Archive for October 2011

KLK is Asean's No.1 paint binders supplier

KUALA LUMPUR: Kuala Lumpur Kepong Bhd, the biggest shareholder in London Stock Exchange-listed Yule Catto & Co plc, has set its sights to become Asia's biggest paint binders supplier in the mid-term.

It is now southeast Asia's largest supplier of paint binders, following the British firm's £10 million (RM49.4 million) purchase of Quality Polymer Sdn Bhd from Nippon Paint Malaysia. Quality Polymer is now placed under Yule Catto's 70 per cent unit Revertex Malaysia Sdn Bhd. Yule Catto is also the owner of the Synthomer Group, of which Revertex is a key part.

Paint is essentially made up of pigments, binders and solvents. A pigment gives the paint its colour and is mixed into a solvent. The binder, which form the bulk of the paint, binds the pigment to the solvent to form a very thick liquid so that it can properly coat a surface.

In an interview with Business Times here, Synthomer Asia managing director Dr Brendan Catlow said: "The Quality Polymer purchase is just the beginning of our plans to expand across Asia. 

"We aim to have more than 50 per cent of our sales from emerging markets by 2015. The only way to achieve this target is via major investments and acquisitions," he said.

On the size of Synthomer's war chest, Catlow declined to specify but said: "We have a very strong balance sheet."

On details of the recently-concluded Quality Polymer purchase, Catlow said: "We've been in talks with Nippon Paint for over a year before we finally agreed on the price. This acquisition is all about growth, not cost reduction. There's no voluntary separation scheme." Quality Polymer, which employs 30 staff at its Pasir Gudang factory in Johor, chalks up an annual sales of some £10 million.

With the addition of Quality Polymer's 15,000-tonne facility, Catlow said Synthomer's paint binders capacity in Asia now totals over 65,000 tonnes a year. "Our binders are used in eight of top 10 global paint brands. In view of the increasing demand for paint binders in southeast Asia, we're planning to set aside more investments to raise capacity at the Pasir Gudang facility. This will be carried out next year," he said.

According to the World Paint & Coatings Industry Association, the 10 most popular paint brands are AkzoNobel, PPG Industries Inc, Sherwin-Williams Co, DuPont Coatings & Color Technologies Group, ICI Paints, BASF Coatings AG, RPM International Inc, SigmaKalon Group BV, SACAL, Valspar Corp, and Nippon Paint Co.

Synthomer is not a newcomer to Malaysia, having been in business here for 75 years.

Apart from making paint binders, it is also the world's number one supplier of nitrile latex, catering to the needs of the top 10 rubber glovemakers in southeast Asia.

Describing Synthomer's business, Catlow said: "Our polymers are used in a wide range of industries to create and enhance everyday consumer products. "Whether you're reading a book, opening a pack of breakfast cereals, painting your kitchen, labelling an envelope, laying a carpet, tiling a bathroom, using hairspray or simply driving your car, you could be using a product that has been improved by our scientists," he added.

Labelling bill unfair, Aussies told

This is written by my colleague Roy See Wei Zhi.

KUALA LUMPUR: The Food Standards Amendment (Truth in Labelling -- Palm Oil) Bill 2010, if passed by the Australian House of Representatives, would undermine the country's palm oil exports to Australia -- a central pillar of the Malaysian economy.

Malaysian Palm Oil Council (MPOC) chief executive officer Tan Sri Dr Yusof Basiron testified at the Australian House Standing Committee on Economics, highlighting the importance of the industry to the Malaysian economy and how the bill would have detrimental effect on various sectors if passed.

In August, Yusof said the bill directly targeted the Malaysian palm oil industry, which would affect almost 100 per cent of all palm oil products exported to Australia. Incidentally, these exports account for 9.3 per cent of Malaysia's gross domestic product.

The bill had also previously been expanded to non-food palm oil products, which meant that it was no longer a "food labelling" bill. Yusof said the bill was discriminatory because it singled out palm oil and not other vegetable-based oils.

The discrimination would directly affect the livelihood of almost one million Malaysians who were involved in the growing, harvesting, packing and logistics of palm oil products.

Yusof argued that the singling of Malaysian palm oil products from other food products also violated several principles of the World Trade Organisation as well as terms of the Asean-Australia-New Zealand free trade agreement.

The bill would undo the efforts taken over many years to bring Australian and Malaysian trade relations and bilateral ties closer.

Yusof said the bill would also have adverse effects on Australian consumers as there were costs associated with the label changing exercise, estimated at between A$5,000 (RM15,000) and A$15,000 per product.

The products affected in the Australian market by the label change are numbered in the thousands.

Yusof said claims by environmental groups that the oil palm industry had a huge negative impact on the natural environment were without basis.

The bill was the work of environmental non-governmental organisations with the aim of gaining a monopoly on the palm oil supply chain by promoting their own certification scheme for "sustainable" palm oil.

Also, claims by Australian forest conservation groups that Malaysia had been practising rampant deforestation for oil palm plantations were hypocritical and unsubstantiated.

Ironically, the United Nations' Food and Agricultural Organisation reported that Australia's rate of deforestation was at a rate five times greater than Malaysia.

Concluding his presentation, Yusof said the labelling exercise which discouraged palm oil product consumption would undermine conservation efforts in Malaysia, such as the Malaysian Palm Oil Wildlife Conservation Fund, as it supported the enforcement of environmental laws, wildlife sanctuaries and reserves.

The full report can be accessed at, an online resource initiative by the MPOC.

Najib hails Canberra move

This is written by my editor Datuk Nuraina Samad, who is reporting from Perth, Australia.

MALAYSIA has welcomed the decision by the Australian government not to support a legislative proposal for the compulsory labelling of Malaysian palm oil.

Prime Minister Datuk Seri Najib Razak said yesterday this was a decision that “extremely pleases” Malaysia, in particular the palm oil industry. 

“I have expressed my thanks to Prime Minister Julia Gillard for this,” he told Malaysian journalists after delivering his keynote address, “Building Infrastructure for the 21st Century” at the Commonwealth Business Forum at the Burswood Entertainment Complex.

Najib, who is here for the four-day Commonwealth Heads of Government Meeting, had earlier in the morning held bilateral talks with Gillard.

It was reported that Gillard’s government would oppose the bill, which was deemed to be in violation of the country’s obligation to the World Trade Organisation. The bill, however, has the support of the Liberal-National party coalition.

The prime minister said the Free Trade Agreement talks with Australia were ongoing and expected to be concluded next March. “This is a big plus for us. That is why it is important to have cooperative arrangement because it spills over into other sectors as well and is positive in terms of assisting them in terms of goodwill between two gover nments.” The bill requires new labels on food products containing palm oil to identify the ingredients and carry a certification attesting to environmentally sustainable practices.

Malaysia has presented a strong case against the bill called the Food Standards Amendment (Truth in Labelling - Palm Oil) Bill 2010, arguing that it is in violation of WTO provisions.

The Australian Senate passed the bill in June, but before the Lower House of the Australian Parliament’s debate, there will be a hearing at the committee level.

Malaysian Palm Oil Council chief executive officer Tan Sri Dr Yusof Basiron said such compulsory labelling of palm oil would affect the imports of food products and was a discriminatory use of the labelling law against the interests of palm oil.

Bilateral trade last year was valued at US$10.63 billion (RM32.31 billion), with exports valued at US$7.46 billion (RM22.67 billion), while imports from Australia were valued at US$3.17 billion (RM9.63 billion). Australia is Malaysia’s 11th largest trading partner. It is also Malaysia’s eighth largest export destination and 12th largest import source.

Najib, who was accompanied by his wife, Datin Seri Rosmah Mansor, would join 52 world leaders at the opening of the biennial meeting by Queen Elizabeth II at the Perth Convention and Exhibition Centre.

IOI maintains stand on deal turned sour

This is written by my colleague June Ramlee.

KUALA LUMPUR: IOI Corp Bhd, which stands to lose an RM83 million deposit to Dutaland Bhd from a deal turned sour, yesterday insisted that the latter had breached their sale and purchase agreement.

Dutaland, however, maintained that it had not acted in breach of the agreement relating to a piece of plantation land.

IOI previously announced that it had terminated the agreement to buy 11,977.91ha of oil palm plantation land in Sabah from Dutaland for RM830 million. IOI then said the cancellation was "due to non-compliance of certain terms and conditions".

On July 28, 2011, IOI's unit Sri Mayvin Plantation Sdn Bhd had signed the deal with Dutaland's unit Pertama Land and Development Sdn Bhd. Yesterday in a filing to Bursa Malaysia, IOI maintained that Dutaland, among others, had failed to continue upkeeping and maintaining the properties. It also claimed that there were discrepancies in the particulars relating to the properties, and that Sri Mayvin had communicated the alleged breaches to Pertama Land.

Dutaland, in its latest filing to the stock exchange, said Pertama Land had consistently maintained that it was not in breach of the agreement as alleged. There had also "been non-compliance on the part of Pertama Land under the agreement as alleged or at all by Sri Mayvin", it added.

Meanwhile, analysts said there will be a minimal impact on IOI's overall earnings if it loses its RM83 million deposit from the deal inked with Dutaland Bhd a few months ago. This is because IOI is a cash-rich company with profits of close to RM2 billion to RM3 billion a year.

Losing the RM83 million deposit on that deal would not make a big difference as the potential loss will only lower its earnings by three to four per cent, said several analysts when contacted by the Business Times yesterday.

"It's too early to say (if the deposit will not be returned) but if they can prove that it is non-compliance, then they should be able to get their money back. But if they lose their deposit, then there would be minimal impact on the company as it makes RM2 billion in profits in a year, so it won't hurt much," said one analyst.

It will not be the first time IOI will lose its deposit. In 2008, the company had forfeited its deposit of RM73.4 million after it walked away from buying Menara Citibank.

Analysts, however, said the Citibank and the Dutaland deals cannot be equated, given that the company had decided to walk away from the former deal.

Dutaland earlier said it was seeking legal advice and had notified OSK Trustees Bhd not to remit to Sri Mayvin the deposit of RM83 million being the 10 per cent deposit paid by Sri Mayvin under the agreement and any interest accrued.

Millers turn greenhouse gas to green energy

Sludge ponds emit greenhouse gases like methane after palm oil is extracted from fresh fruit bunches at the mills. OOI TEE CHING tells how palm oil millers capture this gas and turn it into clean energy by investing in biogas plants. These anaerobic digesters behave like our intestines, containing friendly bacteria that feed on organic matter to produce flammable gas and solid waste.

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. 

Under the Palm Oil National Key Economic Area of the Economic Transformation Programme (ETP), the country is targeting 500 biogas plants by 2020. This initiative is expected to generate about RM2.9 billion in gross national income and create 2,000 jobs by 2020. 

Malaysia's growing green jobs sector is vital in our ability to create jobs and compete globally in the new economy. By leveraging on home-grown green technologies, millers trap methane from the sludge and channel it to gas engines to generate electricity.

The government encourages the oil palm industry to operate more sustainably. Since January 2010, the Ministry of Energy, Green Technology and Water has pledged to facilitate RM1.5 billion worth of cheap loans via local banks for the provision and use of green technologies.

With these incentives, the Malaysian Palm Oil Board's engineering and processing research division director, Dr Lim Weng Soon, is confident that the country is on track to achieve the target. "There are currently 46 biogas plants in operation, 22 under construction and a further 46 in planning stage."

In a recent media visit to United Plantations Bhd's estate in Jendarata, Perak, vice-chairman/executive director (corporate affairs) Datuk Carl Bek-Nielsen said the benefits of this waste-to-energy project is extensive and varied.

Since the sludge is converted into biogas and fertiliser, there is no chance of it entering water bodies and polluting them. 

While the organic fertiliser is ploughed back into the fields, greenhouse gas extracted from the biogas plants is fed into a combined steam and power plant at the mill to generate electricity for the surrounding community in this estate.

Bek-Nielsen said when biogas plants are being used to generate electricity for the estate's own use, leftover biomass from the mills can now be sold as solid fuel to others in the manufacturing sector for as high as RM180 a tonne. 

Indeed, such waste-to-energy projects are gaining momentum among palm oil millers because the projects are not only kind to the environment, but also easy on the wallet. "It's also about economic motivation," Bek-Nielsen said. "While everyone wants to do the right thing, there need to be an extra incentive on top of the motivation of putting up plants that emit less pollution."

"Currently, we have three biogas plants in the country and they help a lot in terms of cost-savings. Although we've invested RM20 million to set up three biogas plants, the impact that we receive is really worth it. We've been able to reduce our annual fossil fuel usage by 25 per cent," he added.

KL-Jakarta talks to include CPO tax waiver

KUALA LUMPUR: Prime Minister Datuk Seri Najib Razak and Indonesian President Susilo Bambang Yudhoyono are expected to discuss the waiver of crude palm oil (CPO) taxes in both countries.

If both leaders were to agree to this proposal during their bilateral meeting in Lombok, Bali today, oil palm planters in Malaysia and Indonesia, particularly some six million smallholders, will benefit from higher palm oil prices.

Current high CPO taxes in Malaysia and Indonesia have caused refiners to slash prices in order to compete, and this, in turn, has lowered the CPO prices.

Since February, the global benchmark pricing for palm oil on Bursa Malaysia's Derivatives Market has dropped by more than 25 per cent. Yesterday, the third month palm oil futures closed at RM2,892 per tonne.

"The leaders will deliberate on the proposal to lift the high CPO taxes on both sides. It is on the agenda," a reliable source told Business Times. Oil palm planters in Malaysia and Indonesia supply more than 85 per cent of the world's palm oil. "There are about 1.5 million smallholders in Malaysia and triple that in Indonesia. If the CPO taxes are lifted, higher prices will make many planters happy," the source said.

The scheduled talks between the two leaders is a follow-up to the 11th Joint Commission for Bilateral Cooperation meeting between Malaysia and Indonesia in Kuala Lumpur last week.

Malaysia is the world's second largest palm oil producer, harvesting about 17 million tonnes of CPO a year. This, however, is not enough to feed some 20 refineries here. As a result, they need to import a large amount of CPO from Indonesia. But with the high CPO taxes, supply from Indonesia has become limited and expensive for Malaysian refineries.

Palm Oil Refiners Association of Malaysia chief executive officer Mohammad Jaaffar Ahmad reportedly said high CPO taxes had been detrimental to Malaysian refiners but benefitting refiners in Indonesia, with a price advantage of between US$72 and US$129 (RM223.6 and RM400) per tonne for processed palm oil exports.

He also highlighted that since 2008, Malaysia's annual refining capacity has dropped by almost 300,000 tonnes.

When contacted, the Indonesian Palm Oil Producers Association or Gabungan Pengusaha Kelapa Sawit Indonesia (Gapki) said it is re-iterating its call to the Indonesian government to revise the CPO export tax.

"The progressive tax is hurting producers and reducing competitiveness. Smallholders have no incentive to invest in the replanting and maintenance of their oil palm estates. We want the government to re-evaluate the ruling," said Gapki executive director Fadhil Hasan.

"We have been paying very high taxes whenever there was an increase in international palm oil prices," he told Business Times.

Currently, the Indonesian CPO export tax is set at 22.5 per cent while the maximum export tax on refined, bleached and deodorised palm oil is capped at 13 per cent.

Despite the Indonesian government justifying the high CPO export tax as to encourage the development of palm oil processing industry in the country, the reality is far from that. Fadhil noted that the significant tax gap between CPO and its derivative products seemed to be incentivising rampant smuggling of CPO.

Renewable energy tariff bidding from Dec

KUALA LUMPUR: Renewable energy (RE) producers will not automatically receive payment under the feed-in tariff (FiT) from December 2011.

Nevertheless, consumers in Peninsular Malaysia and Sabah, whose monthly electricity bills exceed RM77, will have to start paying an additional 1 per cent levy to subsidise RE producers from December 2011.

The 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 will benefit from FiT includes that of oil palm biomass, biogas, small hydro and solar. 

Energy, Green Technology and Water minister Datuk Seri Peter Chin said, "RE producers need to go online and bid for the RE quota and the relevant FiT rate. "This is because the FiT rate differs for different RE technologies and installed capacities."

Chin said this is the first time a government agency is facilitating FiT bidding via the Internet. "This is to ensure a transparent application process. The online FiT application system is available from December 2011," he told reporters after witnessing the signing of memorandum of understanding between Flexo-research Malaysia and Flexoresearch Thailand here yesterday.

RE producers have to apply for licence from Sustainable Energy Development Authority (Seda) via

Chin said during the application for a FiT approval, an eligible producer will be required to submit the work plan for their RE installation/plant. Once the Feed-in-Approval is granted, Seda will closely monitor each RE installation/plant until commencement date is achieved.

This close monitoring is to prevent the applicant from monopolising the RE quota. This monitoring is important as once a FiT application has been approved, a portion of the RE fund will automatically be allocated to the approved applicant.

The minister said the RE quota is revised accordingly to take into account the reduced RE Fund availability.

To avoid any monopolisation of the RE quota, Chin said Seda's online system will track the RE installation/plant's milestones via the submitted work plan. If any delays are detected, a notice will be sent to the applicant to request for an explanation for the delay. If the applicant fails to respond satisfactorily, then the application will be revoked.

When that happens, the fund committed to the applicant will be released, and this will return the allocated quota to the system. "This is to prevent any abuse of the FiT system and to allow other interested parties to apply for the FiT," Chin added.

Planters disappointed over lack of tax relief

KUALA LUMPUR: Oil palm plantation companies are disappointed at the total lack of tax relief for the industry in the recently-announced 2012 Budget.

In making things worse, the already heavily-taxed sector has been slapped with an additional 1 per cent Employees Provident Fund (EPF) contribution.

"We're deeply disappointed at the total lack of tax relief for planters. 

"Already, the oil palm sector is most heavily-taxed in the country and we're still made to subsidise cooking oil," said Malaysian Estate Owners Association (MEOA) president Boon Weng Siew. 

"The higher EPF contribution is adding to the burden," he told Business Times in an interview here recently.

Cooking oil subsidy in Malaysia is being funded by a windfall profit levy imposed on oil palm estate bigger than 40 hectares. Smallholders and Felda settlers are exempted.

From May 2007 to September 2011, MEOA estimated that estates had paid more than RM4 billion to subsidise the price of cooking oil, which is capped at RM2.50 a kg against the open market price of more than RM4.70 a kg in Thailand, Singapore and the Philippines.

"We expected favourable response from the Finance Ministry to review the windfall profit levy but were disappointed that there was no mention of it in the 2012 Budget," said Boon.

Earlier this year, MEOA, Malaysian Palm Oil Association (MPOA), East Malaysia Planters' Association (EMPA) and the Sarawak Oil Palm Plantation Owners' Association (SOPPOA) jointly appealed to Prime Minister Datuk Seri Najib Razak for a review of the windfall tax.

The levy is seen to be unfair and inequitable because it is imposed on assumed profit and not on actual profit when the price of CPO exceeds RM2,500 a tonne for Peninsular Malaysia and RM3,000 a tonne for Sabah and Sarawak. Plantation companies' profits vary according to the age of the palms.

Newly-developed plantation or green fields and areas under replanting, do not make any profit in the initial year of harvest of fresh fruit bunches. "From the fourth to the seventh year, the proceeds from fresh fruit bunches sales are hardly adequate to recover planting and maintenance costs of around RM12,000 a ha," said Boon.

Oil palm planters are proposing a gradual abolition of the windfall profit levy, commencing with the exemption of estates having oil palms aged seven years and below. This can tie in with a gradual reduction of the cooking oil subsidy like that on other necessities, such as petrol, diesel, rice and sugar.

They urged the government to review the cooking oil subsidy, which is benefitting restaurant operators, traders and people across the border more than the the hardcore poor as reflected in the frequent media reports of cooking oil shortage in the country.

This is in spite of the huge quantity of 70,000 tonnes of cooking oil being subsidised monthly against the total estimated household consumption of only 40,000 tonnes a month.

The price of palm-based cooking oil should be allowed to float in the open market, they argued.

Cooking oil vouchers can be issued to hardcore poor households to mitigate the impact on them. "Removing cooking oil subsidy should be viewed in a positive light because it will prompt wise consumption of oils and fats. This is in line with the advice of the Health Ministry," said Boon.

As lawmakers in the country prepare for their next debate session, MEOA is appealing to members of Parliament to consider abolishing the windfall tax as provided under Windfall Profit Levy Act 1998. "Alternatively, lawmakers may want to consider imposing it across the board to cover all industries based on actual profit, say a threshold of 20 per cent return on investment instead of singling out the palm oil industry to impose the levy," he added.

Excited over Felda listing

This is written by my editor Francis Fernandez.

KUALA LUMPUR: "I earned RM8 a day working in a Felda settlement in Palong, Negri Sembilan," said a visibly excited Zakaria Arshad. He is excited because after years of planning, Felda is almost on its final leg of being listed on the Main Market of Bursa Malaysia.

The listing could possibly create the world's largest publicly-traded plantation company, with a staggering plantation size of 850,000ha. This even dwarfs Sime Darby Bhd's land bank of 647,373ha in Malaysia and Indonesia.

Being listed should help it come out of the shadows, as up to now, investors have always been focused on the listed Sime Darby. This is despite Felda boasting an annual crude palm oil (CPO) production of about three million tonnes as opposed to Sime Darby's 2.4 million tonnes.

Zakaria will be more than pleased than the rest in seeing Felda listed, as he currently heads one of the units which might be bundled into the listed entity. 

He is the chief executive officer of Delima Oil Products Sdn Bhd, a unit of Felda Holdings Bhd.

A listed Felda will incorporate assets of Felda Global Ventures Holdings Sdn Bhd and Felda Holdings, collectively known as Felda Global Group, the cash-generating units of the Federal Land and Development Authority (Felda).

Zakaria, who graduated in 1984 from University Sains Malaysia, also had his first big break in the job market with Felda. "I started working in Felda as an executive soon after graduating, with a starting salary of RM1,000, while the yearly increments those days were about RM75 a year," said Zakaria, who now heads a company with an annual revenue of about RM800 million a year.

"As a second-generation Felda settler, I am excited about the listing, as it will benefit the settlers and the country," he told a group of journalists at his office yesterday.

"I support the listing as it provides a new income stream for the settlers, said Zakaria, adding that as a Felda corporate man, the listing will help open up opportunities for Delima Oil. "Proceeds from the initial public offer (IPO) will help Delima Oil as we need between RM100 million and RM200 million capital expenditure to expand."

Zakaria explains that Delima Oil's sole factory in Pasir Gudang, Johor, is running at full capacity with two full shifts, churning out some 1,000 tonnes a day.

He is banking on the money from the IPO to help expand Delima Oil's product range. "Currently, we only have three products, but we intend to have as many as 18 products as well as expand into the non-food segment, such as healthcare," said Zakaria.

Established in October 2000, Delima Oil is one of the country's largest cooking oil producers, producing the cooking oil under the brand Saji. Some 80 per cent of its products are for the home market, with the balance exported to Southeast Asian countries as well as to China.

Zakaria says the IPO will help Delima Oil expand overseas faster. "Size allows us to compete, but efficiency and sound management are the key to ensure our continuous progress," he said. As such, Zakaria feels that the planned listing of Felda is a natural progression for the settler.

Felda Global to hire banks for IPO next week

This is written by my boss Francis Fernandez.

Kuala Lumpur: Felda Global Ventures Holdings Sdn Bhd plans to hire investment banks by as early as next week to help arrange its initial public offering, said its group president cum chief executive officer Datuk Sabri Ahmad.

"We will hire them as soon as possible, perhaps by next week," Sabri said at his office here yesterday.

The company plans to hire as many as two Malaysian investment banks. "We will also be hiring one or two foreign merchant bankers." Sabri said the banks are being selected via a closed-tender exercise. Interest on the Felda Global listing work is high, with the planned IPO already being touted as one of the biggest in Malaysia.

He declined to comment on speculation that CIMB and Maybank Investment Bank, the pair that handled MSM Malaysia Holdings Bhd's IPO for Felda, will be selected for the planned Felda Global IPO. The selected bankers will help Felda organise roadshows at home and abroad to drum up interest.

Felda Global is the commercial arm of the Federal Land Development Authority (Felda), the world's largest estate owner.  It has been tasked with helping rural settlers to develop plantations of agricultural commodities such as oil palm and rubber.

On the size of the IPO, Sabri said the numbers are being crunched, and restructuring activities are being held "to unlock the value". "It will definitely be bigger than the MSM Malaysia Holdings Bhd IPO," said Sabri.

Felda raised slightly more than RM800 million from the MSM share sale, which saw the sugar company valued at about RM2.4 billion.

Koperasi Permodalan Felda, which is owned by the settlers, made a paper gain of RM300 million from the MSM IPO from its 20 per cent stake.

Sabri said as part of the restructuring exercise, Felda Global and Felda Holdings Bhd will be merged into a single entity. "This will help us unlock value for our stakeholders," said Sabri, adding that the eventual structure of the listed entity will be somewhat similar to that of Sime Darby Bhd and IOI Corp Bhd.

Both Sime and IOI have built specific units to focus on upstream and downstream activities.

A listed Felda will have about 850,000ha of plantation land. "In terms of acreage we will be bigger than Sime. We are also competitive in terms of plantation yields and our mill output is the best in the industry," said Sabri.

Malaysia to maintain B5 diesel price

KUALA LUMPUR: The government has assured that it would continue to keep B5 diesel pricing at the pump at RM1.80 per litre by absorbing the difference from world oil price.

B5 is a blend of 95 per cent regular diesel with five per cent palm biodiesel. "Right now, B5 is being subsidised at the pump in the central region of the country. We've allocated RM23.65 million in B5 subsidies from June to December 2011," said Plantation Industries and Commodities Minister Tan Sri Bernard Dompok.

The rollout of B5 in Kuala Lumpur involves 247 service stations. About one million litres of palm oil biodiesel are being used each month. "This will contribute to a saving of close to 12.4 million litre of fossil diesel per year in Kuala Lumpur," Dompok told reporters last week after launching the fourth phase of B5 implementation at a service station along Jalan Kuching, Kuala Lumpur.

Previous central region launches covered Malacca, Negri Sembilan and Putrajaya.

On top of the B5 subsidies, the government has also allocated RM42 million to fund in-line blending facilities at six petroleum depots owned by five oil companies, namely Petronas, Shell, Esso, Chevron and Boustead Petroleum Marketing.

Felda Global joins the march of big IPOs

KUALA LUMPUR: The planned listing of Felda Global Ventures Holdings Bhd (Felda Global) would mean that 2012 will be the fourth straight year Malaysia has offered investors major initial public offerings (IPOs).

Felda Global is the commercial arm of government-owned Federal Land Development Authority (Felda). It is the owner and manager of over 850,000ha of plantation land and its listing should create the world's largest listed plantation entity by land.

Drumming up interest in the local stock market has been a feature of the government under Prime Minister Datuk Seri Najib Razak since he came into office in 2008.

Malaysia's biggest mobile phone operator by subscribers, Maxis Bhd, returned to the market in 2009, followed by the country's biggest IPO, Petronas Chemicals Group Bhd.

Petronas Chemicals raised RM12.8 billion in 2010 and immediately made it to the country's top 10 list of companies by market value. The company is the petrochemicals unit of Petronas, Malaysia's multinational oil and gas corporation. Prior to Petronas Chemicals, Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) was also listed in the same year. MHB, a rig and shipbuilder, is also ultimately owned by Petronas.

This was then followed by the listing of MSM Malaysia Holdings Bhd this year, the sugar refiner that belongs to Felda Global. "This listing (of Felda Global) will create yet another blue chip in the plantation sector and add to our niche offerings, attracting larger international portfolio funds to the Malaysian market," Bursa Malaysia chief executive officer Datuk Tajuddin Atan said in his response to the 2012 Budget announcement on Friday.

CPO buyers switch to KL after Jakarta tax change

KUALA LUMPUR: Foreign buyers sold back at least 200,000 tonnes of Indonesian crude palm oil (CPO) to refiners since mid-September when Jakarta slashed export taxes on the processed grade and made minor cuts for duties on the crude grade, traders said yesterday.

The buyers - including trading houses and processors - have switched over to Malaysian CPO from plantations who have not finished their tax-free export quota on the grade, traders from Indonesia and Malaysia said. 

Malaysia, the world's No. 2 producer, imposes very high export taxes on CPO to protect its refining industry but has allowed for firms such as Felda, Sime Darby and IOI Corp to export the grade without any duties.

The market feared the Malaysian export quota would squeeze global CPO supplies further as top producer Indonesia cut its refined palm oil export tax to jump-start its processors, leaving less of the crude grade for shipment.

"At first I thought the quota was going to be a stumbling block, but it seems the Malaysian palm oil companies still have it. My seller says don't worry, you can buy, we can sell," said a Malaysian trader with a key palm oil processor. "Just watch Malaysian crude palm oil exports in October. It will jump a lot because a lot of people are selling Indonesian crude palm oil back and buying Malaysian crude," the trader added.

The higher demand for CPO will cut into rising stock and possibly lift benchmark Malaysian palm oil futures that have fallen more than 25 per cent this year on fears of another global recession.

The government sets the annual quota, and this year it was pegged at 3.3 million tonnes. In the first nine months of 2011, Malaysian CPO exports stood at nearly 2.5 million tonnes, according to data from Societe Generale de Surveillance, and leaving at least 800,000 tonnes available.

"The quota always gets exceeded and these palm oil companies will ask the go-vernment to raise the quota, which is always granted," said a second Malaysian trader.

"This year especially, with the new Indonesian export tax coming into, it is bound to go higher," he added.

Commodities Minister Tan Sri Bernard Dompok said in August that the government had a "flexible view" to the tax-free crude palm oil export quota in order to keep the industry market driven, as the grade is in high demand in Rotterdam.

Buyers are selling back Indonesian CPO to refiners mostly in Sumatera and Java island at the same price the cargoes were contracted at.

The buyers, including Western trading houses and processors, make enquiries with Malaysian firms who will offer local CPO that is now at US$890 (RM2,812) a tonne, a 7 per cent discount to Indonesian FOB export grade.

"Once you add in some profit margins, Malaysian palm oil for export grade is about US$15 (RM47) chea-per compared to Indonesian palm oil," said a trader with a Malaysian plantation firm with a tax free export quota. - Reuters

Planters: Let millers go full capacity

KUALA LUMPUR: Planters in Sarawak, who are experiencing bumper harvests, are appealing to the Malaysian Palm Oil Board (MPOB) to allow millers to run their plants at full capacity.

"We are losing hundreds of million ringgit in the form of rotting fruits," said Sarawak Oil Palm Plantation Owners Association (Soppoa).

"We have members who own mills designed to process 90 tonnes of fresh fruit bunches (FFB) per hour but MPOB only allows them to run at 60 tonnes per hour. When we run the mill at the design capacity, we are compounded by MPOB. Upon appeal, MPOB later licensed the mills to run at 75 tonnes per hour.

"Why can't MPOB straight away approve the running of our mills according to the design capacity? Why are millers made to pay compound after compound and submit in appeal after appeal?" Soppoa vice-president Paul Wong asked.

"Right now, there are lorries filled with fresh fruit bunches waiting to be processed, many of which are sourced from smallholders. We appeal to MPOB not to compound millers when they run at full capacity. It is not fair to penalise millers when they are doing their best to help smallholders contribute to the country's palm oil exports," he said in a telephone interview from Miri.

Last year, Sarawak harvested 2.2 million tonnes of palm oil. A 10 per cent average of uncollected fruits at a conservative pricing of RM2,800 crude palm oil (CPO) price translates into some RM600 million loss in export opportunity from Sarawak.

As at December 2010, Sarawak's oil palm planted area stood at 0.9 million hectare, of which close to 10 per cent of the hectarage is owned by about 7,500 smallholders.

Earlier this year, Soppoa forecast 15 per cent output growth to 2.5 million tonnes of CPO, as more oil palms mature and bear more fruits. "We appeal to the decision- makers at MPOB to look at this problem in totality. For the country to achieve 18.3 million tonnes in CPO output, it is pertinent for Sarawak to be able to achieve the 2.5-million-tonnes target," Wong said.

The MPOB is the regulator of the palm oil industry.

Meanwhile, MPOB director-general Datuk Dr Choo Yuen May, when commenting on the issue yesterday, said: "We will investigate this matter, I will get my officers to get to the bottom of this bottleneck problem."

Choo was speaking at the launch of the fourth phase of B5 implementation by Plantation Industries and Commodities Minister Tan Sri Bernard Dompok at a BHPetrol service station here. B5 is a fuel blend of regular diesel (95 per cent) and palm biodiesel (5 per cent).

Noble Group to list agriculture business

SINGAPORE: Singapore-listed commodities firm Noble Group is seeking to list its agriculture business, which accounts for a third of its earnings and may have a value of more than US$5 billion (RM15.9 billion).

The company, which wants to list the business on the Singapore Exchange, said late Tuesday the process will be subject to market conditions. JPMorgan is advising Noble on the planned listing, two sources with knowledge of the deal said yesterday.

JPMorgan and Noble declined to comment on who is advising the company or the size of the deal. Shares of Hong Kong-based Noble jumped as much as 5.8 per cent yesterday, their biggest intra-day jump since August 31.

Noble, which counts sovereign wealth funds China Investment Corp and Korean Investment Corp among its shareholders, has a market value of about US$6 billion. Its shares have suffered this year from a selloff in companies that trade industrial commodities.

"We believe a spinoff makes sense to further avoid the structural de-rating that has defined the commodities trading sector this year," UBS analyst Andreas Bokkenheuser said in a note to clients.

Nomura said the equity value of the business could be more than US$5 billion and even at current valuations, it should have a value of US$3.3 billion. "We believe it may be good for valuations, as agri-assets and traders/processors generally command a higher valuation as compared to non-agri portfolio," it said in a note.

Noble has a price-to-earnings ratio of around 8, below rival Olam's 10.8, which benefits from a premium due to its focus on largely agriculture commodities. Noble's agriculture business is primarily made up of soyabean crushing in Argentina, Brazil and China, sugarcane mills in Brazil as well as other businesses such as cotton, coffee, cocoa and other grains.

Noble shares have been hurt this year because the company trades a lot of cyclical commodities such as iron ore and aluminium. Its shares had fallen about 44 per cent, more than the 21 per cent drop in the Singapore market, based on Tuesday's close. - Reuters

Unico asked to consider listing

KUALA LUMPUR: A group representing minority shareholders of Unico Holdings Bhd yesterday urged its board of directors to consider listing the company on Bursa Malaysia to give better returns to all its shareholders.

Alternatively, the board could consider a reverse takeover of a company on Bursa Malaysia," said K.K. Chow, a spokesman for the minority shareholders, at a press conference here. "The time is now ripe for Unico to consider such an exercise as there are many listed companies that need capital or business injection," he said, adding that a merchant bank could be called to provide independent advice on the viability of such a proposal.

Chow, who is also a minority shareholder of Unico, said the company's directors should discharge their responsibility that they publicly announced three years ago to list Unico instead of using the company's funds for property development, which may have an element of risk.

He stressed that listing the company would provide shareholders with better returns and to realise their investments made some 20 years ago.

Chow claimed that the shares of Unico were estimated to worth about RM3.50 a share currently but shareholders had no means to sell their shares at that level because of the company's non-listed status except to sell them back to the company at a lower value of around RM1.80 per share.

Asked whether it would be possible to requisition an extraordinary general meeting to get the directors to initiate the listing proposal, he said it could be an arduous task. - Bernama

Indonesian group quits sustainable palm oil body

JAKARTA: The Indonesian Palm Oil Association (Gapki) has withdrawn its membership from the Roundtable on Sustainable Palm Oil (RSPO), after the world's top producing country forged ahead with its own sustainability scheme, both groups said yesterday.

The RSPO is an industry body of consumers, green groups and plantation firms that aims to promote use of sustainable palm oil products and many major European palm oil buyers say the RSPO will continue to be the international sustainability benchmark.

Many palm oil producers have criticised the RSPO for being too much in favour of green groups, and both Malaysia and Indonesia are pushing on with their own schemes.

Fadhil Hasan, executive director of Gapki said, " ... we decided to resign from RSPO because we already have ISPO," he said. "We sent the letter of resignation on Thursday last week."

Unlike the RSPO, the Indonesia Sustainable Palm Oil (ISPO) will punish by law those found to be breaking ISPO rules, a ministry official said last November.

The RSPO, on its website, said it regretted Gapki's withdrawal. "However, we accept its decision as the RSPO is a voluntary membership- based organisation." - Reuters