Averting price war

PETALING JAYA: MALAYSIA must get on the dance floor and tango with Indonesia to avoid a price war, said Palm Oil Refiners Association of Malaysia (Poram) chief executive officer Mohammad Jaaffar Ahmad.

Last month, the Indonesian Palm Oil Association reportedly urged its government to slash refined palm oil export duty from 12.5 per cent to zero. This would further widen the export tax gap between its crude and refined oils.

Poram has urged the Malaysian government to be vigilant. “The government must take a more dynamic approach. We cannot afford to repeat the mistake of staying on the sidelines when Indonesia makes a move,” said Jaaffar when asked about the prospects of Indonesia changing its palm oil tax structure.

“The last time Malaysia hesitated in 2012, we fell into a lose-lose situation, of which downstream players bled losses and planters in both countries suffered from a price war.”

Two years ago, Indonesia, in its efforts to boost exports, slashed its refined palm olein tax to seven per cent and retained its crude palm oil (CPO) duty at 15 per cent.

As a result, stakeholders throughout the palm oil value chain in Malaysia took a beating. At that time, decades-old partnerships between millers and refiners in Malaysia broke down as refiners bled losses for every tonne of CPO refined. Jaaffar said to stem losses, refiners unwound long-term contracts, which then slowed down purchases and resulted in a rapid build-up of CPO inventories.

This, in turn, caused CPO and crude palm kernel oil prices to tumble, affecting planters in Indonesia and Malaysia. With cheap CPO and low duty export for packed products, Indonesian exporters sold their products at reduced prices, thus grabbing the market share from refiners in Malaysia.

When Indonesia moved and Malaysia took a 'wait-and-see' approach in 2012, the local palm oil industry lost an estimated RM9 billion in export revenue. 

“We cannot afford to remain static again. Ideally, it’s best for Malaysia’s tax gap between crude and refined palm oil to mirror that of Indonesia. If and when Indonesia widens its tax gap, Malaysia must also follow suit.

“We need to move in lockstep with Indonesia, like the way dancers hold hands and do the tango. That way, Malaysia’s refiners can continue to compete on a level playing field and hopefully, oil palm planters in both countries can avoid the dreaded price war.

“The yesteryear thinking of ‘We’re better than the other’ is over. In the spirit of the Asean Economic Community, it’s time for Malaysia and Indonesia to adopt a mutually beneficial approach of ‘We’re better together.’

He said if Indonesia widens the tax gap between crude and refined oil by a certain percentage, Malaysia’s CPO tax must be immediately amended to match the gap. This will allow oleochemical and specialty fats producers here to also benefit from the competitive prices. 

Palm oil prices have been on a downtrend for six months. Last Friday, the third-month benchmark CPO futures on Bursa Malaysia Derivatives Exchange traded RM49 lower to close at RM1,930 a tonne, below the psychological comfort level of RM2,000.

On the current downtrend, Jaaffar said it is wrong to assume that refiners and planters are engaged in a zero-sum game. “It is a misconception that in times of falling CPO prices, refiners are happy at the expense of planters. As refiners, we are margin players. It doesn’t matter if palm oil prices are high or low.

“In fact, everybody will win if the price of CPO is high. That is the role of the refiners in supporting the price of CPO by being able to buy and process every drop of CPO in the country,” he added.

FGV buys Sarawak estates, upgrades biodiesel business

KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) is buying London-listed Asian Plantations Limited (APL) for RM628 million.

In a statement, FGV said it intends to make a voluntary conditional cash offer for all of APL ordinary shares (excluding treasury shares) at £2.20 per share. The Singapore-incorporated APL is listed on the London Stock Exchange's Alternative Investment Market. 

APL owns 24,622ha of oil palm plantations in Miri and Bintulu, Sarawak. Its 29.4% major shareholder, Keresa Plantations Sdn Bhd, is owned by Tan Sri Leonard Linggi Jugah. One of APL’s directors is Tan Sri Amar Leo Moggie, who is more well-known as chairman of Tenaga Nasional Bhd.

“FGV continues to seek opportunities to strengthen our leading position in the oil palm plantation business, through organic and inorganic growth. 

"We are attracted to APL’s high-quality estates and are confident it will bolster FGV’s lead in sustainable palm oil production,” said FGV group president and chief executive officer Mohd Emir Mavani Abdullah.

He said the acquisition complements FGV’s long-term expansion strategy to be in the world’s top 10 agribusiness players and a leader in the sectors of palm oil, rubber and sugar by 2020.

These estates are serviced by a 60 tonne-per hour palm oil mill. Incidentally the estates are near Bintulu's deepwater port, where four of the big palm oil refineries in Sarawak are located. “FGV intends to double the productivity of the mill once it completes the purchase,” Emir said.

In October 2013, FGV bought Pontian United Plantations, which has oil palm estates in Sabah and Johor, for RM1.2 billion.

With all these acquisitions, FGV becomes the world’s third-largest plantation owner of more than 450,000ha in Malaysia and Indonesia.

The group is now the largest crude palm oil producer in the world with about 18 per cent of Malaysia’s production and 7 per cent of the world’s production.

Moving up the value chain, FGV via its unit Felda Global Ventures Downstream Sdn Bhd is upgrading its biodiesel plant at Pahang with the latest technology in renewable fuel.

The joint-venture parties consist of FGV Downstream (60 per cent), M2 Capital Sdn Bhd (20 per cent), a subsidiary of Australia stock exchange-listed Mission New Energy Ltd and Benefuel International Holdings S.A.R.L (20 per cent).

The joint-venture will acquire a biodiesel plant in Kuantan Port from Mission Biofuels Sdn Bhd and carry out retrofitting on the plant so that it can operate on the Benefuel ENSEL technology with capacity of 250,000 tonnes per annum.

“Through this synergistic collaboration with our partners, there are ready market players throughout their networks in North America and Europe," Emir said. “With the new plant, our biodiesel capabilities will increase threefold, resulting in FGV becoming one of the largest exporters of biodiesel in Southeast Asia.” 

He estimated cost for the proposed joint venture, including the plant acquisition, licensing costs, purchase of catalyst, refurbishment and retrofit to amount to US$47.5 million.

PLCs embrace 'People, Planet and Profits' presentation

This is written by my colleague Muhammad Ahmad Hamdan.

KUALA LUMPUR: The government has taken a step further in realising the adoption of integrated reporting (IR) among local public-listed companies (PLCs) to better inform investors of Corporate Malaysia balancing the needs of People, Planet and Profits.

Prime Minister Datuk Seri Najib Razak said the Securities Commission (SC) is working closely with communication practitioners and the industry on the matter, which will help to publicise good business initiatives within Corporate Malaysia.

“I’m pleased to share with you that Sime Darby Bhd will be adopting IR by 2016, making it the first company in Malaysia to do so,” Najib said during his speech at the Business Leaders Dialogue Session, here, yesterday. The event was organised by the Economic Planning Unit of the Prime Minister’s Department and the SC.

IR is a new approach towards corporate reporting and provides a more comprehensive overview of organisations, helping all stakeholders — from management to investors — to make better-informed decisions. It involves publicising the company’s initiatives and commitment to the environmental, social and governance agenda, given the rising trend of socially-responsible investing.

In December 2013, the International Integrated Reporting Council launched the framework on IR to prepare PLCs for the adoption of this method of corporate reporting. More than 40 corporate leaders representing the country’s top PLCs and government-linked investment companies contributed their views to this initiative in better communicating a common practice of balancing the needs of People, Planet and Profits. 

Also present were Ministers in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar and Datuk Seri Idris Jala, Second Education Minister Datuk Seri Idris Jusoh and SC chairman Datuk Ranjit Ajit Singh.

Corporate leaders lauded the government’s call for the adoption of IR by PLCs, saying that more companies have taken serious efforts in better communicating their business practices.

Felda Global Ventures Holdings Bhd (FGV) and Telekom Malaysia Bhd (TM) said IR is an important element in corporate reporting. “FGV has taken steps to implement it. We are doing our internal harmonisation of the reporting mechanism and we should be ready by 2016,” said group president and chief executive officer Mohd Emir Mavani Abdullah. “We fully support this as it provides the shareholders with a much clearer perspective of the company and makes the company more transparent and accountable,” he added.

TM group chief executive officer and managing director Tan Sri Zamzamzairani Mohd Isa said: “For the next annual report to be published in 2015, it is encouraged that all PLCs come up with an integrated reporting and we have started doing it already”.

Ranjit said while IR will not be made a mandatory, the regulatory body will continue its efforts in encouraging all PLCs to adopt it. “As of now, there is no plan to make IR mandatory for all PLCs,” he told Business Times on the sidelines of the dialogue.

IOI Corp upbeat on Betapol

KUALA LUMPUR: IOI Corp Bhd is upbeat on the prospects of its palm oil-derived nutritional additive Betapol, which is increasingly being used to fortify infant milk powder globally, especially in China.

“Breast is best. But don’t be sad, if you can’t. Uncle Lee can help,” said its chairman Tan Sri Lee Shin Cheng in reassuring mothers of newborns, who are unable to breastfeed.

He was responding to a media query on IOI Corp’s supply of the nutritional additive to global baby milk powder manufacturers.

When breast-feeding is not always possible, infant milk powder fortified with Betapol provides the next best option, Lee told Business Times in a telephone interview.

Betapol is the first and foremost vegetable fat blend created specifically to mimic the human milk fat structure, said IOI Corp, adding that it offers the same nutritional benefits and positive health effects as breast milk.

Its studies have shown that infant formulas containing Betapol reveal better calcium absorption, rise in the babies’ bone density and softening of stools.

Infant formula is generally used from birth through 12 months, but more targeted nutritional products may be used till up to 24 months. The global market for infant formula has been growing, particularly in China, despite its one-child policy.

Lee said China’s Ministry of Health has approved Betapol as an additive in infant milk powder since 2008.

Milk powder is a sensitive matter in China after a 2008 scandal involving milk tainted with melamine that led to the deaths of at least six infants and made many thousands ill. The incident hit the reputation of local dairy firms but boosted the market share of imported brands, such as Danone SA, Nestle SA, Mead Johnson Nutrition Co and Abbott Laboratories.

In recent years, domestic milk powder makers in China, in their bid to boost the quality of their products, started incorporating Betapol into their formulation. They include Inner Mongolia Yili Industrial Group Co Ltd, China Mengniu Dairy Co Ltd, Feihe International Inc and Heilongjiang Wondersun Dairy Co Ltd.

The global human milk fat replacer market is a duopoly, of which Betapol competes with InFat. The latter is marketed by Advanced Lipids, a joint venture between Enzymotec Ltd of Israel and AarhusKarlshamn (AAK), the downstream arm of United Plantations Bhd. 

InFat is a palmitate fat that mimics the composition and properties of human milk fat. Peer reviewed research and clinical studies have also shown InFat, like Betapol, is beneficial to infant intestinal health and bone strength.

When asked if IOI Loders Croklaan has an upper hand over rival AAK in capturing China’s market, Lee said his team is committed to better serving the clients.

He said IOI Corp’s arsenal of 17 patents provide worldwide intellectual property protection for the process currently used in the company’s dedicated Betapol facilities in Malaysia and the Netherlands. 

It involves the enzymatic acidolysis of a palm stearin component with oleic acid to produce an OPO-type fat. By protecting its product ideas, IOI Corp is seen to increase its dairy customers’ chances of success with their premium offerings.

Separately, while conducting a media tour of IOI Corp’s refinery complex in Pasir Gudang, IOI Loders Croklaan Asia chief operating officer Michael van Sallandt assured milk companies security of supply.

“Our Betapol plant here in Johor is able to churn out 10,000 tonnes a year. We’re also setting up a blending facility in Xiamen, China, so as to be closer to our clients. So far, there are 25 infant milk powder brands using Betapol,” he added.

FGV beefing up CPO trading

This is written by my colleague Zaidi Isham Ismail.

KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) wants to ramp up its crude palm oil (CPO) trading activities to consolidate its position as the world’s largest CPO producer, as well as to boost earnings.

FGV transport, logistics, marketing and others (TLMO) cluster head Datuk Khairil Anuar Aziz said the company will set up a marketing and trading company by year-end.

“It is a numbers game out there and we want to beef up our trading activities to drive revenue. We realise that other plantation companies are doing it and we don’t want to miss the opportunity.

“In fact, we are much better as we are backed by our own assets such as CPO from our own plantations, crushing mills and refineries,” Khairil told Business Times in an interview recently.

FGV, which produces about 3.2 million tonnes, or six per cent, of the world’s global CPO a year, reorganised its operations last month into six clusters with the aim of becoming a top 10 global agribusiness player.

The six clusters are upstream, downstream, sugar, rubber, research and development, and TLMO. The reorganisation is also part of FGV’s blueprint to rake in RM100 billion worth of revenue by 2020.

Khairil said 2.3 million tonnes of FGV's output are for internal consumption, such as for its unit Delima Oil Products to make cooking oil and for its oleochemicals partner Procter & Gamble in Kuantan.

“We can only trade about one million tonnes, which is not enough to boost income. Thus, we will go into trading in a bigger way. We will buy CPO from Indonesia and other producers and market it overseas.”

He said FGV will put more effort in expanding its trade offices in Indonesia, United Arab Emirates, China and Turkey.

Tocotrienols for brain health

This is written by my colleague at Penang Bureau.

A recent study has found that Vitamin E from palm oil can help protect brain cells, writes Marina Emmanuel.

MALAYSIA’s top spot as the first country to commercialise tocotrienols has been strengthened by the findings of a two-year human clinical study carried out at Universiti Sains Malaysia (USM), which now lend promise for the preservation of brain health.

Derived from palm oil, this Vitamin E supplement, consumed long-term, has been found to protect brain cells and the nervous system as well as help minimise brain cell injuries, especially during a stroke.

The clinical study was published in the American Heart Association journal, Stroke. It is being touted as the first study to provide solid evidence of tocotrienol’s neuroprotective benefits in humans.

The clinical trial, led by USM Professor Dr Yuen Kah Hay and detailed in Stroke, shows that Vitamin E tocotrienols, derived from palm oil may support white matter health by weakening the progression of white matter lesions (WML) or oxygen-starved brain cells.

About 50 per cent of our brain is made of white matter, which provides connections to various other brain centres and is key to learning and memory.

WMLs are abnormal regions in the brain that can be detected by magnetic resonance imaging. Brain WMLs have been reportedly linked to the development of other neurodegenerative diseases, such as Alzheimer’s and Parkinson’s.

“Injury to white matter has been reported to be the major cause of functional disability in cerebrovascular disease,” said Yuen, adding that previous animal studies have reported that palm oil Vitamin E tocotrienols are capable of preventing damage to white matter during a stroke, and improving blood circulation to the damaged part of the brain after a stroke.


The trial was a randomised, double-blind, placebo-controlled study conducted by USM which followed two groups of volunteers — one with WMLs and the other with no WMLs — for two years.

One group received 200mg of mixed tocotrienols (Tocovid Suprabio) twice daily for two years, while the others were given a placebo. All volunteers were instructed to maintain their regular diets and physical activity levels.

MRIs were performed at entry into the study (baseline), and then repeated after one year and again after two years.

After two years of supplementation, the mean WML volume of the placebo group increased whereas those who received mixed palm tocotrienols remained unchanged, the study concluded.

“Tocotrienols,” noted Yuen, “have been in the market for a long time and are sold here and in the US and Europe. It is through the efforts of Malaysian companies that the world today knows of the availability of tocotrienols.”

He said that though doctors in Hong Kong have been prescribing tocotrienols to patients, there is still a need to convince local health professionals of its neuroprotective benefits.

“They remain sceptical unless we show them evidence, which is the result of tests on humans. With more studies coming out that tocotrienols are indeed neuro-protective, the effect is likely to be seen in better demand for palm Vitamin E tocotrienols while further improving the image of Malaysian palm oil,” said Yuen.

“As proven by studies carried out abroad, palm oil is healthy and just as good as olive oil, if one looks in terms of their cholesterol profile. What is needed now is to to convince consumers.

“Doctors and pharmacists can do a good job in advising their patients on palm oil since they are looked on as opinion leaders in the health field.”

Jakarta to tighten grip on plantations

JAKARTA, Indonesia (Reuters): LAWMAKERS are looking to restrict foreign ownership of plantations to no more than 30 per cent, as the country tries to maximise land usage, protect indigenous people and tighten environmental controls in the sector.

A new draft bill drawn up by members of the Parliament aims to open up the sector to smaller, local players. But it would also discourage foreign investment just after the nation has set an ambitious goal of raising its palm oil output by a third to 40 million tonnes by 2020.

Foreign ownership of Indonesian plantations is currently set at a maximum of 95 per cent. As well as simplifying Indonesia’s complex rules on land use, the new proposed law may also make it easier to prosecute businesses responsible for Southeast Asia’s annual “haze” season.

“It’s a bombshell and has snuck in under the radar, and as far as I know, without consultation with the industry,” a source said.

“There will clearly be a decline in new foreign investment. I would think there will be a decline in the capital value of plantations.”

Foreign plantation firms currently operating in Southeast Asia’s largest economy include Golden Agri-Resources and Wilmar International, Sime Darby Bhd and Cargill.

Limiting foreign ownership in palm firms to 30 per cent would hinder the flow of overseas capital needed to develop and modernise the industry, said Fadhil Hasan, executive director at the Indonesian Palm Oil Association.

The government has introduced a series of nationalistic rules for commodity exports, including palm, cocoa and mining, in an effort to boost domestic processing industries and boost the value of its exports.

The Parliament is looking to finish discussions on the draft bill with the government soon and expects it to be approved before the new administration is in place, said Gamal Nasir, director general of plantations at the agriculture ministry.

If the draft bill becomes law, it would be retroactive for companies that already own plantations, said Herman Khaeron, a lawmaker and vice-chairman of the parliamentary committee for agriculture, forestry, fisheries and maritime.

But this interpretation was rejected by agriculture ministry and industry officials.

Firms would be given five years to comply with the new bill and those that refused to comply may face fines, temporary suspensions or the revoking of licences. 

B5 biodiesel mandate delayed, again

PUTRAJAYA: Malaysia, the largest palm oil producer after Indonesia, delayed the nationwide implementation of its biodiesel mandate to the end of the year, said Datuk Seri Douglas Uggah Embas, Plantation Industries and Commodities Minister.

The B5 programme will be completed by December instead of an original target of July, doubling average monthly consumption, Uggah said in an e-mailed response to Bloomberg questions. 

The delay was because construction of 15 blending facilities in the states of Sabah and Sarawak and the federal territory of Labuan in East Malaysia were taking longer than expected, he said.

Palm, the world’s most consumed cooking oil, has declined 16 per cent in 2014 and slumped to the lowest level in a year in Kuala Lumpur today as the US government predicts record global inventories of soybeans, used to make an alternative oil. 

Prices have also been pressured by the failure of Indonesia and Malaysia to boost use in biofuels, according to Dorab Mistry, director at Godrej International Ltd, on June 26.

"We are monitoring the progress of the construction of the blending facilities and exploring ways to accelerate completion,” Uggah said. 

Full implementation of the B5 programme is expected to consume 500,000 tonnes of methyl ester annually. The country is set to produce 19.5 million tonnes of palm this year, he added.

Futures declined as much as 0.7 per cent to RM2,239 (US$700) a tonne today on the Bursa Malaysia Derivatives, the lowest level since August 12. News of the delay added to the bearish outlook for palm oil, said Chandran Sinnasamy, Kuala Lumpur-based head of trading at LT International Futures Sdn Bhd.

B5, which involves blending five per cent of palm methyl ester with 95 per cent of diesel petroleum, was completed in March in Peninsular Malaysia, Uggah said. Monthly usage will average 41,667 tonnes upon full implementation compared with 20,833 tonnes now, Uggah said. 

This will increase to 58,333 tonnes with the start of the B7 programme in the first quarter of 2015, he said, adding the Malaysian Palm Oil Board (MPOB) is in discussions with engine manufacturers and automobile associations to get warranties for B7.

Indonesia in September 2013 also boosted the amount of biodiesel blended with fuel to 10 per cent from 7.5 per cent and power plants had to blend 20 per cent from January 2014.

The country’s use of palm biodiesel in the first five months was roughly the same as in the same period a year earlier and full-year consumption will not increase, Mistry said at a conference in Mumbai in June. Domestic consumption of biodiesel is not as good as expected, Fadhil Hasan, executive director of the Palm Oil Association, told reporters on July 21.

Indonesia and Malaysia, collectively produce 86 per cent of world supply. --Bloomberg

Planters’ minimum wage headache

KUALA LUMPUR: The minimum wage policy is meant to pave the way for a higher income nation but blanket implementation of this law had resulted in higher amount of money sent out by foreign workers.

Feedback from rubber and oil palm estates showed that the higher salary payouts under the minimum wage policy have resulted in a substantial increase in remittance by foreign workers. The amount is estimated to almost double this year from 2012, before the policy was implemented.

The Minimum Wages Order 2012 took effect in January 2013 and 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 Labuan.

While lawmakers seek to propel Malaysia towards becoming a high-income nation by introducing minimum wages, the blanket implementation of the “basic rate” instead of “take-home pay” across all sectors has given foreign workers more money to send home.

In an interview with Business Times, Malayan Agricultural Producers Association (Mapa) executive director Mohamad Audong said the blanket implementation of the minimum wage policy, rising bank borrowing costs and falling palm oil and rubber prices have resulted in planters being hit from all sides.

“While there was a 20 per cent increase in basic wages, there was almost 40 per cent more money outflow from Malaysia last year. In theory, this law is supposed to help the oil palm industry become more productive. In reality, planters are badly hurt.”

He pointed out that in 2012, foreign workers in the agriculture sector remitted around RM8 billion. “After the minimum wage policy was implemented, foreign workers sent back around RM11 billion. This year, Mapa estimates the figure to surpass RM15 billion.”

Mohamad said planters are facing higher production costs due to costlier fertiliser, higher foreign worker recruitment fees and higher fuel and utility costs. There are also various fees and tax hikes.

Oil palm planters are already paying corporate tax, service tax, sales tax, windfall profit levy, crude palm oil export duty and import duties on agricultural tools and machinery. They also have to pay cess of RM13 per tonne to the Malaysian Palm Oil Board.

Mohamad said the bleak outlook is compounded by Bank Negara Malaysia’s recent rate hike, which means costlier bank loans.

Oil palm planters are also at the mercy of the world commodity markets. If palm oil prices were to drop below RM2,000 per tonne, some planters will lose money. “Many of our planters borrow money from the banks and issue bonds, of which bankers and insurance companies are subscribers.” Depending on the year of planting, Mapa calculated that palm oil production cost of these heavily-geared planters ranges between RM1,300 and RM3,000 a tonne. 

“If palm oil prices were to fall below RM2,000 a tonne, some planters may face difficulty in repaying the loans. They will then have to hire fewer workers and there will be less harvest. The minimum wage policy works best if commodity prices are on the uptrend, not when prices are falling,” he said.

As the government seeks to review the minimum wage policy at the end of this year, planters are appealing for a more judicious implementation.  “We are not opposing the minimum wage law. It would be more practical if the government amends the RM800 and RM900 per month minimum figure to that of take-home pay instead of basic rate. This will streamline the Minimum Wages Order 2012 to the main thrust of existing labour laws.”

Mapa represents about 200 plantation companies in Peninsular Malaysia with estates spanning more than one million hectares. These planters employ some 125,000 workers in the fields, of which 80 per cent are foreigners.

Meanwhile, Malaysian Palm Oil Association (MPOA) chief executive officer Datuk Makhdzir Mardan concurred that oil palm planters are enduring severe financial burden under the spectre of the taxes and new ones to be introduced. 

“For every RM1 we earn, we have to pay almost 45 sen in taxes to the federal and state governments.”

Planters are not required by law to provide accommodation, schools, clinics and places of worship but many MPOA members do so as part of their corporate social responsibility “When you factor in amenities such as housing, water, electricity, medical care, transportation, etc, it amounts to about RM450 per worker per month.”

He also said the new Property Assessment Tax of between RM5 and RM100 per hectare imposed by local authorities is painful on members.

“If the public think what is happening to oil palm plantations has no bearing on their savings, think again.” Makhdzir said when planters experience severe profit erosion, the man in the street will inevitably feel the impact. “Pension funds, such as the Employees Provident Fund, are all heavily invested with plantation companies.

He said Permodalan Nasional Bhd, the country’s biggest fund manager, and pilgrims fund board Lembaga Tabung Haji derive a big chunk of dividends from palm oil earnings. What this means is that the average Malaysian’s savings is considerably tied to the country’s palm oil sales.

If palm oil earnings shrink as a result of the “less thought out” implementation of the minimum wages law, Makhdzir said pension and unit trust funds with big stakes in plantation companies may not be able to generate as much dividend as before.

Heng Huat to grow on China’s briquette market

This is written by my colleague Muhammad Ahmad Hamdan.

KUALA LUMPUR: Heng Huat Resources Group Bhd, which debuted on the ACE Market of Bursa Malaysia yesterday, is banking on the robust briquette demand from China to help it achieve a 10 per cent increase in revenue by year-end.

Co-founder and managing director H'ng Choon Seng said Heng Huat's oil palm and coconut biomass, which is processed into briquette, is seeing growing shipments into the energy hungry republic.

China’s growth potential for alternative energy sources is apparent in areas where environmental issues are increasingly coming to the fore.

“The higher environmental awareness globally has led to increasing government laws to curb air pollution and usage of depleting fossil fuels, such as the recent ban on new coal-fired plants in several cities throughout China.

“These developments are likely to spur greater demand for cleaner and renewable energy sources such as palm biomass briquette,” H'ng told a press conference after the company’s listing ceremony, here, yesterday.

Heng Huat saw revenue rising to RM21.3 million in the first quarter ended March 2014, from RM16.1 million a year ago on significant export sales to China, which contributed 50 per cent of the revenue.

H'ng said the company, which has 10 intermediate companies in China, will set up a subsidiary in southern China to support its operations there.

Heng Huat raised RM20.93 million from the listing exercise, of which RM4 million would be used for capital expenditure, RM4.55 million for working capital and the remaining RM9.38 million and RM3 million for the repayment of bank borrowings and listing expenses, respectively.

Out of the RM4 million capital expenditure allocation, RM3.20 million will be for factory expansion and upgrade, situated at the mainland of Penang.

The company operates two coconut fibre production lines, 20 oil palm empty fruit bunches fibre production lines, two briquette production lines and three coconut fibre sheet production lines.

Yesterday, Heng Huat opened at 61 sen, a premium of 16 sen above its offer price of 45 sen.

Palm oil vitamin E good for skin health

Ontario TV viewers recently learned how vitamin E tocotrienols extracted from Malaysian red palm fruit oil may soothe their dry, scaly and itchy winter skin.

Holistic pharmacist Sherry Torkos stopped by the CHCH Morning Live studio to explain that frying, sautéing or even baking with this heat-stable oil may help you "get some benefits of the positive fatty acids."

She added that palm oil, which is rich in vitamin E tocotrienols, is also available in soft gels.

Torkos believes regular tocotrienol supplementation helps with body cell hydration, fights UV deterioration and free radical damage that can lead to premature aging. 

When we consume these powerful healing anti-oxidants we get to experience slowdown in skin aging from the inside out. So, this is a simple change we can make from a lifestyle perspective to improve our skin health, from what we eat and drink.

Another side benefit worthwhile to look out for is that tocotrienols may also improve heart-and brain-health.

Hey beautiful! How are you?

Malaysian red palm oil may be a secret to flawless skin, exclaims Hollywood celebrity skin expert Scott-Vincent Borba. During a Good Morning, San Diego! interview, Borba explained that beautiful skin starts from within.

His reasons for loving Malaysian red palm oil -- "I've tried everything!" -- is simple.

Wrinkles, sags, and age spots are outward signs of internal inflammation. Triggers include environmental toxins, a diet high in refined and sugary carbohydrates, sun exposure, hormonal changes, stress, smoking and excessive alcohol consumption. 

The solution begins with an anti-inflammatory diet. Key anti-oxidants — such as the palm oil vitamin E tocotrienols — can be a powerful beauty arsenal.

Red palm oil's high smoke point allows it to be versatile. You can use palm oil to bake, stir-fry and even drizzle it in your salad with balsamic vinegar.

"Red palm oil actually helps with anti-aging, your skin texture and tone. You'll actually get a glow within a couple of weeks of using this product. It's awesome."

The Cooking Your Way to Gorgeous author dishes out his recipes for a healthier, beautiful you.

Rich in antioxidants such as the full range of vitamin E of tocotrienols and tocopherols, and vitamin A's beta carotene, Borba believes Malaysian red palm oil can replace olive oil in your kitchen.

What you put in your body is actually good for you outwardly, too. As the vitamin E anti-oxidant in the cooking oil called tocotrienols work to counteract inflammation processes in your body, it will lead to better cell regeneration and moisture retention. 

Take it from Borba and stir-fry your meals with spoonfuls of red palm oil. In time, your natural beauty will shine from the inside out.

Mapa appeals to govt to replace monopoly bodies

KUALA LUMPUR: Malayan Agricultural Producers Association (Mapa) appeals to the government to replace monopoly bodies such as Fomema Sdn Bhd with a more economically competitive system of medical examination, of which employers can directly pay their foreign workers’ doctors.

“From an economic standpoint, it would be more prudent to allow open competition of supply and demand to determine the rate of medical examination fees,” said Mapa president Tan Sri Mohd Noor Ismail.

“Furthermore, the monitoring of health matters concerning all workers should be vested directly with the Health Ministry and not by a consortium company,” he told Business Times after chairing Mapa's annual general meeting, here, yesterday.

Fomema was established in 1997 to manage and operate a mandatory foreign worker health screening system in Peninsular Malaysia. It does not conduct the medical checks but farms it out to private clinics and takes a cut on the charges.

By its own estimate, Fomema makes at least a RM45 million profit a year — a RM25 service charge and RM5 for issuing a computerised certificate for each of the 1.5 million legal migrant workers every year.

It was reported that Fomema has been using the same fee structure since its inception. It charges RM180 to arrange medical screening for every male worker and RM190 for every female worker. The additional RM10 is for a pregnancy test that all female workers must take.

Out of the RM180, RM60 is for the doctor’s consultation, RM65 for urine and blood tests and RM25 for X-ray. That works out to RM150 each.

Mohd Noor also noted that a new consortium firm, namely the Foreign Workers Centralised Management System (FWCMS), will place tremendous financial burden on farmers, rubber smallholders and oil palm planters. 

It is purportedly set up for the implementation of medical examination of workers in the source country and for the visa with reference, or VDR, online application.

“This kind of consortium company would not be established for free. Further financial burden is going to be imposed upon our members. We fear this move would further increase cost of agricultural production without any real improvement in productivity,” Mohd Noor said.

“As of todate, we’ve not been not informed by the government if FWCMS is a one-stop centre for matters concerning foreign labour affairs,” he added.

Is this reporter "taking sides"? Is he bias?

Three years ago, at Washington, DC, USA, Bryan Thompson, a 14-year-old student at Colonial Forge High School was suspended for running onto the field during a school football game — wearing a banana outfit.

Thompson was interviewed by WRC reporter Pat Collins (watch the video, above). Thompson wore the infamous banana outfit. Collins, not to be outdone, dressed like a grape, in a not-so-subtle attempt to make the point that Thompson was doing nothing wrong.

"It starts with a banana," Collins said in his report. "Then all of a sudden you have an apple, and an orange, and then maybe a grape, and before you know it, you have fruit salad in the schools. We can't have that."

Students who protested Thompson's 10-day suspension were given detention. 

Faced with an onslaught of criticism — from reports like this one, as well as advocacy groups like the ACLU, school principal Karen Spillman resigned. All the suspensions were subsequently lifted.

Now, you might ask what has this got to do with oil palm planters and palm oil companies? 

Well, it's about "taking sides" in speaking out against injustice and trade oppression oil palm investors and palm oil exporters face. 

Is it ever right for mainstream media reporters to be vilified and branded as bias for "taking sides" with oil palm planters when they lay down the facts on the double standards definition of "forest destruction" between that of tropical Asia and western countries' pine forest?

Even some oil palm planters, who are so used to being relegated the whipping boy of modern agriculture, exclaim in relief "that reporter is on our side, she's on our side." 

Sadly, some plantation companies which are bullied into wounded silence, forget they have every right to a very basic expectation ... insightful reporting from ALL journalists, commentators or market observers.

It's time for oil palm planters to step up to the plate in better communicating their contribution to the economy. Employees of plantation companies must learn to be comfortable with their show-and-tell skills and think on their feet. These "soft" skills are a necessity as Malaysia's economy shifts into a knowledge-based one. 

It's time for decision makers of the palm oil industry to expect higher standards of journalism from editors in uncovering the truth on insidious trade barriers and the nasty implications on Malaysia's economy. After all, journalism has always been the last bastion of justice when other avenues fail. 

Is the planting of oil palms anymore polluting than rainforest? Ladies and gentlemen, let's use our common sense.

Rainforest has more variety of big animals living there, right? Animals, trees and plants in the forest die from old age and diseases. So when termites feast on dead trees and maggots eat up dead animals, they emit carbon dioxide, yes? 

So, logically, one can conclude that estates planted with young oil palms actually produce more oxygen and absorb more carbon dioxide than old rainforest.

If saturated fats is bad for health, why do the same people who demonise palm oil advocate fish oil supplements, butter and cheese which certainly have higher content of saturated fats?

If oil palm planters think the current situation is just a straightforward trade rivalry with rapeseed, soybean and sunflower farmers .... think again. Take a few steps back and try and see the bigger picture. I leave you with the wise words of Albert Einstein.

Courage under fire

Courage under fire means being able to remain calm and doing the right things when most people would panic.

Many corporate and government agency leaders like to think they have courage – few actually do.

Courage should not be mistaken for reckless bravado or dismissive arrogance.

Courage is actually having the conviction to inspire people to do what’s right (and usually, difficult) rather than what’s popular and easy. 

It is choosing between doing the right thing (potentially risking yourself jobless and your family to unpopular backlash) versus turning a blind eye to a situation in order to “play it safe.”

Courage is necessary in leading one to do the right things in life. People are more likely to follow a leader  who asks of them to sacrifice time away from loved ones and struggle against adversities  when he or she is willing to do the same.

In my many years of interaction with people in Malaysia's palm oil industry as a reporter, I've noticed a pattern or two. Here's my summation of how courageous leadership is demonstrated. 

It takes the form of necessarily venturing into the unknown to seek business growth opportunities, working in collaboration (not isolation), cutting losses, being decisive in making tough choices, listening rather than speaking, admitting faults, forgiving faults of others, not allowing failure to dampen one's resolve to succeed and practising ethics in furtherance of good governance.

Courage is teachable and learnable – proof of this are in the moments we step up to the challenge and overcome our fears. 

I totally agree with Marilyn Monroe that fear is stupid and so are regrets. 

Courage makes us faithful, whereas the lack of it makes us fearful. Whether we look back on our personal experience or people around us, it is always better to stand for courage than regret failing to do so. 

Courage should not be defined as the absence of fear – it is stupid to assume brave people have no fears.

Courage is actually finding the strength to move ahead in the presence of fear.

In short, courage isn’t exclusive to the few. Courage is shown in everyday decisions.

We’re remembered for the decisions we make or don’t make. We're acknowledged for the courage we display or fail to exercise.

There are great rewards for those who choose the path of courage. This is because courage will give one the humility to accept bravery in others rather than stifle it. 

True leaders who consistently demonstrate courage will stand apart from the masses. They earn the trust and loyalty of those whom they lead.

Leadership always begins with one courageous act – make that calculated decision. Ladies and gentlemen of the palm oil industry, will you be brave enough to do what is right for the common good?

From ‘dirty’ gas to clean energy

Sludge from palm oil mill, when left idle, emit dirty gases like methane. Plantation companies tell OOI TEE CHING how they use green technology, in the form of biogas plants, to turn these agricultural waste to fuel up their mills and light up community houses and schools in their estates. 

PALM oil millers in Malaysia are leading the way in "greening" the palm oil supply chain by capturing greenhouse gas before it enters the atmosphere and turning it into green energy and organic fertiliser. 

Millers capture greenhouse gas from the sludge and turn it into renewable energy by investing in biogas plants. These anaerobic digesters behave like our stomach, containing friendly bacteria that feed on organic matter to produce flammable gas called methane and digestate that can be turned into fertiliser.

In an interview with Business Times, Sime Darby Plantation Sdn Bhd managing director Datuk Franki Anthony Dass noted his company's involvement in biogas plants has gained momentum in recent years because this environmentally-friendly initiative of stemming greenhouse gas emissions has its socio-economic benefits, too.

Apart from producing renewable electricity, the biogas anaerobic digestion process also converts environmentally polluting sludge into organic fertiliser that can be used to increase the yield of planted crops. 

By running a large combined steam and power generator, a palm oil mill becomes a self-sustaining powerhouse lighting up the houses, places of worships, schools and sporting facility in the estate, Franki explained.

Planters get to reduce their reliance on fossil fuels and any surplus electricity can be sold to Tenaga Nasional Bhd (TNB) if the mill happens to be located near the power grid, he added.

Sime Darby has, so far, put up two biogas plants in Peninsular Malaysia. In working towards reducing its operation’s carbon footprint, the group aims to have 18 mills installed with methane capturing facility by 2020. 

Palm oil clients from developed nations, like the EU, are happy to learn of the green movement among oil palm estates to capture and recycle these greenhouse gas into good use. This effort adds value to the notion that palm biodiesel is responsibly produced with environmental protection in mind.

If palm oil mills are located near TNB's grid and they have excess electricity to sell to the government, they can bid for the renewable energy quota laid out by government agency Sustainable Energy Development Authority (Seda).

An agency under the Energy, Green Technology and Water Ministry, Seda facilitates supply and renewable energy usage in Malaysia via feed-in tariff (FiT). This mechanism guarantees renewable energy producers a premium selling price over that generated from depleting and finite sources such as oil, gas and coal. 

Seda divides the renewable energy fund – among biogas, biomass, small hydro and solar photovoltaic – on a quota basis. Todate, biomass and biogas projects are allocated 222MW or only 37 per cent of the total 601MW renewable energy quota. 

Oil palm biogas plant operators, which had successfully bid for the renewable energy quota and accorded licences by Seda receive 32 sen per kWh under the feed-in tariff (FiT) when they hook up to the national grid. If they had leverage on home grown technology, use agricultural waste and efficient gas technology they would receive bonus incentives of 5 sen per KWh, 8 sen per KWh and 2 sen per KWh, respectively.

At the current FiT for qualified biogas plant operator, one can only expect minimal returns after 10 years. Franki said a more targetted package of government incentives could spur more palm oil millers to invest in waste-to-energy projects and help reinforce the notion that oil palm planting is a sustainable practice that balances the needs of People, Planet and Profits.

BELL Group, the pioneer among palm oil millers in installing biogas power plants, concurred with Sime Darby that energy recovery from waste is ultimately a waste management issue and not just a green power plant activity. 

BELL Group chief executive officer Puan Sri Liana Low noted the onus and cost of connecting biogas plants to TNB's grid lie with palm oil millers. It can be very costly if the mill is located a few kilometres away from the power grid.

She suggests the cost of laying the cable be shared between TNB and renewable energy producers. "Apart from the formidable cost of cabling up, there is also the logistical and technical challenge if there is a fault or sabotage of the connecting cable. This burden is too taxing on palm oil millers."

She urges the government to consider revising the nation’s electrification master plan. One can look to Indonesia where the authorities have facilitated isolated grids that are close to several biogas and biomass power plants for the benefit of rural communities. "A joint study between the World Bank and the Indonesian government showed installation of isolated grids proved to be cost effective in rural and island electrification."

It is common knowledge that solar only thrives on a few hours of intense sunlight while biogas power plants are able to run 24 hours a day, seven days a week. At current technology, solar conversion to electricity efficiency is only around 15 per cent while for biogas, it is close to 60 per cent. That means the conversion of biogas to electricity is four times more efficient than sunlight to power.

There had been reports that the government's allocation of renewable energy quota to the solar sector is seen to be inefficient use of the renewable energy fund. Also, compared to biogas investments, the solar sector is highly dependent on foreign technology and imports. 

Given the relatively limited FiT budget, which is funded by a 1.6 per cent levy on electricity bills of heavy users in Peninsular Malaysia and Sabah, it would a step in the right direction for Seda to further fine-tune its incentives to spur more participation from the biogas sector.

Current first generation biogas plants take about a month to generate a reasonable amount of biomethane. Going forward, Low highlighted that biotechnologists and engineers are seen working on second generation know-how that could speed up the digestion by 10 times to just three days.

Separately, Kuala Lumpur Kepong Bhd (KLK) executive director Roy Lim Kiam Chye concurred that Seda's FiT for qualified biogas plant should take into consideration the high investment and maintenance cost millers have to shoulder.

"The current package of tariffs for biogas plant operators of 42 sen per KWh, which include bonus incentives for agricultural waste management and engine efficiency, is still too low. It has got to be higher as biogas plants doubles up as a carbon emission savings initiative," he said.

"This year's 25MW quota allocated to biomass and biogas operators, or 39 per cent of total 65MW renewable energy quota is actually not enough. If a higher quota allocation is accorded to biogas plant operators, it can also help light up more energy-starved places in Sabah," he added. 

"It would be to the government's interest to further incentivise and widen the renewable energy quota to biogas plant operators. Apart from its relatively high energy conversion efficiency that makes payment from the renewable energy fund worthwhile, palm oil millers' investment in this biotechnology initiative leads to cleaner air and creation of more high-skilled jobs," Lim said.

KLK has, so far, installed a biogas plant in Sabah. By 2020, it aims to put up three more at its estates in Peninsular Malaysia.

Not all 368 palm oil mills throughout Peninsular Malaysia and Sabah can benefit from Seda's FiT because many are located far away from the national power grid and the cost to connect is just not commercially viable.

Going forward, Lim noted there is still much potential in biogas because millers can leverage on local know-how to purify biomethane and sell them as compressed natural gas to industrial users such as oleochemical producers or as transport fuel for taxis and express buses. There is also the possibility of compressing the methane into cooking gas tanks for household use in remote areas.

Felda Global Ventures Holdings Bhd (FGV) group president and chief executive officer Mohd Emir Mavani Abdullah said the group has, so far, put up 13 biogas plants at its estates. 

"By 2020, we aim to push this figure to 51. As the world’s largest crude palm oil producer, we're committed to reducing our carbon footprint and improving our environmental friendly practices for the benefit of our community."

He highlighted FGV's biogas facility at Umas palm oil mill in Tawau, Sabah is now generating 1MW for a rural electrification. Settlers, commercial entities and staff quarters are benefiting from this effort. 

Over at Lahad Datu, FGV's biogas plant at Mercu Puspita mill is also generating 1MW for use by residents at Bandar Cenderawasih township.

In theory, biogas plant operators is accorded a maximum FiT incentives of up to 47 sen per KWh. In practice, however, FGV's Mavani concurred with KLK's Lim that biogas plant operators can only achieve 42 sen per KWh. "We're not able to benefit from the 5 sen per KWh incentive for homegrown technology because currently there are no local gas turbines manufacturers we can source from. We've no choice but to import them from Germany and Spain," he said.