their own governments to justice for deforesting 90 per cent of their country’s landmass? Are they lobbying for reforestation of deciduous forests in their own countries?” he asked.

By criticising the virtues of oil palm planting and ignoring the evidence that economic development leads to better environmental protection, Abdul Hamed said it is questionable whether these activists’ true commitment is to the environment or to erection of trade barriers to benefit rapeseed farmers who are already heavily subsidised by the European Union (EU) government.

This hand-in-glove fit is also seen in the activists’ campaign against palm oil imports, especially for biofuels, which is very much aligned with the EU’s Renewable Energy Directive that seeks to discriminate against palm biodiesel.

Skilful in communication and blackballing tactics, these activists have also harassed oil palm planters into submitting to the standards and criteria of which they dictate, such as the Roundtable on Sustainable Palm Oil (RSPO). 

Abdul Hamed described these mercenary activists as whistleblowers, judge and jury, all rolled into one — a stark contrast to the check and balance that corporates undertake in the name of justified return on investments to shareholders. 

“Why should our oil palm industry submit to principles and criteria governing our country’s land resources that is being pushed by green activist-driven organisations such as the RSPO? 

“Where is the respect for Malaysia’s laws enacted by Parliament and state assemblies that had shaped good agriculture practices, workers’ rights and sustainable return on investments for farmers?”

Abdul Hamed noted that France’s smear campaigns of “no palm oil” on food packaging and environmental activists’ incessant harassment for oil palm planters to cough out tonnes of money to be RSPO-certified has restricted market access for palm oil. 

“Is RSPO the EU’s “Trojan Horse” meant to hoodwink plantation corporates into surrendering their rights of redress with the World Trade Organisation that promotes fairness in free trade?” he asked.

Abdul Hamed reiterated the oil palm is an economic security crop. This is because Malaysia’s annual US$25 billion (RM79.75 billion) palm oil exports support some two million jobs and livelihoods along the sprawling value chain.

More than 40 per cent of oil palm planters in Indonesia are smallholders whilst in Malaysia they contribute to 38 per cent of the country’s palm oil output.

Last year, Malaysia and Indonesia earned some US$45 billion from exporting more than 40 million tonnes of palm oil all over the world, data from industry regulators of both countries revealed.

Oil World confirmed that in 2012, Malaysia and Indonesia shipped out the bulk of 41.8 million tonnes of palm oil, or 61 per cent of the 68.2 million tonnes of vegetable oils traded globally. Soyabean, rapeseed and sunflower oils, however, only commanded 27 per cent of market share.

Interestingly, Oil World’s data also showed that while the vegetable oils market had doubled in size since 1990, people around the world have chosen palm oil over other oils. Among 17 major vegetable oils traded in the world, palm oil consumption exceeded soft oils like soyabean, rapeseed and sunflower.

In the last two decades, global palm oil consumption expanded three times. Rapeseed oil purchase, however, only increased by 2.5 times and soyabean oil’s popularity just doubled.

“We’re at a crossroads. It’s time for oil palm planters to adapt to the fast-changing world of ruthless vegetable oil politics if we want to stay relevant in this market,” Abdul Hamed said. 

He then highlighted Malaysia’s neighbour has its own certification called the Indonesian Sustainable Palm Oil (ISPO) that is structured around a more commonly acceptable definition of sustainability and good agricultural practices. 

“Indonesia has embarked on ISPO to retain its sovereignty and bring discrimination against palm oil exports to the World Trade Organisation to achieve liberal trade that thrives on healthy competition. What about Malaysia?” he asked. 

‘Fall in commodity prices will pose immediate risks’

This is written by my colleagues Zaidi Ismail and Rupa Damodaran.

KUALA LUMPUR: A significant decline in commodity prices will pose immediate risks for Malaysia, the World Bank says.

It says moderating demand from China and weak growth in advanced economies, combined with expanding supply from surging investments over the past five years suggest downside risks for commodity prices.

“Although Malaysia can cope with additional declines in prices, sharp downward movements could potentially lead to deficits in the current and fiscal accounts as well as slower economic growth from delays in energy related investments,” the bank said in its eight Malaysia Economic Monitor report.

Themed “Harnessing Natural Resources”, the report was launched last night by Minister in the Prime Minister’s Department Senator Datuk Seri Abdul Wahid Omar.

In his speech, Abdul Wahid said Malaysia will prudently manage its natural resources towards achieving a sustainable and a high income nation by 2020.

Malaysia has been able to fully leverage on its endowments both in terms of natural resources and human capital. 

“Natural resources is one of the key factors for our success, with rubber, palm oil and oil and gas,” he added.

Meanwhile, the World Bank economist Frederico Gil Sander said not many countries have a good story like Malaysia, where investments totalled more than the 100 per cent of what was taken out of the ground.

The government encouraged commodity sectors to move downstream and industrialisation more broadly by easing foreign investment in manufacturing, reforming regulations and creating tax incentives.

National oil company Petronas acted as an oil fund as it kept some export earnings overseas and made significant direct investments domestically in downstream industries as well as in production abroad. 

“This reduced the flow of foreign exchange into the economy (thus reducing exchange rate pressures), supported downstream diversification and built assets to provide for future generations,” he noted.

Firms refute illegal burning allegations

KUALA LUMPUR: Three Malaysian plantation companies refuted allegations that they are involved in illegal burning of forest and peat lands in Riau Province, Indonesia, which is causing the current haze situation.

Sime Darby Bhd, Kuala Lumpur Kepong Bhd (KLK) and TH Plantations Bhd have each issued statements yesterday, refuting allegations of involvement in open burning activities in Indonesia and thereby causing widespread haze which is enveloping Sumatra, part of Malaysia and Singapore.

Last Saturday, Indonesian Environment Ministry had named eight companies that are being investigated for contributing to the haze by scorching their land in Riau and Jambi.

Another 14 companies are also being investigated for burning, but have not been named yet.

Meanwhile, Bernama quoted Association Plantation Investors of Malaysia in Indonesia (Apimi) as saying that Malaysian companies are not at fault in clearing land in Indonesia and causing fire. 

Apimi executive secretary Nor Hazlan Abdul Mutalib said open burning in oil palm plantations owned by Malaysian companies was carried out by local smallholders in the land allocated to them.

Yudhoyono apologises to Msia and Spore on haze

JAKARTA: Indonesian President, Susilo Bambang Yudhoyono has apologised to Malaysia and Singapore over the haze emanating from forest and peatland fires in Sumatra, which has affected air quality in the two countries.

“As the president, I apologise for what has happened and  hope for understanding from our friends in Singapore and  Malaysia,” he told a news conference at the president’s office here Monday evening.

“For sure, what has taken place is not on purpose,” he  said.

Yudhoyono said at the moment, the areas affected by fires  in Jambi, Bengkulu and Riau had been declared as districts under disaster emergency and the central government had  deployed maximum manpower to fight the calamity.

He said Indonesia was fully responsible for overcoming the  problem and was confident that this would be done soon.

Yudhoyono pledged that Indonesia would put out every  spot of fire burning in Indonesian forests by carrying cloud  seeding apart from mobilising fire-fighting personnel on land  including from the armed forces.

At the news conference, the Indonesian President also  ticked off several government officials of the republic for mentioning the names of plantation companies believed to  have started the fires which he said should not have been divulged.

“From what I monitor daily, there were statements made  by some officials which according to me should not have been  delivered as such,” he said. He said the companies concerned involved had not been  determined and government officials should refrain from issuing such statements.

“Even if the companies were negligent, it is not necessary  to name them…or the fact that they are owned by our neighbouring countries. What is more important now is to focus on overcoming the fire disaster that has dragged on for a week,” he said. — Bernama

China’s Uighur community want palm cooking oil

KUALA LUMPUR: CHINA-based Firat International Trade Co Ltd, the main distributor of palm oil in Xinjiang, expects to distribute 100,000kg of Malaysian palm oil-based cooking oil per month in the province.

This translates into monthly sales of around RM10 million.

Firat director Elmurat Eli said the company intends to make Urumqi, the capital city of Xinjiang, as the distribution hub for the central region of China and Commonwealth of Independent States (CIS) countries.

“Xinjiang has a Muslim majority population and Malaysia is well known for its halal food, including cooking oil. 

“The Uighur community in my home country China are always active in exploring halal food. After scouring several destinations, we decided to import 100 per cent of Malaysia’s palm oil-based cooking oil which is certified halal, affordable and nutritious,” he said at a briefing yesterday. 

A Turkic-speaking people of interior Asia, the ethnic Uighurs live, for the most part, in north-western China and are staunch believers of the Quran.

The Xinjiang province has a population of more than 25 million people, of whom 65 per cent are Muslims.

He said Xinjiang will indirectly facilitate re-exports of palm cooking oil to neighbouring countries like Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan and Uzbekistan through Firat’s distribution hub in Urumqi.

“We are thankful to Malaysian Palm Oil Board and Malaysian Palm Oil Council for their technical assistance and Malaysian Intellectual Networking Association for establishing this business tie-up with Al-Kaleej Industries Sdn Bhd,” he added.

Elmurat said the first shipment of two container loads of cooking oil, brand-named Melor, to Xinjiang will dock at Tianjin seaport next month, in time for Ramadhan.

Designer seeds for fruitful returns

Many people are not aware that there are companies which are specifically set up to breed oil palm trees and produce superior seeds for farmers. Why is there a need for such companies when a farmer can collect seeds that fall to the ground? It’s because these seeds, which are second generation, will not grow into trees that are exactly the same as the original.

What oil palm tree breeders do is they select good mother palms and match-make them with good father pollens so as to produce good babies. So, among “good” characteristics these agronomists target in their breeding process are for the trees to yield fruits that are super-oily, short in stature (for easy harvest), resilient against disease and able to withstand drought.

 It’s important that farmers plant good seeds obtained from tree breeders in order to get good returns. This is because seeds collected from the ground (which are usually sold at dirt cheap price) will only grow  into “bad” trees and not yield the amount of fruits like the original tree, no matter how much fertiliser the farmer feed the “bad” trees.

To all the first time oil palm planters out there, do remember….good seeds are not cheap and cheap seeds are usually no good.

New threats to palm oil

This is written by columnist Dr Ahmad Ibrahim.

HIDDEN AGENDA: Under the guise of saving the environment, some nations’ laws impede the import of palm oil

KUALA LUMPUR: Remember the much publicised London raid on the palm oil giant Guthrie in 1981? According to records, it took only about four hours for the transfer of ownership to take place. Malaysia eventually succeeded in taking over the 100-year-old company built during the colonial era.

From then on, Guthrie grew to become a respected global player in the palm oil business, managed fully by Malaysians. It is now merged into the Sime Darby conglomerate. And Malaysia has single-handedly turned palm oil into a leading oils and fats commodity for the world.

Malaysia and Indonesia now together control about 90 per cent of the world’s palm oil production. And palm oil dominates the international trade in edible oils, exporting to literally all corners of the world.

Looking back, this might have been difficult if that historic London dawn raid had not taken place. Even to this day, competing oils have tried all sorts of tactics to suppress the global expansion of the palm oil industry.

However, despite the growing popularity of palm oil among consumers and manufacturers worldwide, competitors have not stopped thinking of new ways to deny palm oil its rightful place in global trade.

Palm oil is, for example, the preferred oil in frying because of its unique heat stability. In China, Korea and Japan, instant noodle makers use 100 per cent palm oil. In the USA and European Union (EU), palm oil has emerged as the preferred fat for the manufacture of margarine and shortening.

But this is more to do with the health benefits of a trans fat free product offered by palm oil.

In fact, consumers should thank palm oil for the findings on the deleterious nature of trans fats.
This came about when scientists were looking for the scientific explanation as to why palm oil, despite its higher content of saturated fats, did not raise cholesterol when consumed.

That was when they found the real culprit, trans fats from partially hydrogenated liquid oils. The rest is history. Now all nutritional labels, especially in the West, carry warnings on trans fats content, which is good news for palm oil. 

But the enemies of palm oil are not giving up easily. Their latest attempt is disguised under the widely popular sustainability agenda.

Nowadays, it is easy to sell any idea which promises to help develop solutions for the global sustainability challenge. All you have to do is to come out with convincing arguments that a crop like oil palm is bad for climate change and has to be policed using the many sustainability criteria.

Actually, the palm oil industry in Malaysia has no real problem with that. The problem starts when the criteria imposed become unrealistic and irrelevant. 

In fact, before all the hue and cry over sustainable palm oil, Malaysia had long embraced the commitment to adopt environmentally sustainable management practices for oil palm.

The industry has long implemented biological control of pests, zero burning techniques in oil palm replanting, effective treatment of palm oil mill effluents, recycling of treated water for irrigation, conversion of biogas into energy and many more.

And sustainability is not just about the environment. We must not forget the other two pillars of profit and people.

Admittedly, oil palm is one crop which reaps considerable income. It has also helped alleviate the country’s hardcore poverty through land schemes like Felda and Felcra.

However, recent developments in Europe suggest that we may soon again lose control over its destiny. Already we are seeing laws in the EU enacted to deny the export of our palm oil for biofuel to the EU.

All are under the guise of the environment and sustainable development. The Renewable Energy Directives (RED), for example, have classified palm oil as not meeting the criteria for sustainability.

But the criteria for assessment keep changing. New elements such as land use change are introduced to make it difficult for palm oil.

Though we do recognise the noble intentions of sustainability to guide future global growth, it can also be abused. Is colonisation coming back to haunt palm oil-producing nations under the guise of the environment?

Sarawak Oil Palms rides out global storm

The 2013 change of palm oil tax structure gave breathing space to refiners in Malaysia. Sarawak Oil Palms Bhd’s recent downstream venture turned the corner and is now running at full capacity. Ooi Tee Ching writes.

MIRI: The Year of the Dragon is considered the luckiest of the Chinese lunar years. But last year,  the auspicious creature was not kind at all to Malaysia’s palm oil industry. 

In fact, stakeholders throughout the palm oil value chain took a very bad beating. Oil palm planters suffered falling palm oil prices while refiners bled losses when they tried to export refined palm oil.

The dismal sentiment was very much fuelled by the Indonesian government’s policy move in October 2011 to widen its export tax gap between crude palm oil (CPO) and refined products drastically.

Decades-old partnerships between millers and refiners in Malaysia broke down. It was an unavoidable move as refiners were bleeding losses for every tonne of CPO refined. To stem refining losses, refiners here unwound long-term contracts and slowed down purchases, resulting in a rapid build-up of CPO inventories. 

This, in turn, caused CPO and crude palm kernel oil prices to fall throughout 2012. With cheap CPO and low duty export for packed products, Indonesian exporters were able to sell their products at much lower price, thus grabbing market share from refiners in Malaysia.

Among more than 50 refineries in Malaysia hit was Miri-based Sarawak Oil Palms Bhd (SOPB), a newcomer.

“Our new refinery in Bintulu commenced operations in July 2012. It was very challenging and painful. The tax structure then made it totally uncompetitive. We were only operating at half capacity then,” said group financial controller Eric Kiu Kwong Seng.

Refiners also balked at the Malaysian government’s surprising move in allowing more duty-free CPO exports in mid-2012. As expected, refiners had to contend with loss of market potential for refined oil.

However, after more than a year of laborious and vociferous lobbying for the restructure of palm oil taxes and waiver of duty-free CPO exports from Malaysia, refiners here finally get to compete on a more level playing field.

In January this year, the government abolished duty-free CPO exports and lowered the export tax from 23 per cent to between 4.5 per cent and 8.5 per cent, depending on the palm oil prices. 

When prices hover between RM2,250 and RM2,400 a tonne, the tax is 4.5 per cent. And if the palm oil prices jump to RM3,450 per tonne, the tax is 8.5 per cent.

Following this new tax regime, SOPB has started to see better refining margins. “We stand a better chance to buy up more CPO from the mills as we incrementally ramp up our refinery,” Kiu told Business Times in an interview in Miri, Sarawak.

Indeed, data from the Malaysian Palm Oil Board showed that the national CPO stock levels have consistently come down in the last five months to 1.8 million tonnes.

“There’s a steady flow of crude palm oil coming from the surrounding estates. Our refinery is now running at full capacity,” said Kiu.

As stock levels come down, palm oil prices have started to climb. Yesterday, the third month benchmark palm oil futures on Bursa Malaysia Derivatives market rose RM26 to close at RM2,464 per tonne.

In view of increased palm oil demand from the Muslim world ahead of Ramadhan next month, prices are expected to trade in a more volatile bandwidth. Kiu said SOPB’s team of traders are hedging back to back to protect against drastic fluctuation in price.

Moving on to SOPB’s upstream business, Kiu said the group expects to harvest one million tonnes of fresh fruit bunches, 15 per cent more than last year’s 883,000 tonnes. 

As of March 2013, about 24 per cent of its planted area is of prime fruit bearing ages. “As more young trees mature, we expect very good harvest prospects. By the end of this year, about 30 per cent of our total planted area will be of matured ages and bearing more fruit bunches,” he said.

SOPB’s aggressive plantings in 2007 have resulted in 80 per cent of its planted area consisting of young oil palms and primed to bear more fruit bunches. This means big earnings growth potential in the next five years. To date, SOPB has planted more than 85 per cent of its 75,155ha land bank.

This year, SOPB is spending some RM200 million on the construction of its fifth and sixth mill at Sebauh and Baram.

SOPB was set up in 1968 via a joint venture between Commonwealth Development Corp (CDC) and the Sarawak state government. In 1995, conglomerate Shin Yang Group bought CDC’s entire stake. Now, Shin Yang Group is the largest shareholder with 36.5 per cent, while state-owned Pelita Holdings Sdn Bhd holds 28.9 per cent.

Keeping an eye on the less fortunate

MIRI: As one of the pioneering oil palm planters in Sarawak, Sarawak Oil Palms Bhd (SOPB) has set out to be a good role model as it takes on its corporate social responsibilities seriously.

One of its heart-warming initiatives is the Vision Care Programme which saw the provision of eye health check-up services to villagers staying near its estates.

In a recent visit to the hinterland village of Sg Arang at Baram, some 200 village folks received free eye check-ups by medical practitioners brought in by SOPB. Spectacles were also provided free of charge to those who were certified as short-sighted by an optometrist. 

Elderly folks diagnosed with eye cataract problems were subjected to further medical review and surgery at Miri Hospital, also fully funded by SOPB.

“It has been a humbling experience serving villagers in the interiors,” said Dr Wan Mohd Hafidz, 36, who was recently transferred from Selayang Hospital to Miri Hospital. He noted that since the villagers in the interiors experience more direct exposure to sunlight, there are quite a few who are diagnosed with pterygium, a benign growth of the conjunctiva.

“Cataract is also very common among elderly folks. Surgery and hospitalisation ranges from RM50 to RM1,000, depending on the severity of cases. So, it’s good that SOPB steps in to help out those who cannot afford medical fees,” Dr Wan Mohd added.

Challenging year ahead for FGV

This is written by my colleague Zaidi Isham Ismail.

KUALA LUMPUR: FELDA Global Ventures Holdings Bhd (FGV), the world’s largest crude palm oil producer, expects a challenging 2013 due to lower CPO prices and soft demand from top buyers China and India.

FGV president and chief executive officer Tan Sri Sabri Ahmad said CPO prices averaged above RM3,000 a tonne in 2011 before settling to around RM2,400 a tonne presently.

“So it will be a challenging year for FGV and the industry this year due to slower economic growth in China and India,” Sabri told Business Times and Berita Harian at the company’s headquarters here recently.

He reminded the industry to be careful not to allow CPO prices to dip below the RM2,000-a-tonne level. “Everybody wants to see the CPO price rise above RM3,000… we must also make sure it does not go below RM2,000,” said the outgoing president and CEO, whose contract expires on July 15.

“For the past few months, some 100,000 tonnes of CPO were taken from the market through the local biodiesel programme, which helped to support prices as well as trim the stockpile level to 1.8 million tonnes.

Sabri did not disclose where he will be heading next, only saying that he will devote his time for the betterment of the palm oil industry.

He declined to comment on whether he will be leading Biodiesel Malaysia Sdn Bhd, a consortium called that was formed to give the lacklustre biodiesel sector a new lease of life. The consortium is 32 per cent-owned by FGV while Sime Darby Bhd holds 23 per cent. The remaining 50 per cent is reserved for industry stakeholders, including plantation companies and biodiesel players.

Before leaving FGV, Sabri said he will helm the company’s annual general meeting on June 26, its first since being listed last June. The AGM will be the country’s largest shareholders meeting as FGV has more than 180,000 shareholders, including the 112,000 settlers nationwide.

FGV, which contributes to some 10 per cent of the world’s CPO output, posted a 55.9 per cent increase in revenue to RM2.68 billion for its first quarter ended March 2013. Its pre-tax profit for the quarter, however, declined 22.2 per cent to RM218.51 million from RM280.81 million. a year ago.

KLK upbeat on good dividends

KUALA LUMPUR: Kuala Lumpur Kepong Bhd (KLK), having to contend with low palm oil prices like other plantation companies, has assured shareholders of its plantation growth prospects and the expanding oleochemical business that will help sustain profits and, hence, good dividends.

The third-month benchmark crude palm oil futures on the Malaysian Derivatives Exchange rose RM14 to close at RM2,438 a tonne last Friday. It has been trading at between RM2,200 and RM2,600 a tonne for the last nine months.

“When we do well, we usually pay out more but when we make less, we pay less. In the last five years, we’ve been dishing out at least half of our profits to shareholders. So, this year, it won’t be any different,” said chief executive Tan Sri Lee Oi Hian.

When asked for a forecast on the palm oil price trend, Lee said the current strong fundamentals support a rebound to RM3,000 per tonne.

“Prices should hold up in the coming months, given that the national palm oil inventories have dropped to its lowest in nearly a year at 1.8 million tonnes. 

Also, palm oil is still trading at a substantial discount to soya oil,” he said on the sidelines of Invest Malaysia 2013 here on Friday.

Maybank Investment Bank senior analyst Ong Chee Ting said even though palm oil prices had risen by RM200 per tonne from a month ago to around RM2,450 per tonne, there is room for it to strengthen to RM2,600 per tonne.

Ong added that the present price gap between palm oil and soya oil of US$270 (RM842) per tonne is very high compared to the historical seven-year average of US$177 per tonne.

KLK has so far planted 211,259ha of oil palm and rubber estates in Malaysia and Indonesia.  The plantation business makes up 76 per cent of the company’s profit.

In the first half of its financial year, KLK harvested 1.9 million tonnes of fresh fruit bunches, 19 per cent more than a year ago. This is due to the group’s consistent efforts in replanting old and unproductive oil palms with higher yielding clones.

On the progress of KLK setting up three refineries and an oleochemical plant in Indonesia, Lee said these facilities are at various stages of completion.

IOI denies buy of RM900m neighbouring estate

KUALA LUMPUR: IOI Corp Bhd shot down rumours that it is in talks to buy Achi Jaya Plantations Sdn Bhd’s 12,074ha oil palm plantation in Labis, Johor, for RM900 million.

“As far as I know, it’s not true,” executive chairman Tan Sri Lee Shin Cheng said.

Two months ago, an online portal cited an unidentified source claiming that Achi Jaya Plantations, which neighbours IOI Corp’s estates in Johor, had been put up for sale for a while.

Achi Jaya Plantations (formerly Achi Jaya Services) acquired Socfin Plantations Sdn Bhd’s assets comprising 12,074ha oil palm estate, workers’ quarters, staff and executive bungalows, a clubhouse, a nine-hole golf course, a 60-tonne oil mill and other facilities and amenities for RM512.16 million in January 2004.

Meanwhile, IOI Corp had announced last month that it plans to spin off and relist its property division on the stock market. 

It will do so by injecting its property development, real estate investments, land and other related businesses into IOI Properties Group Sdn Bhd in exchange for shares in IOI Properties. It will also distribute one share in the new unit for every three held by existing shareholders. 

When asked on the progress of this plan, Lee smiled and said IOI Corp shareholders are poised to benefit from lower entry price in its property division. 

“The property business is on a stronger footing now with more valuable assets. We have built up the property landbank in strategic locations, so it is about time we unlock its value,” he said.

Since IOI ventured into Singapore and China in 2011 and 2012, it has been rebranding itself. It is no longer just a township developer and is moving towards becoming a high-end condominium and commercial developer. 

This effort is seen in its appointment of world-renowned Sir Norman Foster as the architect for its South Beach development in Singapore.

Analysts estimated the share sale of the soon-to-be relisted company to raise as much as RM10 billion.

This is a huge improvement in size, considering that it was only in 2009 that IOI Corp had taken private its then-listed property arm, IOI Properties Bhd, for a mere RM310 million in cash and shares, valuing the unit at about RM1.3 billion.

Misguided attacks on palm oil must stop

PARIS: Nicole Bricq, France’s Minister of Foreign Trade, will be in Malaysia until tomorrow to attend the 2013 Global Summit of Women. 

The minister’s visit comes during a tense period in Franco-Malaysian trade relations due to French attacks on palm oil, a crucial commodity for the Malaysian economy. 

Last year, French politicians proposed a 300 per cent tax increase on palm oil, supposedly to improve public health. 

In the end, the French National Assembly rejected the tax since the allegedly harmful effects of palm oil could not be scientifically documented. 

In fact, French experts such as Dr Jean Michel Lecerf of the Pasteur Institute and Dr Odile Morin of ITERG have published research showing that palm oil is a healthy and nutritious product that is perfectly compatible with a balanced and healthy lifestyle.

However, palm oil still suffered reputational damage as a result of the proposed tax increase. The French government has made some amends by agreeing to a joint Franco-Malaysian taskforce to explore ways to provide more accurate information about palm oil. 

Yet the fact remains that palm oil-producing countries such as Malaysia and Cote d’Ivoire now have reason to doubt France’s commitment to economic cooperation. 

It doesn’t help the situation that a French member of the European Parliament, Corinne Lepage, is currently leading an effort to discriminate against palm oil in new European biofuels policies. 

Lepage is promoting a scientifically flawed concept known as Indirect Land Use Change (ILUC), which claims that palm oil production harms the environment by displacing rain forest. 

What the concept misses is the fact that palm oil is by far the least land-intensive of all the competing products used to make biofuels. 

A true green policy would, thus, promote reforestation of France and other European countries rather than a halt to palm oil development in Malaysia. Incidentally, Malaysia currently has 63 per cent of its land under forest cover. The corresponding figure for France is 29 per cent. 

Furthermore, major French corporations such as Casino, Système U and St Michel have launched campaigns against palm oil in order to promote their own “palm oil free” products. 

In the case of Système U, the campaign was so blatantly misleading that a group of small farmers from Africa sued the company and won the case in French court. 

The French attacks on palm oil are unfortunate on many fronts. First of all, disinformation and boycotts in France harm thousands of Malaysians who depend on palm oil to make a living. 

Businesses related to palm oil employ more than 800,000 people in Malaysia, including 240,000 small farmers who account for 40 per cent of the land under cultivation. Palm oil accounts for 10 per cent of Malaysia’s gross domestic product. 

Thanks in large part to palm oil production, Malaysia has successfully reduced poverty from 50 per cent at independence to less then five per cent today. 

Secondly, France is missing out on the growth opportunities that would follow from closer ties to Malaysia. At this time when the French economy remains stagnant, it is in the national interest of France to tie itself to the rising tiger economies of Southeast Asia, notably Malaysia. 

France has a proud tradition of sophisticated diplomacy to advance its national interest. Bricq would do well to keep this tradition in mind during her visit. 

It would be wise for the French minister to reassure her Malaysian counterparts about the commitment of the French government to economic development in Malaysia. 

Such a commitment must necessarily include reassurances that France will not discriminate against palm oil. 

Ideally, Bricq should go even further and positively embrace palm oil as a core strategic product for the economic future of both France and Malaysia. 

Such an act would go a long way in countering the negative and misguided campaigns by French corporations and politicians.

Nash: French position unjust

KUALA LUMPUR: THE current French position on palm oil trade is neither free nor fair and, in fact, it is unjust, said National Association of Smallholders (Nash) president Datuk Aliasak Ambia. 

In a telephone interview with Business Times yesterday, he said Nash had appealed to French Minister of Foreign Trade Nicole Bricq to support open trade and positive trading relations between France and Malaysia.

“We wrote to the French minister. We asked for the French government’s commitment not to discriminate against palm oil and not to put up protectionist trade barriers that harm small oil palm farmers here,” Aliasak said.

Of late, big multi-nationals in the French food industry like Casino, Système U, Findus, Lesieur, Lays and Jacquet have been intensifying their campaign against palm oil.

“The French government needs to re-set relations between France and Malaysia. 

“We call upon the French government to publicly disassociate from the actions of these multi-nationals and condemn their aggression towards small oil palm farmers,” said.

Aliasak noted that the Tribunal de Commerce in Paris had, recently ruled that there was no justification for the anti-palm oil campaign and ordered Système U to remove misleading and inaccurate anti-palm oil advertising.

France and Malaysia have excellent trade co-operation and this includes imports of French beverages, food, airplanes and defence equipment. “Why should Malaysia sign a trade agreement with the European Union when French companies vehemently attack Malaysian products and undermine the opportunity for many families here to earn a decent living?” he asked.

The French anti-palm oil campaign is not based on facts and figures but rather on exaggeration and emotions, he said. 

The reality is that oil palm is the most efficient oil crop in the world yielding seven times more oil that France’s rapeseed agriculture. In terms of energy balance, it takes less sunlight to produce a unit of palm oil than any other vegetable oils. 

“These are known to scientists and academics who are worth their salt, including those in France from the Institut Pasteur and CIRAD. In fact, the first oil palm estate in Malaysia, named Tenamaram, was established in Selangor in 1917 by Frenchman Henri Fauconier,” Aliasak said. 

Nine months ago, Nash submitted a letter to the French ambassador to Malaysia, Martine Dorance, to express Malaysian smallholders’ disappointment over the behaviour of French retailers, in particular Casino and Système U, for producing television commercials that slander palm oil and, by association, the small farmers of whom Nash represents.

To make matters worse, French Industry Minister Arnaud Montebourg had even said in a statement that “all (French) left-wing parties should campaign against palm oil”.

Half truths on palm oil were and are still being repeated by other French political leaders. For example, senator Jean-Vincent Place had claimed in Parliamentary Question 02164 that palm oil contains trans fat.

This is simply untrue, said Aliasak, as palm oil is 100 per cent free of the artificial trans fat. In fact, palm oil is instrumental in removing artificial trans fat from the daily diet of common folks worldwide, he added.

Hovid on road to recovery

PETALING JAYA: HOVID Bhd is on the recovery path after taking steps to sort out Carotech Bhd’s debts and is looking to expand the pharmaceutical business next year, said managing director David Ho.

Last week, in its filing to the stock exchange, Hovid’s third quarter net profit ended March 2013 rose 33 per cent to RM5.13 million from RM3.85 million posted a year ago. 

Excluding the non-recurring item, Hovid’s year-to-date pre-tax profit RM18.41 million works out to be 51 per cent higher than the previous year’s RM12.19 million.

In its notes to investors, Hovid said Carotech was an associate company up to December 22 2011. It has now become a simple investment to Hovid. 

In the last three years, Carotech faced difficulty as there was no working capital. One way for Hovid to raise funds is to embark on a rights issue of new warrants.

Hovid is set to raise RM7.62 million. These 5-year warrants will replace the original warrants that had expired. The listing of the new rights warrants will be carried on June 10. Apart from working capital. Hovid will also use a portion of the RM7.62 million to defray expenses incurred in the right issue of warrants.

In an interview with Business Times here, Ho assured investors that Hovid is on the recovery path. It has been 17 months since Hovid was lifted from PN17 status on January 16 2012. 

“When Hovid slipped into PN17 status, it was like we were in intensive care. Now that we’ve been lifted from that status, you can say Hovid is well on the recovery path in the normal hospital ward,” he said. 

“In Hovid’s books, Carotech is written off to RM1. The plant in Lumut is still running with just a skeletal workforce. We are still resolving Carotech’s debts with the banks. Hopefully, we can resolve this by the end of this year and get discharged from the hospital, so to speak,” Ho added.

Hovid’s laboratories in Perak produce antibiotics, antidiabetics, antihypertensives, antimalarial and anti-inflammatory analgesics, ranging from skin care and hair care products to health beverages. Its products are GMP-compliant and exported to more than 40 countries. 

In the consumer market, Hovid is known for its popular Tocovid SupraBio health supplement and Ho Yan Hor Herbal Tea.

The Tocovid SupraBio health supplement is currently the consumer market leader for palm oil phytonutrient extract. Among the active ingredients in the extract are tocotrienols, little known but the better half of the vitamin E family.

Tocotrienols, which are most abundantly found in palm oil, are showing promise in clinical trials that they are capable of reducing risk of degerative diseases such as stroke, heart attack and cancer.

Asked on the prospects of Hovid’s pharmaceutical business, Ho said the requirement for product registration has become lengthier with increasing stringent rules in the development of generic drugs. This, he said, has slowed pharmaceutical launches.

Nevertheless, Hovid has at least 10 to 15 products being developed in the pipeline each year. “We hope that our margin will improve slightly in the second half of this year. We are tweaking our product mix to drive sales of higher margin products. 

“We have been working hard submitting dossiers to gain market approvals. We do expect some new dossiers to come in some time towards the end of the year,” he said.

“This year, if we can maintain our performance, that will be quite good. Hopefully, by next year, we will be back on our feet and focusing on growing the pharmaceutical business,” Ho added.

Sime: RM3.2b profit target within reach

This is written by my colleague Roziana Hamsawi.

KUALA LUMPUR: SIME Darby Bhd, the country’s largest and oldest conglomerate, is expected to match or even exceed its internal net profit target of RM3.2 billion, said president and group chief executive officer Datuk Mohd Bakke Salleh.

“We have, so far, achieved 75 per cent of our current financial year KPI (Key Performance Indicator) net profit target,” he said.

Mohd Bakke said Sime Darby’s internal profit target is RM1 billion lower than what the group had achieved in the financial year ended June 2012. Last year, it registered RM4.2 billion in net profit.

Sime Darby, which last year beat Russian billionaire Roman Abramovich to acquire London’s iconic Battersea Power Station for £400 million (RM1.88 billion), had anticipated the current financial year to a challenging one. Net profit in the current quarter ended March 2013 stood at RM691 million, 21 per cent lower than the RM876 million recorded a year ago.

The figures were posted on the back of RM10.84 billion in revenue, which is one per cent lower than corresponding period last year.

Mohd Bakke said the anticipated lower fullyear profit was due to the challenging conditions of lower crude palm oil (CPO) prices and weaker economy in some of its markets. 

The average CPO price in the three months ended March 2013 was RM2,147 per tonne, 26 per cent lower than RM2,903 in the same period last year. As a result, its plantation division’s pre-tax profit declined to RM413.2 million, a 27 per cent drop year-on-year.

For the nine-month period, its net profit was RM2.39 billion, 22 per cent lower than the RM3.05 billion registered previously. Revenue was RM33.84 billion, two per cent higher than in the previous nine-month period.

The bright spot for the conglomerate came from its motor, property and healthcare divisions, which posted double-digit gains. 

The motor division’s pre-tax profit expanded by 18 per cent, helped by strong local and Hong Kong sales, while the property unit’s pre-tax profit climbed 15 per cent year-on-year and 100 per cent against the preceding third quarter due to higher sales from new projects.

The healthcare unit also did better in the third quarter with a 28 per cent rise in pre-tax profit.

Mohd Bakke said with the group’s recent joint venture with Australia’s Ramsay Healthcare, a major expansion in Asia was on the cards. The healthcare business, he said, is planning to double the number of hospitals in five years and a listing will only be considered thereafter.

On the listing of some of its other flagship businesses, Mohd Bakke said the company is working towards that direction, but at this point of time, “it is still too premature to announce anything”.

Miri, Miri…Mee Sapi

I was in Miri to meet up with Sarawak Oil Palms Bhd (SOP) to get an update of their estate and refinery business.

One of the highlights of the visit was Rosela (my colleague) and I got to savour the lip-smacking hawker delights there like Kolo Mee, Kampua Mee and Mee Sapi.

Rosela and I will cherish the warm hospitality extended by SOP corporate communications team who are, none other than the dynamic duo Judy and Abel.

Kolo Mee is made of egg noodle, blanched in water that looks like instant noodle and served in a light sauce with some condiments like chicken cutlets, minced meat or sometimes shredded beef .

The difference between Kolo Mee and Wanton Mee, which is popular in West Malaysia, is that Kolo Mee is not drenched in dark soy sauce and water is not added to the noodles when served.

Mee Sapi is the gravy version of Kolo Mee with a more curly type of noodle similar to that of angelhair spaghetti.

These scrumptious hawker dishes are prepared with palm cooking oil, a nutritious and affordable kitchen staple in most eateries.


Global Malaysia Series #1: The Business Of Palm Oil


Watch 17.13 ….”for our industry, we need to be detailed because as you might have heard… If you don’t walk the fields, if you don’t talk to the trees, I think the trees are not going to produce. Ha! Ha! Ha!” Kuala Lumpur Kepong Bhd (KLK) chief executive officer Tan Sri Lee Oi Hian was actually making a reference to the article I wrote 8 years ago about the legend of IOI Group’s Tan Sri Lee Shin Cheng singing to his trees. 



It all started with that fateful field trip to Sagil Estate, Johor in 2005. Back then, I was still new to the palm oil sector and I had no idea what to report from field trips. I went up to one of my editors then, Shahriman Johari and asked for his advice.

Shahriman looked up from his computer screen and told me in a straight face, “People have said Tan Sri Lee talks to his trees. See if this is true…”

And so I went along to the field trip with this unusual mission at the back of my mind. Throughout the 2-day trip, journalists and stock analysts asked IOI Group Tan Sri Lee questions on crude palm oil price trend, soya oil price trend, oil extraction rates, acquisition plans, company borrowings and forecast results.

When all ‘serious’ questions were asked, senior journalists and stock analysts made their way to the buffet tables, leaving younger and inexperienced reporters, like me, to face the stern looking Lee in awkward silence.

After what seemed like five minutes of polite smiles and nods, I took a gamble and asked Lee if he loved his oil palm trees. He hesitated and looked around. I held my breath and thought to myself, “Oh uh… I’m in big trouble now.”

To my surprise, he replied, “Yes, of course. My trees are my girlfriends. Each one has her own characteristics. If one produces well, I will tell her ‘I love you’,” he grins, adding that if a tree is not productive he would tell her that he will give her six to nine months to bear the quota of fruits. “Surprisingly, they tend to bloom to expectation,” he said.

Three years later in 2008, Sime Darby chairman Tun Musa Hitam acknowledged IOI Group Tan Sri Lee’s singing of Tamil songs has worked wonders on oil palm yields. He then said he was seriously thinking of “asking the boys at Sime Darby to sing Indonesian songs to the trees too.”

More funds needed for Vit E trials

CUT RED TAPE: Malaysia is the first in the world to carry out human trials on the effectiveness of palm oil vitamin E in treating stroke and heart attack. Experts tell Ooi Tee Ching that faster flow of public money for clinical trials could mean hope for dying patients.

MANY who attended the recent “Palm Oil Nutrition Week” lecture presented by Universiti Sains Malaysia (USM) Professor Dr Yuen Kah Hay were surprised when he revealed he was a stroke victim.

He showed no signs of mental regression or physical disability. Indeed, seeing is believing.

The spritely 59-year-old is a living proof that with proper supplementation of palm oil vitamin E and blood thinning medication, one can reduce the risk of contracting stroke that plagues 15 per cent of Malaysia’s population.

On top of proper supplementation, one must also refrain from choosing a lifestyle that contributes to early death. This includes eating too much junk food, not exercising, smoking and over-indulging in alcohol.

Heart attack and stroke are deadly diseases caused by a blockage of bloodflow to the heart or brain. The most common reason for this is a build-up of fatty deposits on the inner walls of the vessels that supply blood to the heart and brain.

The World Health Organisation (WHO) statistics show that globally, more people die of stroke and heart disease than all cancers combined. By 2030, WHO estimates the death toll to jump as high as 23 million.

Although the numbers look depressing, there is increasing medical evidence that palm oil vitamin E can reduce the risks of cardiovascular diseases.

Vitamin E is an oil soluble nutrient that is made up of eight siblings, namely four tocopherols and four tocotrienols. Soft oils like olive, soya, canola and sunflower only contain tocopherols. Tropical oils such as palm and rice bran, however, have both tocopherols and tocotrienols.

Over the last 30 years, scientific studies have shown that palm oil vitamin E, particularly the tocotrienol variants, is a far more potent antioxidant than tocopherols.

Tocotrienols are usually extracted from palm oil because the oil palm tree is able to produce the highest concentrate compared with other oil crops. Every year, Malaysia exports some RM50 million worth of palm oil health supplements, mainly to Europe, the United States, Canada and Japan. A kilogramme of palm oil vitamin E sells for US$500 (RM1,515).

In an interview with Business Time recently, Yuen explained that the difference between tocotrienols and tocopherols is the ‘tail’ on the vitamin E molecule. 

“Tocopherols have long saturated tails while tocotrienols have unsaturated tails.”

The unique structure of tocotrienols enables them to do many things that tocopherols cannot do. This includes more powerful anti-oxidative function in cells, the ability to penetrate internal organs and activation of gene signals.

Since 2009, Yuen and his team have run brain scans on 200 volunteers before and after the administration of the tocotrienol supplements and placebo in a randomised, double-blind study.

After one year, those on tocotrienol supplements showed only a little increase in the amount of white matter lesions, compared with the group on placebo which saw a seven-fold increment.

By the second year, the placebo group continued to show a bigger area of cell degeneration while those on tocotrienols showed slower brain cell death.

What the preliminary findings showed, Yuen said, is that palm oil vitamin E is able to stop human brain cells from dying in the event of a stroke. “They work by suppressing two key signals in the cells to prevent them from dying. So, if people were to take tocotrienols as a supplement, it can prevent brain cells from dying in the event of a stroke and also stimulate the reconstruction of blood vessels thereafter.” 

In view of such promising findings, Yuen said it is imperative that the administrative momentum of clinical trials is accelerated. 

As Malaysia’s population starts to age, the government needs to steadfastly support clinical trials for deadly diseases. With better public awareness and timely administration of government money, many lives can be saved from degenerative diseases.

“We cannot afford to have start-and-stops in government funding to clinical trials. There has got to be a steady momentum to this quest in order to reach any significantly meaningful outcome that can benefit so many lives,” Yuen said.

In a separate interview held in Petaling Jaya, Selangor, Dr Chandan K. Sen, professor of surgery at the Ohio State University Medical Center concurred with Yuen. In the US, the government readily commits deserving funds for the long term to ensure research talent are expeditiously optimised. 

Having dealt with Vitamin E since the start of his career almost 20 years ago, he reiterated that tocotrienols are the better half in the Vitamin E family.

Last year, for the first time in the US, Sen and his team reported a human trial proving palm tocotrienols are potent neuroprotective agents. This is after having studied stroke prevention effects of tocotrienols, using animal and cellular models for the last 13 years. 

Sen said his team’s initial findings matched that of Yuen in that tocotrienols help recovery from stroke by inducing growth of new brain arteries that bypass stroke-affected areas.

Following this assessment, Sen said tocotrienols can be orally consumed with blood-thinning drugs like aspirin to prevent a brain attack. “If I had a mini stroke, I would want to take something that would minimise my damage should I suffer from a full-blown stroke. We are testing this in clinical trials now.” 

Next year, Sen and his colleagues plan to have a much larger clinical trial to assess the safety and effectiveness of tocotrienols against stroke and end stage liver diseases.

“If palm tocotrienols are established in fighting serious liver diseases, it would benefit the bulk of dying patients in developing nations who cannot afford costly liver transplants,” he added.

IOI investors to gain from unit’s lower entry price

This is written by my colleague Lim Cian Yai.

KUALA LUMPUR: IOI CORP Bhd shareholders are poised to benefit from lower entry price in its property division, which will be relisted under a new listing company (ListCo) by year-end.

Analysts said the ListCo is well positioned for steady earnings growth underpinned by booming property sales in the Klang Valley, Johor, Singapore and China.

They pointed out that IOI Corp shareholders may gain more than RM1.49 per share from the ListCo listing.

With the ListCo’s indicative issue price to be at least RM4.46, each IOI Corp shareholder will pay 30 per cent less of the price, or a discount of RM1.49.

“The gain will be greater if the actual listing price turns out to be higher than RM4.46,” said JF Apex Securities, which has upgraded IOI Corp from “hold” to “buy” with a target price of RM6.57.

The ListCo is set to be listed on Bursa Malaysia’s Main Market via distribution in specie of about 2.16 billion shares (one ListCo share for three IOI Corp shares held) and non-renounceable restricted offer for sale of 1.08 billion ListCo shares (one ListCo share for six IOI Corp shares held) to IOI Corp shareholders.

Public Investment Bank believes the ListCo’s valuation will not come cheap based on several factors including its strong earnings growth for the next three years and market value of appraised properties at RM18 billion.

The ListCo also has one of the industry’s highest operating profit margin of 50 per cent and international exposure across Malaysia, Singapore and China.

Kenanga Research analyst Alan Lim Seong Chun has a “neutral” view on the relisting plan. “The positive side of the deal is the unlocking of the value of IOI Corp’s property division and a higher rerating of its plantation business.”

The bad aspect is that IOI Corp’s earnings are expected to plunge by about 28 per cent in 2014 due to the absence of property contribution.

“Due to lower crude palm oil (CPO) prices, IOI Corp’s financial year 2014 core earnings will slide 17 per cent to RM1.5 billion. Besides, its net gearing will also soar to 0.5 times from the current 0.3 times as equity portion decreases,” Lim told Business Times yesterday.

He said IOI Corp may therefore need to expand plantation lands to offset the potential significant losses. 

IOI Corp executive chairman Tan Sri Lee Shin Cheng, however, maintained on Tuesday that its joint venture with Indonesian plantation companies will help sustain its performance in the absence of property business.

“Our yields are improving, our trees are also matured and surely our profit will go up. Hopefully, this can cover potential losses from property,” he said.

On Bursa Malaysia yesterday, IOI Corp was the third top loser, easing 3.3 per cent, or 18 sen, to close at RM5.28.

IOI’s Lee set to be nation’s 3rd richest

This is written by my colleague Lim Cian Yai.

PUTRAJAYA: MALAYSIA’S sixth richest man, Tan Sri Lee Shin Cheng will be the biggest winner upon the relisting of IOI Corp Bhd’s unit, IOI Properties Bhd.

With a stake of 45.77 per cent, Lee is currently the single largest shareholder in the plantation and property conglomerate IOI Corp.

From a wealth creation perspective, the deal will generate billions of ringgit for Lee and his family.

According to Forbes magazine, Lee has a net worth of US$4.5 billion (RM13.4 billion) as of March 2013. 

Based on the current RM18.6 billion market value of IOI Properties, it could bring in an additional RM8.55 billion (about US$2.85 billion) for Lee, bringing his net worth to about US$7.36 billion.

Likewise, Lee will also surpass Tan Sri Lim Kok Thay of Genting Group (net worth of US$6.6 billion) and emerge as the third richest person in Malaysia.

IOI Corp privatised IOI Properties in 2009 in a deal valued at RM1.3 billion. Upon the relisting, the property unit’s asset value will balloon to RM14.6 million, a huge jump of 1,076 per cent.

“We privatised IOI Properties in 2009. At that time, the price was too low and that’s why we privatised it. And now that it has matured, we are going to demerge and relist it.” 

Lee disagreed that the privatisation and relisting are tricks of tycoons to make personal gains. “This is not true at all. We are relisting to enhance the value for shareholders. I am working very hard for the shareholders, not for myself.”

Upon the relisting exercise, Lee will control 46.19 per cent of the shareholding in the new entity, IOI Properties Group Sdn Bhd, maintaining the company in the Lee family’s tight grip.

IOI Properties’ image has gradually changed since it ventured into the Singapore and China markets. From a township developer, it has transformed into a high-end condominium and commercial property developer. 

So far, its overseas projects have received encouraging response from buyers, especially the Cityscape and Jalan Lempeng projects in Singapore.

“The project in Xiamen, China, will be launched soon. Once it is launched, you can collect 100 per cent payment from the purchasers,” Lee said yesterday.

While contribution from Xiamen will begin to come on stream, earnings for the next three financial years are anticipated to spike.

IOI Properties relisting by year-end

This is written by my colleague Lim Cian Yai.

PUTRAJAYA: IOI Corp Bhd will relist its property business on Bursa Malaysia under a RM12.8 billion deal by the year-end, adding to a post-election flurry of stock debuts. 

IOI Corp, the country’s fourth largest plantation company, privatised IOI Properties Bhd in 2009 in a RM1.3 billion deal, or RM2.60 per share.

“If everything goes right, the targeted relisting will be in December 2013,” said IOI Corp executive chairman Tan Sri Lee Shin Cheng at a briefing yesterday. Also present were his sons Datuk Lee Yeow Chor and Lee Yeow Seng, who are also directors in the company.

IOI Corp shares were suspended from May 9 till yesterday afternoon to facilitate the announcement of this exercise.

Once trading resumed at 2pm, IOI Corp’s shares jumped almost 7 per cent to a twoyear high of RM5.70. It gained 13 sen to close at RM5.46.

Under the relisting plan, IOI Corp will dispose of its entire 99.8 per cent stake in IOI Properties Bhd to a new entity for RM9.77 billion. This is in exchange for 2.8 billion shares in the new listing company called IOI Properties Group Sdn Bhd (ListCo).

The group will also sell other subsidiaries involved in property development to ListCo for RM2.63 billion in exchange for 589.27 million new ListCo shares.

IOI Corp will also sell 202ha of agriculture land in Rompin, Pahang, and 517ha in Segamat, Johor, to ListCo for RM276 million in return for 61.89 million new shares.

ListCo will also buy a 10 per cent stake in Property Village Bhd and another 10 per cent in Property Skyline Sdn Bhd from Summervest Sdn Bhd, which is controlled by Lee.

IOI Corp will also distribute one ListCo share for every three IOI Corp shares to eligible shareholders.

The exercise followed a proposed nonrenounceable restricted offer for sale (ROS) of 1.08 billion ListCo shares to selected shareholders on the basis of one ListCo share for every six IOI Corp shares at an offer price to be determined later.

The restricted offer of shares is expected to raise as much as RM1.8 billion to pare down the company’s borrowing.

“Barisan Nasional won in the general election, and everything is stabilising. That’s why during the last week, share prices have gone up. It’s a good sign,” Lee said. “I believe this is a good time for relisting. The property business is on a stronger footing now. We have built our landbank in strategic locations, so it is about time we unlock its value.”

Upon relisting, ListCo’s net asset value will grow from RM1.3 billion to RM14 billion, indicating more than a 10-fold leap.

Lee said the move is to streamline IOI Corp into two separate listed entities. “The relisting of IOI Properties on the Main Market will make it one of the largest listed property companies in the country,” he said.

Lee reassured that he will continue to be executive chairman of the two entities, although there will be a chief executive officer for each of them.

As at January 2013, IOI Properties’ market value stood at RM18.1 billion. As the underlying value of its property assets is unlocked, Lee is confident that ListCo will achieve operating profit of not less than RM1 billion per year in the coming three years.

In the year ended June 30 2012, IOI Corp’s property segment registered RM704 million operating profit. “We project 50 per cent of income to come from domestic market and while another 50 per cent from overseas business,” Lee added.

The property division has a total of 4,046ha here and overseas.

In the next three years, ListCo is expected to manage development projects with a total gross development value of RM16 billion.

It aims to achieve a more balanced ratio of 40:60 for property investment and development business in the coming five years. Currently, real estate investment business contributes 10 per cent to the overall property income.

Meanwhile, Lee expects palm oil prices to rebound to RM2,800 per tonne by year-end. Currently, it is trading at around RM2,300 per tonne at the Malaysian Derivatives Exchange.

“Fundamentals have been improving since last December. We have already seen the bottom and the only way is to go up,” he said.

Malaysia’s CPO inventory was high at 2.6 million tonnes last December. However, the stock level improved to 1.93 million tonnes as at last Friday.

Hospital that goes the extra mile

Seeing a doctor for the first time is like going on a blind date — there’s no  guarantee that even a doctor with the best credentials would be right. Sime Darby Healthcare Group tells Ooi Tee Ching that patients are increasingly requesting for clever doctors who are just as compassionate.

A JAPANESE woman was chatting nervously in her mother tongue with her school-going son when she walked into the newly-built Sime Darby Medical Centre ParkCity. 

Her eyes lit up as a staff member at the hospital counter welcomed her cheerfully in Japanese. The worry lines on her face vanished in an instant as they engaged in an animated banter. Soon after, they were bowing politely to each other. 

As she made her way to the lift, she pointed to the “breast clinic” signage on the wall to her young son and commented that the hospital places high importance on its treatment for breast cancer patients.

When told of this incident, Sime Darby Healthcare Sdn Bhd managing director Raja Azlan Shah Raja Azwa smiled and noted that there are many expatriates living in Desa ParkCity and its neighbouring enclave, Mont Kiara. 

“We see it fit to have interpreters for our clients’ convenience. Among other non-traditional services we offer at our International Patients Centre are facilitation of visa-on-arrival and its extension, currency exchange, shuttle services and short-stay accommodation,” he said.

“Our flagship hospital at Subang Jaya started off as a community healthcare centre catering to the needs of the people staying there. Similarly, we’re doing the same with our latest addition at ParkCity,” he told Business Times in an interview here recently.

Also present were Sime Darby Healthcare chief executive officer Elaine Cheong and Sime Darby Medical Centre ParkCity hospital director Ch’ng Lin Ling.

Sime Darby Medical Centre ParkCity is located at the juncture of Bandar Manjalara Kepong and Desa ParkCity. Manned by about 40 doctors and 160 nurses, it is a 300-bed hospital offering the full suite of medical and rehabilitative services, and a 24-hour emergency unit.

At Sime Darby, Raja Azlan said hospital administrators and doctors hail the adoption of an integrated electronic medical records infrastructure as it supports a patient-centric approach to healthcare. 

The ease of typing a few keywords to retrieve a patient’s record as opposed to ploughing through thousands of folders, filing and refiling them saves the doctor and the hospital millions of dollars, even after taking the cost of the electronic system into account. 

He then listed down intangible benefits such as a reduction in potential medical errors, instant communication of laboratory tests and improvements in the quality of data for clinical research.

While the electronic medical record system gives easy access to patients’ medical information, Raja Azlan gave the assurance that the group adheres to strict confidentiality of patients’ medical records as mandated by the laws of the country, provided under the Personal Data Protection Act.

To date Sime Darby Bhd is among the top 10 listed companies on Bursa Malaysia with a market capitalisation of some RM57 billion. Apart from healthcare, the conglomerate’s core businesses are in plantations, property, motors, industrial equipment, and energy and utilities.

Although the healthcare division accounts for less than one per cent of the conglomerate’s earnings, Raja Azlan is hopeful of doubling earnings contribution in the mid-term.

“Hopefully, as we seek to improve our margins by leveraging the expertise of our partner Ramsay, our earnings contribution could grow to two to three per cent of Sime Darby’s earnings,” he says.

Sime Darby and Australia’s largest private hospital operator Ramsay Health Care Ltd are joining hands to expand their healthcare businesses in Southeast Asia.

Sime Darby is combining its entire healthcare assets with Ramsay’s three hospitals in Indonesia, under a new joint venture company to be known as Ramsay Sime Darby Healthcare. Under this deal, Sime will receive RM390 million for transferring 25.7 per cent of the joint venture company to Ramsay’s subsidiary to allow both parties to own equal stakes in the merged entity.

Raja Azlan noted that the group will leverage on Ramsay’s clinical expertise and global procurement programme to manage costs and improve margins. 

Moving on to the importance of nurturing close working rapport between hospital administrators and doctors, Cheong upheld the importance of a consultative approach that usually leads to joint decisions. “We practise an inclusive culture that is built on trust and mutual respect.”

She went on to explain that loyalty to Sime Darby Healthcare is driven by the patient’s sense that the hospital and its physicians are united in ensuring their medical needs are met.

A doctor who goes the extra mile usually demonstrates empathy and is at ease with patients while involving them in health decisions. On the flip side, poor bedside manners reflect aloofness, curt replies, inadequate listening skills and a somewhat disregard for patients’ worries and fears.

Cheong acknowledged that some doctors and nurses are not naturally engaging in their communication but this soft skill is necessary for the hospital to ensure satisfactory healthcare is given to patients in the most economical and responsible way.

“It is only reasonable for patients to be given options for the most up-to-date treatment and that their doctor knows everything about their case, and that their pain would be adequately controlled.

“The upfront time a doctor spends attentively with patients usually saves time later in the form of phone calls, questions and complaints,” she said.

“For example, when a patient is dealing with a difficult diagnosis or chronic condition like cancer, a doctor or a nurse’s ability to talk respectfully and perhaps more importantly, listen empathetically, is among the most valuable assets for healthcare providers like us,” she said. 

Service delivery, building and sustaining patient and community loyalty, branding an unassailable market reputation – all of this boils down to good old-fashioned teamwork, she added.

In recruiting doctors at Sime Darby Medical Centre ParkCity, Ch’ng said, “We make sure they have the tools they need – the supporting services, the equipment and the personnel they need to effectively do their job.”

Indeed, she is well aware of what motivates physicians to bring their time, effort and skills to the operations and efficient use of healthcare facilities.

She acknowledged that doctors are concerned about the prospects of losing autonomy, rising malpractice costs, increased paperwork, competition, regulatory requirements and tighter reimbursement.

“The ultimate achievement is creating a working environment where doctors would place their loyalty to a hospital where they would send their own families for care without hesitation,” Ch’ng added.

Bintulu Port upbeat it can deliver results

SEPANG, Selangor: BINTULU Port Holdings Bhd, which has largely been dependent on handling liquefied natural gas (LNG), is optimistic of doing better this year as it expects more robust palm oil exports from its clients in the plantation sector and increased containerised and dry bulk cargo.

“There has been a 10 per cent increase in container throughput in the first quarter of the year,” said chief executive officer Datuk Mior Ahmad Baiti.

“We are hopeful of topping 45 million tonnes in total throughput by the end of the year. This is about 10 per cent more than last year’s 41.2 million tonnes,” he said after the company’s shareholders’ meeting here yesterday.

Last year, Bintulu Port reaped RM146.39 million in net profit on the back of a RM527.85 million revenue. Its major customer, Malaysia LNG Sdn Bhd, contributed 23.53 million tonnes of LNG exports, more than half of the total throughput tonnage.

Mior noted that Bintulu Port’s income will be less reliant on LNG as the palm oil cargo has started to expand rapidly in recent years, with encouraging growth in the container and dry bulk sectors, too.

“The amount of palm oil exports has expanded so much that it has overtaken that of container handling. This year, we expect an additional five per cent in crude palm oil shipment to 3.1 million tonnes,” he said.

Also present was chairman Tan Sri Dr Wan Abdul Aziz Wan Abdullah.

Bintulu Port’s major shareholders are Sarawak State Financial Secretary Inc, Petronas and Kumpulan Wang Persaraan. 

It was reported that Bintulu Port was raising RM950 million from sukuk issuance to fund the new Samalaju Port, located 60km away to serve industries in the Sarawak Corridor of Renewable Energy (Score).

Bintulu Port will operate the Samalaju Port through wholly-owned subsidiary Samalaju Industrial Port Sdn Bhd, following Samalaju Port Authority awarding it a 40-year concession.

“The construction of Samalaju Port’s interim facilities to cater for barges is currently under way,” Mior said.

He added that two months ago, Bintulu Port had awarded a RM437 million job to Integrated Marine Works Sdn Bhd to carry out dredging and reclamation works. Under the package, the contractor will dredge a 5km access channel to deeper waters of 15m. 

Mior said contract for the proposed breakwater package will soon be dished out while the wharf package will be called in June. 

The other packages concerning land site infrastructure development and conveyor belt system would likely be awarded towards the end of this year.

The RM1.8 billion Samalaju Port, which is slated to complete by mid-2016, is designed to handle 18 million tonnes of cargo per annum compared with Bintulu Port’s current capacity of 17.63 million tonnes (of non-LNG cargo) per annum. 

Samalaju Port’s capacity can be raised to 30 million tonnes a year, if necessary.

Move to remain TOP brand

April 26, 2013 Leave a comment

PETALING JAYA: SOUTHERN Lion Sdn Bhd, a 50:50 joint venture between Lam Soon (M) Bhd and Japan’s Lion Corp, aims to capture half of Malaysia’s detergent market by year-end from the current 47 per cent.

Its range of brands are Top, Biozip, Puteri Mas and Dobi. 

“Although Top is the leading detergent brand in Malaysia, it’s important that we strengthen our position with new offerings that meet customers’ needs in today’s context of modern living,” said Southern Lion marketing director William Khoo.

He reiterated the company’s brand promise of delivering practical solutions to modern day space constraints for washing and drying clothes among high-rise dwellers, night washing and indoor drying for busy working professionals, smaller families, and the practice of energy and water saving.

In explaining Top’s latest feature, Khoo said the detergent is able to help create a more healthy living condition in the bedroom.

While we cannot completely eliminate dust mites from our homes, we can significantly reduce their number. Apart from vacuuming carpeting and upholstered furniture, we can reduce allergens that accumulate in our bedsheets, pillow cases and blankets by laundering the bedding materials every week. 

“This is where Top comes in handy. Our new anti-dust mite formula is specifically formulated to remove 99.99 per cent of dust mite from our laundry,” he said at the launch of the new variant here yesterday. 

Also present were Southern Lion managing director Annette Ling, senior marketing manager Carmen Foo and Japan’s Lion Corp head researcher (New Technology Development), Fabric Care Research Laboratories Dr Seiichi Tobe.

“We’ve successfully developed an enzymatic cleaning technology that breaks down soluble allergens in mite dust so that they are easily removed during the washing process. This will help minimise the risk of allergy triggered by mite dust,” said Tobe.

Many detergent makers, in a bid to improve environmental profile, have been sourcing renewable ingredients such as palm oil. Southern Lion’s range of detergent incorporates a highly biodegradable substance called methyl ester sulfonates (MES) that is produced by its sister company, Lion Eco Chemicals Sdn Bhd, in Johor. 

“Our leading brand Top uses MES in its formulation because of its high detergency at low concentrate, even in mineral water. It is a very efficient cleaning agent,” Khoo said. 

In Japan, parent company Lion Corp has been incorporating MES in its Top and Biozip brands of laundry detergent since 1991.

WWF agenda punishing the poor

April 25, 2013 Leave a comment
Alan Oxley is chairman of World Growth, a pro-development NGO that which has recently released a study assessing the impact of RSPO certification on producers of palm oil.

KUALA LUMPUR: THE Worldwide Fund for Nature (WWF) is one of the world’s wealthiest international environmental non-governmental organisations (NGOs). Its total global spending is close to US$500 million a year.

But it has blind spot, a big one. Eradication of poverty is not a priority for WWF.  

In fact, the NGO’s strategies to protect the environment hinder efforts to combat poverty. This will be clear today when the Roundtable on Sustainable Palm Oil (RSPO) meets here for an extraordinary session to insert WWF’s anti-development agenda into a revision of the RSPO standard. 

The revised standard includes onerous provisions for growers to report on greenhouse gas emissions. This is despite an acknowledgement by the RSPO that there is currently no practical or robust methodology for any such assessment. 

Growers and millers are being asked to comply with sustainability requirements that lack scientific rigour, and are costly and technically demanding.

Malaysian growers are perturbed. Smallholders in particular should be concerned. The revised standard includes several new criteria that will increase costs for growers, without assuring improved environmental outputs on the farm. 

The RSPO system is already too expensive and technically difficult for the majority of oil palm growers who manage small-scale plantations. There is little evidence that certification under RSPO adds value for growers who are required to meet expensive certification costs.

The system effectively prices palm oil producers out of the global oilseed and vegetable oil markets.

That appears to be WWF’s intention. Restricting the viability of Malaysian oil palm growers has a detrimental impact on the hundreds of thousands of households whose livelihood relies on palm oil production, as well as rural communities who have seen significant development as a result of increasing investment and infrastructure. This is the WWF blind spot. 

Instead, WWF focuses most of its resources on demonising palm oil through a global campaign. It contends that unless producers follow WWF’s rules for cultivating oil palm, forests and habitats for wildlife will be destroyed. 

There is no scientific justification for this claim. Forest land has been converted to oil palm plantations but the United Nations points out that worldwide, poverty is a primary driver of deforestation, as people clear land for housing, subsistence farming and fuel wood. 

Subsistence farming, gathering of fuel wood and unplanned urbanisation drive most global deforestation. Eradicating poverty is the solution to excessive deforestation, not limiting production of palm oil.

The campaign also jeopardises smallholders income, thus their ability to put food on the table for their families. Palm oil is a high-quality and low-cost vegetable oil, widely used in Malaysia, Indonesia, China, India and Africa. 

Development agencies, such as the World Bank, rate oil palm as one of the most effective crops for raising living standards and promoted the industry in Southeast Asia as a poverty-reducing crop. Smallholders prosper when producing oil palm.

The WWF system raises costs and decreases the viability of small producers. It is also not working for big business. 

In order to comply with RSPO requirements, large-scale growers must invest heavily in consultants, auditors and expensive management systems. Manufacturers, like Unilever, have to meet high cost of using more expensive WWF-approved palm oil and segregating supply chains. 

Yet, there is little commercial benefit or return on investment. There is no demand among consumers for RSPO-certified products as a recent poll in Britain concluded. 

Businesses went along with the RSPO model, thinking it would be profitable. It wasn’t. Only about 10 per cent to 15 per cent of palm oil produced worldwide is certified under the RSPO system, while only half of that is purchased.  

Consumers in developing markets are only interested in low-cost, affordable palm oil. And in wealthy Western markets, consumers won’t pay a premium for the more expensive certified oil. Yet, WWF presses on, oblivious to the failing market demand for certified product and dire economic consequences for Malaysian farmers. 

Clearly, WWF does not care. Its global policy is to prevent any conversion of forested land to other purposes, including farming, regardless of forests set aside for conservation. This further punishes the poor. 

World Growth advocates that agricultural production must increase in order to meet global demand for food.

Oil palm growers slam bias e-voting

April 22, 2013 Leave a comment
PETALING JAYA: OIL palm growers are unhappy with the Roundtable on Sustainable Palm Oil’s (RSPO) move to implement electronic voting.

Currently, voting is done via manual balloting or show of hands.

The RSPO, which was formed in 2004, is seen as being lopsided against the growers, who come mainly from Asia. The other stakeholders are based in Europe.

On paper, the growers have four executive board positions from the 12 seats available. However, the other stakeholders, namely the food manufactures and non-governmental organisations, seem to have formed a cartel of their own within the RSPO.

“Already, growers are not adequately represented in RSPO’s decision-making process. So, it is only natural to question the proposal to vote electronically on lopsided proposals that seek to further burden oil palm growers,” said Malaysian Palm Oil Council chief executive officer Tan Sri Yusof Basiron.

“This clear case of biasness in RSPO will lead to undemocratic outcome that is not reflective of the voice of oil palm growers. As the sowing of seeds of discontent worsens, it can and will lead to more sorry state of affairs and eventually… its downfall,” he told Business Times in an interview.

On April 25, the RSPO will vote on proposals on minimising greenhouse gas (GHG) emissions from new plantings, implementing policies countering corruption, adopting human rights policy and banning the use of forced labour.

“While these proposals seem to imply stricter rules for altruistic intent, they are basically aimed at raising growers’ production cost at the discretion of RSPO’s decision makers and, thus, making palm oil exports uncompetitive,” he said.

It was reported that RSPO executive board president Jan Kees Vis said the revised criteria, indicators, and guidance will enhance the effectiveness and relevance of the Principles and Criteria, and help address the sustainability challenges facing oil palm cultivation.

In response, Yusof reiterated that oil palm planters do not agree to changes to the existing eight Principles and 39 Criteria.

In a separate telephone interview from Kuching, Sarawak Oil Palm Plantation Owners’ Association (SOPPOA) secretary-general Philip Ho concurred with MPOC.

“Lopsided decision-makings within RSPO is certainly not a yardstick for any organisation to be viewed as balanced in its presentation of views and opinions,” he said.

Ho cited RSPO’s proposal to impose GHG emission measurement for certification as akin to putting additional and unnecessary burden on oil palm growers when such demands are not imposed on other vegetable oil crops like rapeseed and sunflower.

“How come large cattle and sheep rearing activities, which cause tremendous GHG emissions into the atmosphere, are not subjected to these demands?,” he asked.

Indeed, worldwide areas planted under rapeseed, sunflower and corn far outnumber oil palm but these crops are not subjected to GHG emission checks for certification.

“Where is the justice and fairness in such a scenario? Why are oil palm growers singled out while other oil crop farmers in the developed world are not subjected to these same demands? Why are oil palm growers having to face double standards?” Ho questioned. 

He went on to say SOPPOA members have always fully upheld Malaysia’s laws and stringent measures that are being implemented in the palm oil industry. “We do not agree to RSPO’s imposition of unreasonable and unjustifiable standards,” he said.

Al-Hadharah REIT keen to top up assets

April 18, 2013 Leave a comment
KUALA LUMPUR: AL-HADHARAH Boustead REIT is keen to buy income-generating plantation estates to top up its asset base, chairman Tan Sri Lodin Wok Kamaruddin said.

Currently, Al-Hadharah REIT has 12 oil palm plantations and three palm oil mills with a combined area of around 20,000ha.

Boustead Holdings, the parent of Al-Hadharah Boustead REIT, has an agriculture landbank of 81,333ha. To-date, more than 80 per cent of the landbank has been planted with oil palms.

Lodin, who is also Boustead deputy chairman and group managing director, expects crude palm oil (CPO) prices to rise to RM2,600 per tonne.

For the past seven months, CPO prices on the Bursa Malaysia Derivatives Exchange had been fluctuating between RM2,200 and RM2,500 a tonne.

“Since the start of the year, the CPO inventory level has started to come down from a record of 2.6 million tonnes to 2.14 million tonnes at end-March. If this trend continues, we can expect to see it coming down further to about 1.8 million.

“This, coupled with strong demand ahead of Ramadan month from Islamic nations and south Asian countries like India, Pakistan and Bangladesh, will be a boost to palm oil prices. As global demand starts to pick up and production comes down a little, we can expect palm oil prices to rise to about RM2,600 per tonne,” Lodin said.

While 19,945ha of Boustead’s 68,375ha planted area is injected into the Al-Hadharah REIT, he said, it is open to asset inclusion from other estate owners.

“We are open to acquire new assets to top up the REIT. It does not always have to be injected from Boustead. If there are any other estates that are profitable and interested to be part of the REIT, we are open to discussions. We prefer them to be in the right location and, of course, at the right price,” Lodin said after Al-Hadharah REIT’s inaugural annual general meeting here yesterday.

Also present were Al-Hadharah REIT chief executive officer Fahmy Ismail and executive director Daniel Ebinesan.

In raising yield at the Al-Hadharah REIT estates, Lodin said Boustead’s plantation team will continue its replanting programme to replace ageing trees with high-yielding hybrids and clones supplied by its associate, Applied Agricultural Resources Sdn Bhd (AAR).

AAR, an equal joint venture between Boustead Plantations Bhd and Kuala Lumpur Kepong Bhd (KLK), had been breeding hybrids for the past 25 years.

“Our high-yielding hybrid seeds are meticulously bred and cloned by AAR scientists,” Lodin said, adding the hybrids have proven track records of producing more than 35 tonnes of fresh fruit bunches with 23 per cent oil extraction rate.

That works out to be about nine tonnes of oil a hectare in a year or more than two times higher than the country’s average yield.

“AAR’s role has helped sow the seeds for good and stable dividends for the REIT unitholders every year since 2008,” he added.

In the long run, Lodin noted AAR’s palm breeding plan is to produce elite planting materials using marker assisted genome-wide selected palms. This, he said, will lead to a speedier and more precise prediction of superior parents for seed production.

Boustead: RM9b combat ship deal to buoy earnings

PETALING JAYA: Boustead Holdings Bhd is hopeful of doing better this year as its shipbuilding unit steps up implementation of the RM9 billion job to build six littoral combat ships for the Defence Ministry.

“We hope to achieve better results this year as we step up the fabrication of the littoral combat ships,” said Boustead Holdings deputy chairman and group managing director Tan Sri Lodin Wok Kamaruddin.

Out of its six core businesses, oil palm planting is the biggest earnings contributor, followed by shipbuilding and property development. 

Last year, Boustead’s earnings shrunk as palm oil prices fell. In the last six months, the third month benchmark palm oil futures on the Malaysian Derivatives Exchanges had been trading at low levels of between RM2,200 and RM2,500 per tonne.

The government had proposed the setting up of a consortium to re-ignite the country’s dying biodiesel sector by trimming national stockpile and supporting palm oil prices.

Named Biodiesel Malaysia Sdn Bhd, the consortium is 30 per cent-owned by Felda Global Ventures Holdings Bhd while Sime Darby Bhd will hold 20 per cent. The remaining 50 per cent is reserved for industry stakeholders, including plantation companies, biodiesel players and oil companies.

Asked if Boustead’s fuel retailing arm, Boustead Petroleum Marketing Sdn Bhd, is keen to take up a stake in Biodiesel Malaysia, Lodin said: “If the biodiesel distribution venture can bring in good returns, why not? We’ll need to assess the details”.

Last year, Malaysia produced about 130,000 tonnes of palm-based biodiesel, of which 100,000 tonnes were for domestic consumption and only 30,000 tonnes exported.

Lodin was speaking to reporters after the group’s shareholders meeting held here yesterday. Also present were chairman Jen. (B) Tan Sri Ghazali Che Mat, director Datuk Ghazali Mohd Ali, group finance director Daniel Ebinesan, heads of business divisions Laksamana Madya Tan Sri Ahmad Ramli Mohd Nor, Chow Kok Choy, Datuk Koo Hock Fee and Tan Kim Thiam.

To another query if Boustead’s banking arm, Affin Holdings Bhd, is still keen to acquire Hwang-DBS (M) Bhd, Lodin said the group had submitted its request to Bank Negara Malaysia to start negotiations.

“Hwang-DBS operations are complementary to that of Affin. We’re hopeful that we stand a good chance to be chosen as acquirer. We’re awaiting the central bank’s approval,” he said.

Affin’s major shareholders are the Armed Forces Pension Fund or Lembaga Tabung Angkatan Tentera (LTAT) (35.2 per cent), The Bank of East Asia Ltd (23.5 per cent) and Boustead Holdings Bhd (20.7 per cent). The Employees Provident Fund owns some seven per cent of the group.

On property development, Lodin maintained that Boustead’s RM160 million purchase of a 200-acre plot in Bukit Raja, Klang, is not a political bailout. 

“It was a commercial decision and it worked out to be RM18.40 per sq ft, a fair price for our shareholders. We had actually set our sights on that land since 2005 as it is located next to our existing 700-acre plot. We’re looking to reap economies of scale in developing this 900-acre plot in the near future,” he said. 

Asked if LTAT, which owns 61.8 per cent of Boustead, may want to loosen its grip on its flagship investment arm, Lodin, who is also LTAT chief executive officer, said: “It is good to have liquidity. LTAT will do so at the right time and right price and make some capital gains along the way”.

Sabah RE producers set to enjoy FiT rates soon

March 27, 2013 Leave a comment
KUALA LUMPUR: RENEWABLE energy (RE) producers in Sabah, mostly biomass and biogas plant operators at palm oil mills, may soon be able to subscribe to the feed-in tariff (FiT).

Unlike in Peninsular Malaysia, RE producers in Sabah have not been able to enjoy the deserving rate of 32 sen per kilowatt per hour (kWh) under the FiT. They, instead, have to contend with Tenaga Nasional Bhd (TNB)’s Small Renewable Energy Projects rate of 21 sen per kWh.

This is because under the law, RE producers in Sabah will only be eligible for FiT when the one per cent RE levy is collected by Sabah Electricity Sdn Bhd, a 70 per cent subsidiary of TNB, from heavy power users in Sabah.

FiT essentially guarantees RE producers a premium selling price over that generated from depleting and finite sources such as oil, gas and coal. Power generated from sustainable sources that benefits from FiT includes that of oil palm biomass, biogas, small hydro power and solar.

Since December 2011, heavy power users in Peninsular Malaysia using more than 350kWh or whose monthly bills exceed RM77, have been paying the one per cent RE levy to TNB.

The Sabah government, however, had appealed against collection of RE levy, saying it would be too taxing on heavy power users there.

Now that it has been over a year, the federal government indicated that the Sabah government seemed to have come around.

When met yesterday, Energy, Green Technology and Water Ministry secretary general Datuk Loo Took Gee said “the Sabah government has verbally agreed. We met up this week.”

She was speaking to reporters after representing Energy, Green Technology and Water Minister Datuk Seri Peter Chin in officiating at the launch of the Eco-B workshop organised by Malaysia Green Building Confederation.

Asked when Sabah Chief Minister Datuk Seri Musa Aman will sign on and allow TNB to collect RE levy from heavy power users in Sabah, Loo replied: “We’ll have to wait for the official letter from the Sabah state government”.

Wage rule has small impact on money outflow

March 22, 2013 Leave a comment
KUALA LUMPUR: There has not been any substantial spike in foreign workers’ remittance to their home countries resulting from the implementation of minimum wages at the start of this year, said Bank Negara Malaysia (BNM).

“There’s not much impact on monetary outflow despite a 20 to 25 per cent jump in their salaries,” said BNM’s assistant governor Dr Sukhdave Singh. He was responding to a question if Malaysia had experienced an outflow of more than RM2 billion following the blanket implementation of minimum wage law. 

Previously, Malaysia Employers Federation (MEF) executive director Shamsuddin Bardan estimated that foreign workers, on average, send back some RM700 each month, which is half of their take-home pay that include overtime claims. 

“With a conservative estimate of two million foreign workers here, that works out to be RM1.4 billion flowing out of Malaysia to their home countries every month. Starting 2013, with the blanket implementation of the minimum wage law, the outflow of money from Malaysia is likely to swell to RM2.1 billion every month,” Bardan reportedly said. 

Sukhdave says one need to look at this comprehensively. Minimum wages are good for the economy and it ensures Malaysia achieves its high-income nation goal,” he said, adding that a blanket wage floor eliminates the price advantage that foreign workers have over Malaysians, thus creating greater job opportunities for locals.

“Small and medium enterprises and the plantation sectors say it erodes our competitiveness. If these sectors’ competitiveness is based on low wages, then that’s the wrong economic structure,” he said.

“The main objective of minimum wages is for low-income earners to be able to afford their basic living needs here,” he added.

The Minimum Wages Order 2012, which took effect from January 1 2013, requires employers with six employees and above to pay a minimum wage of RM900 a month in the peninsula or RM800 a month in Sabah, Sarawak and the Federal Territory of Labuan.

Sukhdave was speaking to reporters after presenting his views on the country’s economic performance at a seminar organised by the Malaysian Economic Association here yesterday.

When asked to comment on Goods and Services Tax (GST) and government subsidy reduction, he said this tax can be implemented in a manner with no significant loss to low-income earners’ welfare. 

“As far as the government is concerned, many daily necessities like food products would actually be exempted from GST.

“As for subsidy rationalisation, you can physically transfer it directly to the lower income group. It would also significantly help offset any negative impacts of the subsidy rationalisation on the lower income households,” he said.

On the Economic Transformation Programme, Sukhdave said it has played a catalytic role in promoting private investment to the country’s economy.

RM342m gain for FGV from stake sale

March 22, 2013 Leave a comment
KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) has raked in more than RM342 million one-off gain, outpacing what the giant planter makes in a quarter, from the sale of its 20 per cent stake in Tradewinds (M) Bhd to billionaire Tan Sri Syed Mokthar Albukhary.

The RM342 million is larger than the RM179.6 million net profit FGV made in the fourth quarter ended December alone, which had been dragged by lower crude palm oil (CPO) prices.

In its filing to Bursa Malaysia yesterday, Tradewinds said it had completed its purchase of 59.2 million shares from FGV at RM9.30 a piece worth a total of RM550.5 million.

FGV acquired the 20 per cent stake in 2010 from Grenfell Holdings Sdn Bhd at RM3.50 a share, totalling RM208 million cash.

With the completion of the deal, FGV has made a net gain of RM342 million or a return on investment of 264 per cent.

Grenfell is a company linked to the PPB Group Bhd, controlled by Malaysia’s richest man Robert Kuok.

FGV president and chief executive officer Datuk Sabri Ahmad could not be reached for comments, but last December said that proceeds from the sale will be used in its upstream sector – to buy more plantation land for rubber and oil palm in countries such as Myanmar, Cambodia and Indonesia.

“With proceeds of RM342 million, FGV can buy controlling stakes in many other companies,” said an analyst who declined to be named.

Syed Mokhtar announced last December his plan to take Tradewinds private, of which, sources said, will be restructured into four separate divisions – rubber, sugar, oil palm and rice.

The plan is expected to lead to the privatisation of both Tradewinds Plantation Bhd and the country’s sole rice importer Padiberas Nasional Bhd (Bernas).

The low-profile businessman and Malaysia’s seventh richest was taking over Tradewinds by offering shareholders RM9.30 for every share he did not already own in the company.

The vehicle for the deal is his private companies – Perspective Land Sdn Bhd, Kelana Ventures Sdn Bhd, Seaport Terminal (Johor) Sdn Bhd and Acara Kreatif Sdn Bhd – which would acquire all the shares they did not already own in Tradewinds by cash.

The whole privatisation deal is expected to cost RM2.5 billion.

Prior to the purchase of the 20 per cent stake, Syed Mokhtar directly and indirectly owned 42.97 per cent of Tradewinds, which in turn, had 69.76 per cent and 72.57 per cent control of Tradewinds Plantation and Bernas, respectively.

It was also reported that from January 2010 to date, FGV has received net dividends totalling RM46.3 million from the Tradewinds stake.

FGV is one of the world’s largest plantation company, owning over 850,000ha land in Malaysia, 500,000ha of which it leases and manages for the country’s 112,635 smallholders.

The plantation conglomerate, which produces over three million tonnes or 10 per cent of the world’s CPO output, is already flushed with RM4.4 billion cash, raised from its initial public offering in June last year.

‘Explain to foreign workers about minimum wages’

March 21, 2013 Leave a comment
KUALA LUMPUR: The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) is urging all relevant authorities and agencies to explain to representatives of foreign workers on the latest changes to minimum wages.

In a statement yesterday, the trade body said this is to avoid any misunderstanding by the foreign workers and recurrence of riots in Muar.

Three days ago, Muar police foiled an attempt by 5,000 foreign workers from Nepal to hold a demonstration there. Muar police chief Assistant Commisioner Mohd Nasir Ramli said his men prevented them from gathering in front of a supermarket in Jalan Ali. 

“We detained 106 people, including those believed to be the masterminds behind the gathering, for questioning and they were released at 1pm,” he had said. Last week, Muar police also arrested 32 Nepalese workers for rioting at a furniture factory over their salaries.

In view of these unfortunate incidents, the National Wages Consultative Council (NWCC) had two days ago, announced that small and medium enterprises (SMEs) are allowed to defer implementation of minimum wages for their foreign workers until the end of this year.

Employers of other sectors who are facing difficulties in implementing minimum wages may also appeal for deferment by submitting their applications to NWCC in Putrajaya by June 30 2013.

Following NWCC’s decision, employers in the SME sector are not allowed to make deductions from the foreign workers’ wages for the levy, cost of accommodation or other allowances.

Instead, they will be given more time to negotiate with their employees on ways to restructure their salary framework. 

As for employers of big companies who have been implementing minimum wages for foreign workers from January 1, NWCC said they will be given blanket approval for deductions of levy and cost of accommodation.

NWCC said the amount of levy to be deducted is pro-rated monthly and it shall not exceed RM50 a month for each foreign worker. Both the deductions must be reported to the Labour Department.

However, under special circumstances and based on individual merits, the Labour Department may consider applications for cost of accommodation exceeding RM50 a month for each foreign worker, NWCC said.

The Minimum Wages Order 2012, which took effect from January 1 2013, requires employers with six employees and above to pay a minimum wage of RM900 a month in the peninsula or RM800 a month in Sabah, Sarawak and the Federal Territory of Labuan.

Mobile hospital set up at Felda Sahabat

March 15, 2013 Leave a comment
KUALA LUMPUR: The Health Ministry will set up a 40-bed “mobile hospital” to provide medical treatment for the people and security forces personnel at Felda Sahabat in Lahad Datu, Sabah.

Its minister, Datuk Seri Liow Tiong Lai, said the mobile hospital would benefit those in the remote area as many of the injured or sick patients had to travel more than 100km to reach the nearest hospital.

The Lahad Datu health centre, nearer to Felda Sahabat, only provides outpatient treatment without warding patients.

The mobile hospital, which will be built beside the Lahad Datu health centre, will bolster treatments currently provided at a 12-bed mobile tent set up there.

Six groups comprising 44 medical personnel, specialists, pediatricians and psychiatrists from here will be deployed there.

Liow said safety would not be an issue as the mobile hospital would be located 6km away from the conflict zones and guarded around the clock by security forces.

He added that the ministry was monitoring the hygiene and sanitation levels at relief centres for displaced villagers to prevent any disease outbreak. Liow said vaccinations would be carried out to those at the relief centres.

It was previously reported that the ministry had allocated RM4 million to provide free medical treatment to those in the terrorist-hit areas of Sabah, including the security forces.

‘Palm oil shipments unaffected’

March 15, 2013 Leave a comment
PETALING JAYA: PALM oil exporters from Lahad Datu, Sabah, did not experience any shipment cancellation despite the intrusion by Sulu terrorists.

Since the government launched Ops Daulat offensive on March 5 to counter the terrorist threat, 56 Sulu gunmen had been killed while 10 security forces personnel died in the line of duty.

“No, there had been no force majeure invoked with regards to palm oil shipment from Lahad Datu,” said Palm Oil Refiners Association (Poram) chief executive officer Mohammad Jaaffar Ahmad. 

He was responding to rumours of palm oil shipment cancellation in the midst of unrest in Lahad Datu.

In the frenzy of the Ops Daulat offensive launched last week, a news report stated that the government had ordered Kuala Lumpur Kepong Bhd (KLK) and other palm oil refineries in Lahad Datu to halt operations for a few days. 

Soon after, another news report quoted a KLK official as stating the group’s estates and refinery operations were running as normal.

“We are monitoring the situation and will act accordingly,” the company official said.

Confusion arising from the first few days of fighting in Lahad Datu clouded price-sensitive information flow to many participants at the Palm and Lauric Oils Conference & Exhibition Price Outlook in Kuala Lumpur early last week.

When commenting on conflicting news reports concerning Poram members, Jaaffar noted that traders leveraged on volatile palm oil price swings in the futures market.

According to Malaysian Palm Oil Board, there are 13 refineries in Sabah with a total capacity of 7.73 million tonnes per year. 

In Lahad Datu, there are five refineries under Felda Group, Wilmar International Ltd, KLK and Kwantas Bhd. These refineries get their palm oil supply from surrounding mills under Felda, Hap Seng Plantations, KLK, Sime Darby Bhd, Wilmar and IOI Corp Bhd, including independent mills.

In an interview with Business Times here yesterday, Jaaffar confirmed that Lahad Datu port was never closed to traffic despite the ongoing Ops Daulat offensive. 

“Based on the feedback we received from our members, shipping activities in Lahad Datu are as per scheduled. 

“There is no threat of ‘force majeure’ clause being invoked arbitrarily. Refiners are transporting their refined palm oil products to the port for shipment without any disruption,” he added.

Jaaffar explained that the force majeure clause in a contract excuses a party from not performing its contractual obligations due to unforeseen events beyond its control. These include floods, earthquakes and other “acts of God” as well as terrorist attacks. 

When asked on exports outlook, Jaaffar expects Malaysia’s palm oil stocks to continue its downtrend. 

“We are bullish on palm oil exports as they will pick up when the winter season is over in the Western hemisphere. In the mid term, we see consumers from China and India coming back into the market to replenish their stocks,” he said.

KDF eyes bigger share of derivatives

March 12, 2013 Leave a comment
KUALA LUMPUR: KENANGA Deutsche Futures Sdn Bhd (KDF) wants to expand its trade market share on the Bursa Malaysia derivatives market, as more clients show interest in leveraging on the direct market access mechanism.

KDF chief executive Azila Abdul Aziz said the company had consistently chalked up close to 1.5 million contracts on the derivatives market, making up around 14 per cent of 9.6 million total trades.

In an interview with Business Times here, she said more funds are starting to use futures as a tool to hedge their investment exposure.

A more specific example would be the equity index futures.

The market currently trades less than one time of its underlying stock/equities market value. In other regional markets, futures trade three to five times more than its underlying value.

KDF’s reputation as the leading futures broker in Malaysia was reaffirmed by Bursa Malaysia last week when it won the best performer award at the Palm and Lauric Oils Outlook Conference 2013.

KDF is the top overall performer for 10 years in a row in attracting the biggest trades into Bursa Malaysia Derivatives Exchange.

Asked on factors that had driven consistent achievement, Azila attributed it to clients’ long-term rapport and strategic partnership with Deutsche Asia Pacific Holdings, which instantly raise the group’s profile among potential investors in the region.

“Our best clients tomorrow are the ones that are happy with us today,” Azila said, adding that human capital investment is also a key success factor. “We need to constantly keep up with changing market conditions. We hire candidates equipped with the right technical skills unique to the futures broking industry.”

“We also carry out an internal one-year management trainee programme that includes one-on-one mentorship and training by four highly experienced business managers. KDF employees are highly sought after by the industry, so we have to ensure that we retain our valuable talent,” she added.

On the outlook for the year, Azila said direct market access capabilities will help to improve and increase the number of products available for trading here.

“We see potential growth in attracting liquidity by leveraging on technology to improve market access. It will be the key enabler that drives volume growth, improve liquidity and governance,” she said.

Biofutures buys Malaysian biofuels firm

March 10, 2013 Leave a comment
KUALA LUMPUR: Biofutures International Plc had, on Friday, successfully raised £32.5 million via share placing, in conjunction with its proposed acquisition of Platinum NanoChem Sdn Bhd, a Malaysian biofuels specialist. 

This is to provide the enlarged group with sufficient funds to implement its expansion strategy and for working capital purposes. 

“The proposed acquisition of Platinum Nanochem and the successful fund-raising represent a significant opportunity to enhance shareholder value,” Biofutures chief executive officer Joe Wong said, in a statement issued here today. 

The enlarged group is poised for growth based on its established revenue generating business model and its ability to apply its Graphene production technology to a range of products targeting major markets in the near and longer term. 

Biofutures International will be renamed Graphene NanoChem Plc after the completion of the acquisition and the placing. 

Platinum NanoChem is a global nanotechnology company whose established revenue-generating business model is to design, formulate, manufacture and market a range of IP (Intellectual Property)-backed speciality chemicals and advanced materials including Graphene from waste feedstocks. 

The directors believed that the acquisition offers an opportunity to enhance shareholder value and move Biofutures from its current position and considerable exposure to volatile commodity prices into the manufacture of added-value products with higher margins within niche markets. 

The enlarged group will aim to exploit the global megatrend towards sustainability through the supply of waste-based, high-performance, cost-competitive products into global markets and to focus on the opportunities afforded by Graphene-enhancement. 

Graphene NanoChem will be led by Datuk Jespal Deol who will be supported by a strong and experienced management team and staff with significant technical and business expertise, and a successful track record, in relevant industry sectors. 

“We are delighted to be able to offer shareholders the unique opportunity to participate in our growth story as the enlarged group,” Jespal, who is currently chief executive of Platinum NanoChem, said. 

“We have a clearly defined strategy to exploit our existing market positions and product portfolio within specialty chemicals, whilst driving our commercialisation strategy for Graphene-enhanced applications in niche markets. 

“With the proven experience and expertise of the proposed management team and the funds raised to support this strategy, we look forward to the future with confidence,” he said. 

Biofutures International, which was incorporated in England in February 2006, is the parent of Zurex Corp Sdn Bhd. In Lahad Datu, Sabah, Zurex owns and operates a 200,000 tonnes per annum refinery and has a licence to manufacture biodiesel from palm oil.– Bernama

FGV’s two refineries in Sabah not affected

KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV)’s two palm oil refineries in Felda Sahabat and Lahad Datu are working well and not affected by the skirmishes in the area.

FGV president and group chief executive officer Datuk Sabri Ahmad said the company’s two refineries are far from the conflict area, which is confined to around 2,000ha, or one per cent, of its oil palm plantations and land schemes.

“Our refineries are working well despite the security concerns,” Sabri said when presenting his paper at the 24th annual Palm and Lauric Oils Conference 2013, here, yesterday.

Sabri was commenting on the operation by Malaysian security forces to flush out Sulu terrorists around Kampung Tanduo.

In a research note to investors, CIMB also voiced its concern that FGV’s operations, such as the transport of crude palm oil to refineries, could be disrupted if the conflict in the surrounding areas of Lahad Datu prolongs.

Sabri said all plantation operations are going on as usual except for that one single area. “It is important that FGV continues with its operations because Felda Sahabat contributes 25 per cent to the group’s total crude palm oil production of 3.3 million tonnes a year,” he said at the sidelines of the conference.

On its expansion plans downstream, Sabri said due diligence works were being carried out, such as the opening of new oil palm estates in Indonesia. In Myanmar, it may set up rubber processing plants in the next six months.

Oleochemical firms invest more in Europe

KUALA LUMPUR: Asian oleochemical producers are investing more money in Europe despite a lingering economic recession there.

“We’re in this business for the long term. Although Europe is facing recession, the demand for oleochemicals is sustained because they are a necessity. Oleochemicals are present in household cleaning products, toiletries, cosmetics and industrial and pharmaceutical items,” said KLK Oleo Group managing director A.K. Yeow.

He said the company has committed close to RM200 million to expand and upgrade its oleochemical facilities in Emmerich, Germany.

“By the third quarter of this year, our Emmerich capacity would have expanded to 250,000 tonnes a year,” he told Business Times at the sidelines of the Palm and Lauric Oils Conference and Exhibition 2013, here, yesterday.

Oleochemical production is mainly centred on the manufacture of fatty acids, fatty alcohols, methyl esters and refined glycerin. These are further processed into surfactants, soap and detergents, cosmetics, food emulsifiers, paints and inks, and lubricants.

The use of oleochemicals is very much stimulated by consumers wanting more renewable ingredients in their toiletries, cosmetics and household items.

Emery Oleochemicals Sdn Bhd group chief executive officer Dr Kongkrapan Intarajang said this has spurned innovative applications in biolubricants, green agro-solution and green polymer additives.

“Our higher-value oleo derivatives, which we supply to the personal care, automotive and construction industries, are doing well,” he said in a separate interview.

In view of good prospects in specialty chemicals, Emery Oleochemicals, an equal joint venture between Thailand-based PTT Chemical International Pte Ltd (now known as PTT Global Chemical) and Sime Darby Plantation Sdn Bhd, has pumped as much as €20 million (RM93.8 million) to expand its Loxstedt green polymer business located north of Germany.

Kongkrapan said the facility will also incorporate a technical development centre that will support product formulation for plastic additives, coatings additives and biolubricants.

Malaysia going the bio-oil way

KUALA LUMPUR: MALAYSIA’S ambition to produce and use more second-generation biofuel is fast picking up as process engineers embark on converting biomass to liquid fuel via fast pyrolysis.

“Second-generation biofuel, like bio-oil, is more environmentally friendly than biodiesel or bio-ethanol. This is because bio-oil is derived from biomass and this circumvents the food versus fuel dilemma,” said Lipochem Sdn Bhd managing director Koh Pak Meng.

Second-generation biofuels are a realistic alternative to the costlier fossil fuels. This is because bio-oil can be used to heat up water to produce steam to push turbines that generate electricity. This is a valuable means of replacing depleting fossil fuels like petroleum, coal and natural gas.

One can turn a wide range of agricultural waste like oil palm biomass into stable, concentrated bio-crude. This is then refined into bio-oil to replace fuel oil burnt in boilers.

Unlike the current burning of empty fruit bunches in oil mill boilers, Koh said bio-oil plants adopt the fast pyrolysis process, where biomass is heated rapidly to temperatures between 300 and 550°C at high pressure without any oxygen.

The gases released by the burnt biomass enter a quench tower, where they are quickly cooled and recycled back to the reactor as fuel.

“Bio-oil plants are the way forward as ithey are far more energy efficient and make the industry more carbon neutral,” he told Business Times at the sidelines of the Palm and Lauric Oils Conference and Exhibition POC2013, here, yesterday.

Currently, Lipochem’s demo plant in Klang is able to process five tonnes of dry biomass a day. 

Koh said this plant, when scaled up 20 times to a commercial size of 100 tonnes a day, will cost around RM30 million. 

“The return on investment for a typical 100-tonne-a-day bio-oil plant is around three years. It is a worthwhile investment.”

Koh said bio-oil has many of the advantages over petroleum fuels since it can be easily stored, pumped and transported. It can be combusted directly in boilers, gas turbines, used in slow and medium speed diesels for steam and power plants.

“Fuel oil is priced at around US$750A per tonne while bio-oil can be sold for US$375 per tonne. The price difference itself poses big potential for domestic use of bio-oil as well as for the export market.”

Experts expect CPO to peak at RM2,600

This is written by my colleague Zaidi Ismail.

KUALA LUMPUR: Crude palm oil (CPO) prices are expected to trade as high as RM2,600 a tonne this year due to higher crude oil prices leading to more palm oil-based biodiesel use and demand overtaking supply.

CPO prices are hovering at the RM2,300 to RM2,400 level compared to an average of RM2,900 last year. 

Industry specialists presented mixed views on the price outlook at the conclusion of the 24th annual Palm and Lauric Oils conference (POC2013), here, yesterday. This was attributed to factors like higher soyabean production in South America and the El Nino weather effects. 

In his paper, LMC International Ltd chairman Dr James Fry had forecast CPO prices to touch as high as RM2,600 by June. 

Crude oil is now more expensive than CPO and this may boost palm oil-based biodiesel use. “If I were Petronas or Pertamina, I would be rushing to buy local CPO to go into blending palm oil with diesel. This would help stocks decline and see CPO prices hitting RM2,600 by the middle of the year,” Fry told some 2,000 participants from more than 50 countries attending the POC2013.

Indonesian Palm Oil Board chairman Derom Bangun shared Fry’s views, saying global demand has already overtaken supply and there is higher use of biodiesel now in Europe. 

“I expect CPO prices to touch around RM2,400 by June and slightly higher in the second half of the year,” said Derom. 

However, London-based Godrej International Ltd director Dorab E. Mistry wasn’t so optimistic. He said the palm oil boom over the last five years is over as oil palm trees are expected to be at peak production by September 2014. 

“I expect prices to be at RM2,300 and RM2,500 by end-April. However, it can go as low as RM1,800 if crude oil prices go as low as US$80 a barrel. June and July will be a critical point as to where CPO prices will be heading for the rest of the year,” said Mistry, who did not provide a forecast for the second half of the year. 

He said plantation companies will continue to reap handsome profits irrespective of CPO prices as production costs are at around RM1,500 a tonne.

SOPB expects bigger harvest

KUALA LUMPUR: Sarawak Oil Palms Bhd (SOPB) expects to harvest one million tonnes of fresh fruit bunches by year-end, 15 per cent more than last year’s 883,000 tonnes, as more young trees mature and bear more fruits.

Headquartered in Miri, the group has planted close to 63,000 hectares with oil palms in Sarawak.

In an interview, SOPB group financial controller Eric Kiu Kwong Seng spoke of the company’s favourable tree profile. “As of December 2012, about 24 per cent of our planted area is of prime fruit bearing ages. As more young trees mature, we expect very good harvest prospects,” he told Business Times in an interview.

“By the end of this year, about 30 per cent of our total planted area will be of matured ages and bearing more fruit bunches,” he said when met at the sidelines of Palm and Lauric Oils Conference and Exhibition (POC2013) here yesterday.

SOPB’s aggressive plantings in 2007 have resulted in 80 per cent of its planted area consisting of young oil palms and primed to bear more fruit bunches. This means big earning’s growth potential in the next five years. To date, SOPB has planted more than 80 per cent of its 75,155ha landbank.

On the group’s refinery in Bintulu, Kiu said: “We started operations at the refinery in mid-2012. Following the government’s crude palm oil tax restructure early this year, the trading environment has become more conducive. We’re now running at full capacity”.

SOPB was set up in 1968 via a joint venture between Commonwealth Development Corp (CDC) and the Sarawak state government. In 1995, conglomerate Shin Yang Group bought CDC’s entire stake and is now the largest shareholder with 36.5 per cent while state-owned Pelita Holdings Sdn Bhd holds 28.9 per cent.

In its filing to the stock exchange, SOPB said its profits for 2012 fell 34 per cent to RM159.13 million on the back of RM1.31 billion revenue. Kiu attributed it to unencouraging performance to falling palm oil prices, lower cropping cycle after the bumper crop in 2011 and dilution effect from the young mature estate.

He said the group had in 2011, declared a payout 5 sen a share. Asked if the group is still able to match the same payout, he replied, “we’ll strike a balance of rewarding shareholders and retaining profits for business expansion”.

Kenanga Deutsche Futures bags top award again

KUALA LUMPUR: Kenanga Deutsche Futures Sdn Bhd (KDF), a subsidiary of K&N Kenanga Holdings Bhd, emerged the top overall performer for 10 years in a row in attracting the biggest trades into Bursa Malaysia Derivatives Exchange.

KDF is a joint venture between Kenanga Investment Bank Bhd and Deutsche Asia Pacific Holdings Pte Ltd.

This year, the Palm and Lauric Oils Outlook Conference (POC2013) carried the theme “Price volatility – Ride It, Manage It”, in view of the volatile developments in the global economy and their effects on futures markets.

“For the past 10 years, KDF has shown great fortitude in anticipating the fast-changing market and client demands as well as adopting and localising best practices from around the globe. The accolades awarded tonight to KDF is a reflection of the team’s commitment to excellence,” said K&N Kenanga Holdings Bhd group managing director Chay Wai Leong upon receiving the award from Bursa Malaysia Bhd chairman Tun Dzaiddin Abdullah.

In becoming an international financial player, K&N Kenanga has established its presence in Asia and Middle East, through direct equity participations and strategic partnerships in Vietnam, Sri Lanka and Saudi Arabia.

KDF chief executive officer Azila Abdul Aziz, who was also present said: “Last year, our business accounted for about 14 per cent of the total contracts volume on the Bursa Malaysia Derivatives. We’ve established a strong brandname in the Malaysian derivatives industry for almost a decade now. In the next five years, we are looking to realign our goals to better suit the current market environment, allowing on board diverse clientele base to enhance our income stream.”

Milan Jevtovic, a businessman from Serbia participating in the POC series for the first time, remarked that he was amazed at the ease and convenience of trading palm oil futures on the Malaysian Derivatives Exchange. His company, Coinix Montenegro d.o.o., had just engaged TA Futures Sdn Bhd to hedge on the commodities market.

Jevtovic also said he’s seeking possible partnerships with plantation giants like Felda Global Ventures Holdings Bhd, Sime Darby Bhd and IOI Corp Bhd to supply palm cooking oil to Serbia and countries like Romania, Bulgaria and Bosnia. 

“My country has a population of 100 million and our staple kitchen ingredient is sunflower oil. Right now, there’s some small shipment of palm cooking oil and bakery fats into Serbia. Palm oil is an affordable and nutritious alternative to sunflower oil,” he said.

Call to boost competitiveness

This is written by my colleague Zaidi Ismail.

KUALA LUMPUR: MALAYSIA’S palm oil sector must go all out to boost its competitiveness as crude palm oil (CPO) prices are extremely volatile, fluctuating against a backdrop of uncertain supply and demand situation as well as strong competition from the world’s other 16 edible oils and fats.

Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said the global economic slowdown in the third quarter has contributed towards raising the domestic stocks level, which resulted in lower crude palm oil (CPO) prices compared with 2011.

In the last few months, CPO prices on the Malaysian Derivatives Exchange have been hovering between the RM2,300 and RM2,500 a tonne level compared with an all-time high of over RM4,000 in 2008.

“The government has implemented measures to enhance the competitiveness of the palm oil industry, including restructuring the export duty on CPO and providing replanting incentives beginning this year.

“This move is aimed at reducing the CPO stocks and strengthening its prices,” Dompok said in his keynote address here yesterday at the 24th annual Palm and Lauric Oils Conference and Exhibition 2013: Price Outlook 2013/2014.

He added that in situations of uncertainty, price discovery is necessary for the traders, especially in mitigating risk factors and Malaysia, as the preferred benchmark for the pricing of palm oil globally, has attracted strong attention from international traders.

Dompok said as at December 2012, foreign trading participation for crude palm oil futures (FCPO) contract was recorded at 30.2 per cent, an increase from 28.7 per cent in 2011.

He said Malaysia, which is the second largest producer of CPO after Indonesia, will continue to drive the growth by seeking opportunities to expand partnerships to strengthen connectivity with the rest of the world.

Malaysia recorded a palm oil production of 18.8 million tonnes last year, accounting for some 10 per cent of global palm oil output.

Prolonged Lahad Datu crisis may affect CPO output

This is written by my colleague Zaidi Ismail.

KUALA LUMPUR: CRUDE palm oil (CPO) production and sales from Sabah, accounting for 30 per cent of Malaysia’s total output, may be affected if the security situation brought about by the terrorist intrusion in the eastern part of the state continues.

However, Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said palm oil refineries in Lahad Datu to date have not been affected as most of them are in industrial areas far from the conflict zones where the security forces are launching operations to flush out armed gunmen from the Philippines.

“No refineries have shut down and none have been affected as they are far from the hostilities,” Dompok told reporters here yesterday after launching the 24th annual Palm and Lauric Oils Conference and Exhibition.

Sabah is one of Malaysia’s top oil palm growing regions with much of the palm oil from the state shipped to China – the world’s second largest consumer of edible oils.

Meanwhile, CIMB analyst Ivy Ng, in her research note on Monday, said the situation there would affect the harvesting, transportation and sales of palm oil from Sabah.

She said a check with Felda Global Ventures (FGV) last Friday revealed that the company was not able to access its 1,000ha estates while Genting Plantations has suspended transportation of CPO from two of its five mills to Lahad Datu.

FGV owns 95,542ha of Sahabat estates which are close to where the intruders landed.

Ng said so far, the impact of this incident on CPO production is still minimal but if the crisis escalates, the impact would be significant.

“This is negative for refiners and planters in Sabah as productivity and shipment of CPO could be affected. For every one per cent change in fresh fruit bunch output, earnings may be dented by up to two per cent,” she said.

KL Kepong came second in terms of the size of its estate exposure in Lahad Datu. It has a refinery there while FGV has two in the Sahabat region.

“The concern for refineries near the areas where clashes have been reported is that planters may not want to transport their CPO to the refineries and may divert their production to other refineries in Sabah for security reasons,” said Ng.

However, she said if the matter is resolved quickly, the impact would be minimal or none as the planters could play catch-up on harvesting and shipments.

CIMB Research, she added, does not think the issue will impact CPO prices significantly given the high stock buffer in Malaysia and Indonesia.

Security forces in the early hours of Tuesday moved into Kampung Tanduo to end a stand-off with the armed intruders after violence killed at least 27 people and sparked fears of broader insecurity in the resource-rich area.

Govt urged to abolish duty free quota on CPKO

KUALA LUMPUR: MALAYSIA’S palm oil downstream players have appealed to the government to abolish duty free quota on crude palm kernel oil (CPKO) and waive the five per cent duty on refined, bleached and deodorised palm kernel oil (RBD PKO).

Palm Oil Refiners Association of Malaysia (Poram) chief executive officer Mohammad Jaaffar Ahmad acknowledged that while the government had lowered crude palm oil (CPO) tax at the start of this year, it has yet to consider other requests put forward by downstream players.

“Right now, RBD PKO is the only refined product in Malaysia that is still being taxed,” he said.

Jaaffar said Indonesia’s move to lower export duties on refined oils and fats in September 2011 had eroded Malaysia’s RBD PKO export competitiveness. Currently, Indonesia does not impose any RBD PKO tax, while Malaysia has a five per cent duty.

“Since Indonesia does not have any tax on RBD PKO, refiners here are at a disadvantage. We face unfair competition and loss of business opportunities,” he added.

Last year, only 258,640 tonnes of RBD PKO were exported, 40 per cent less than 363,690 tonnes in 2011.

Jaaffar was speaking to Business Times on the sidelines of the Palm and Lauric Oils Outlook Conference (POC2013) here yesterday. “Since we have not been able to export our RBD PKO competitively, there’s less demand for CPKO. This continues to pull the CPKO prices down,” he explained.

More importantly, Jaaffar said downstream players are also appealing to the government to abolish the export quota on duty free CPKO.

If the government were to do so, both oleochemical and specialty fats manufacturers will be able to procure CPKO from the market at a 10 per cent cheaper pricing. “This is what we want and it will be good for all downstream players,” he said.

Among the specialty fats producers that support abolition of duty-free CPKO quota are IOI Loders Croklaan, Premium Vegetable Oils, Cargill, Sime Darby Kempas, Intercontinental Specialty Fats and Fuji Oil.

Specialty fats are used by food companies to make margarine, coffee creamer, bakery fats, chocolate, ice cream, non-dairy cheese and infant milk.

In a separate interview, Malaysian Oleochemical Manufacturers’ Group (MOMG) chairman Tan Kean Hua said its members use as much as 1.2 million tonnes of CPKO a year.

“We prefer the 10 per cent tax on CPKO to remain unchanged. We need all the CPKO there is at competitive pricing. As for RBD PKO, we have no objection for the five per cent tax to be waived,” he said.

POC2013 to see solid turnout

KUALA LUMPUR: The Palm and Lauric Oils Outlook Conference (POC2013) attendance is set to match that of last year despite a global economic downturn.

In an interview with Business Times here recently, Bursa Malaysia Derivatives chief executive officer Chong Kim Seng said some 2,000 delegates from more than 50 countries have confirmed their participation. 

In view of the conference themed “Price Volatility – Ride It, Manage It”, he noted that many vegetable oil traders have been leveraging on futures markets as prices fluctuate on volatile global economic developments. 

Delegates will be benefiting from insightful views on vegetable oils price trends. Among the notable luminaries attending are CME Group chief executive officer Phupinder Gill, Chinatex Grains and Oils Import & Export Co Ltd chief economist Xu Jian Fei and Indonesian Palm Oil Board chairman Derom Bangun.

For more than 20 years, the POC series have been able to attract top executives from major companies, traders and even foreign government officials to converge here and get a feel of where palm oil prices are heading.

Following the partnership between CME Group and Bursa Malaysia a few years ago, Chong said traders were introduced to palm oil contracts on CME Globex, the same electronic trading platform as CME Group’s existing suite of agricultural products.

Celebrity-status palm oil analysts Dorab Mistry and Dr James Fry are due to arrive here today and give their forecasts on Wednesday.

The palm oil industry has had a rough ride last year. From a high of RM3,600 per tonne in April 2012, crude palm oil prices tumbled to a low of RM2,200 in October.

Since then, prices have somewhat stabilised. Last Friday, the third month palm oil futures on the Malaysian Derivatives Exchange closed RM30 lower at RM2,367 per tonne.

When Malaysia first started the annual palm oil conference 24 years ago, the government had to pay for the participants’ hotel charges to start the ball rolling.

Today, POC2013 can afford to charge people to attend and they still come despite the global economic downturn and high fees.

Although Malaysia is no longer the world’s biggest palm oil producer nor home to the world’s largest market for palm oil derivatives, palm oil prices continue to be quoted from Kuala Lumpur.

Traders like Bursa Malaysia’s convenient trading environment. In the past year, the stock exchange had introduced new services like NLTs (Negotiated Large Trades) and EFRPs (Exchange Futures for Related Positions) and launched OCPO (Options on FCPO). 

Chong said these new initiatives have helped market participants to better leverage the use of futures and options for their price risk hedging and management.

Sime eyes RM3.2b net profit

February 28, 2013 Leave a comment
KUALA LUMPUR: Sime Darby’s net profit for the three months ended December 2012 fell 36 per cent to RM708.5 million from RM1.1 billion, a year earlier. This was the group’s third consecutive quarter of declining profits.

Despite the unencouraging performance, president and group chief executive Mohd Bakke Salleh said he is hopeful of achieving a RM3.2 billion net profit for the year ending June 2013. 

He also  assured shareholders that the group is able to go on dishing out at least half of its profit to shareholders, as palm oil prices stabilise and are starting to stage a recovery.

Yesterday, the third-month benchmark palm oil futures on Bursa Malaysia Derivatives dropped RM9 to close at RM2,410 per tonne.

When asked for a forecast, Bakke said he is optimistic that “palm oil prices will average at between RM2,700 and RM2,800″ because global demand for the staple food ingredient still outstrips supply.

“In the first half of our financial year, plantations contributed almost half to our total profits. 

“The gap between palm oil and soyaoil has widened to US$320 tonne, so the current attractive prices could give an incentive for consumers in India, China and Pakistan to make the switch. 

“As prices is set to improve in the second half, we hope to do better,” he said at a briefing here yesterday.

Also present were group chief operating officer Datuk Abdul Wahab Maskan and group chief financial officer Tong Poh Keow. 

“We are confident of riding out of the current challenging environment and reaping the benefits in the future when the global economy gets on the recovery path,” Bakke added.

Sime Darby proposed paying a lower interim dividend of 7 sen a share from 10 sen, previously. Asked if this means lower dividends for shareholders for the full year, Bakke said: “It may seem lower but I assure you we’re maintaining a dividend payout of at least half of our profits.”

The group’s property division suffered a 54 per cent decline in its second-quarter profit due to lower recognition from two mature townships in Klang Valley. Bakke, however, said the division’s take-up rate will pick up in the coming quarters. 

“The launch of the Saffron Hills housing in Denai Alam, Selangor, has managed to garner a 92 per cent take-up rate to date, while the Battersea Power Station project in London has already sold 97 per cent of the first phase of its property offerings,” he said.

The first phase of the Battersea project will start construction in June, while the second phase will be launched towards year-end.

Sime Darby’s industrial division profit dipped 4.0 per cent to RM285 million, due to lower deliveries of heavy machineries to the oil and gas, marine and power generation sectors.

Profit from its motor division for the second quarter went up 7.0 per cent to RM164.6 million, thanks to overall strong sales of BMW, Peugeot and Hyundai models.

The group’s search for a foreign partner to grow its healthcare business into that of a regional player is still “work in progress”, said Bakke.


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