Archive for May 2012

'CPO prices will rebound'

PLANTER Kuala Lumpur Kepong Bhd (KLK) is hopeful of palm oil prices bouncing back to RM3,300 a tonne, as orders for the food ingredient pile up in the face of tight global supplies.

The third-month benchmark crude palm oil futures on the Malaysian Derivatives Exchange fell RM67 to close at RM3,111 a tonne yesterday. KLK's chief executive Tan Sri Lee Oi Hian said palm oil prices, despite having slipped from a peak of RM3,600 a tonne in mid-April, is likely to sustain and trade up to RM3,300 a tonne again.

"Prices should hold up in the coming months. Stocks are tight," he told Business Times at the sidelines of Invest Malaysia 2012 held here yesterday.

He concurred with commodity reports stating tight global edible oil stocks is caused by South America's drought on soya harvests and a lower rapeseed crop output in India.

"We're also receiving more orders for Ramadhan in July. Based on these strong fundamentals, we think palm oil prices are likely to recover to around RM3,300 a tonne," he said.

KLK has, so far, planted up 205,848ha in Malaysia and Indonesia. The plantation business makes up 77 per cent of the firm's profits.

"We replant using tissue culture ramets in our Malaysian estates as this improves yield per hectare. We also carry out 5,000ha to 8,000ha new plantings in Indonesia every year," Lee said.

"Going forward, our earnings growth will be driven by the rising yields of our young areas," he added.

Rising yields in the field has also contributed to rising oil extraction rates (OER) at the mills. In 2008, KLK's OER was only 20.5 per cent. To date, it has gone up to 21.8 per cent.

KLK is favoured over larger rivals like Sime Darby Bhd and IOI Corp Bhd, thanks to its younger oil palm tree profile.

BIMB Securities analyst Ng Keat Yung said more than two thirds of KLK's oil palms are of young to prime age. This suggests KLK estates can withstand and profit from erratic weather, which has a negative impact on older oil palms.

"We're also positive on the disposal of Crabtree & Evelyn," he said, adding the management can now put more time and resources in oil palm planting and the manufacture of oleochemicals.

"We like that KLK is putting up three refineries and an oleochemical plant in Indonesia to leverage on the Indonesian palm oil taxes that favours downstream investments," he said.

Ng commented that KLK's cashflow is strong and sufficient to cover its borrowings. "Their debt is manageable. Gearing is at a minimal of 0.06 times, it's healthy. Should the company wish to embark on any sizable acquisitions to boost its plantation landbank, they have no problems gearing up," he said.

Yesterday, KLK’s shares closed 12 sen higher at RM22.10. The BIMB Securities analyst recommended a ‘buy’ and estimated the shares can climb to RM25.10 in the longer term.

Boustead Q1 earnings up

KUALA LUMPUR: BOUSTEAD Holdings Bhd's first quarter profit rose 29 per cent to RM144.6 million from RM112.2 million a year ago. This was mainly driven by higher profits in its pharmaceutical, property and banking businesses.

In its filing to the stock exchange yesterday, Boustead said revenue jumped 51 per cent to RM2.4 billion from RM1.59 billion. Earnings per share added up to 13.98 sen, much higher than 10.85 sen previously.  The group declared an interim dividend of 7.5 sen.

Boustead group managing director Tan Sri Lodin Wok Kamaruddin, said in a statement, "Except for one division, all other divisions delivered on the bottom line". He noted that despite an RM18 million gain from the sale of aircraft by MHS Aviation, Boustead's heavy industries division suffered RM5 million losses as the work on the second generation patrol vessels has yet to move into full swing.

Lodin, who is also deputy chairman of the group, said the most significant improvement was driven by pharmaceuticals. This business raked in RM35.7 million in profits, four times of last year's RM9.1 million. The significant increase is mainly due to the consolidation of Pharmaniaga Bhd into the group's portfolio.

For the three months to March 2012, Boustead's oil palm business posted lower profits at RM92.2 million compared to RM99 million a year ago. This was because the average palm oil selling price was RM3,143 per tonne, 11 per cent lower than RM3,541 per tonne recorded in the first quarter of 2011.

Boustead's trading and manufacturing profits rose 22 per cent to RM35.1 million, thanks to higher sales volume and stock holding gains. 

Its banking business held under Affin group did well when its profits more than doubled to RM26.1 million.

Earlier this year, the group sold off a piece of vacant land and this bumped up its property development division's profits to RM40 million, more than three times that of RM12 million previously.

On this year's outlook, Lodin said Boustead is cautiously optimistic of chalking up another year of good profits.

IOI on the prowl for more Indonesian estates

KLUANG, JOHOR: IOI Corp Bhd, which now has RM3 billion in cash reserves, is on the prowl to acquire more oil palm estates in Indonesia. 

"We're always looking at opportunities to increase our plantation landbank. This sizeable acquisition is likely going to be in Indonesia," said executive director Lee Yeow Chor. He, however, declined to elaborate on the timing of the impending purchase.

Lee then signalled that he is optimistic about the prospects of IOI's main-stay palm oil business, following drought-like weather in the last two years that resulted in challenging conditions for plantation companies.

The onset of dry conditions wrought havoc on the productivity of the country's oil palm trees. This meant that IOI, which has a matured oil palm area of about 140,000ha, is not seeing much growth in oil palm fruit production in the current year ending June 2012. This, Lee said, is having an impact on palm oil prices.

"Lower production will not have an effect on our financial performance because prices will more than compensate for it," he said after a tour around its Pamol estate complex here yesterday. He said palm oil prices had averaged around RM3,100 per tonne in the first half of this year.

In the last six weeks, palm oil prices have been on the decline from a peak of RM3,600 a tonne. Yesterday, the third-month benchmark palm oil futures on the Malaysian Derivatives Exchange closed RM61 higher at RM3,130 per tonne. In response, Lee said: "The spike in prices at the beginning of the year was overdone. As the market factors in the eurozone crises, we saw some sell down. 

"In the coming months, however, we should see some price upside. This is because stocks are tight and orders are coming in for Ramadhan in July. Based on these fundamentals, we are confident prices will recover to around RM3,200 per tonne," he added. 

As early as 2007, IOI invested US$62.63 million to take up a 33 per cent stake in PT Bumitama Gunajaya Agro. This was part of its plan to participate in Indonesia’s oil palm expansion and ensure upstream profit growth.

Today, Bumitama has an agriculture landbank of 191,948ha, of which 119,162ha is already planted up with oil palms. Of that total area, 87,851ha is held under the company and 31,311ha under the smallholders or plasma schemes.

Lee, who is a member of Bumitama's board of directors, said the group is aggressively stepping up its plantation development programme in Indonesia. The pace of planting is expected to pick up in the coming years. “We aim to plant at a rate of 10,000ha per year,” he said.  

On its property business, Lee indicated that IOI will spin off the arm to be re-listed. "Yes, we plan to list it in Singapore but we've not decided on the timing."

Offer prices for QSR, KFC 'not likely to be increased'

KUALA LUMPUR: The offer price to take private QSR Brands Bhd and KFC Holdings (Malaysia) Bhd is unlikely to be revised upwards.

In December 2011, Johor Corp Bhd (JCorp) and private equity firm CVC Capital Partners announced their intention to buy QSR shares at RM6.80 each and RM3.79 per warrant. They also offered RM4 per KFC share and RM1 per warrant.

To a query if minority shareholders of QSR and KFC were happy with the offer prices, QSR and KFC deputy chairman Ahamad Mohamad replied, "everyone always wants higher offer prices. The advisers of this exercise; OSK Investment Bank, Am Merchant Bank and Affin Investment Bank, had advised that the offer prices are fair and reasonable".

He was speaking to reporters after the companies' shareholders meetings held here yesterday. Last week, the Employees Provident Fund (EPF) announced it was participating in the buyout of QSR and KFC alongside JCorp and CVC Capital.

Ahamad, who is also Kulim (M) Bhd managing director, said the privatisation of QSR and KFC would be facilitated via Kulim, which is 56 per cent owned by JCorp. Kulim has a 53.9 per cent stake in QSR and KFC is a 51 per cent unit of QSR.

He then estimated that this RM3.6 billion exercise will be completed by October 2012. "Judging from the recent price gain in Kulim shares, it can be inferred that many shareholders are receptive." Two days ago, Kulim was the top gainer on Bursa Malaysia, rising 29 sen to RM4.55 with 1.29 million shares done at market close. Kulim-CE rose six sen to 20 sen.

Last week, QSR and KFC announced the execution of the definitive agreements for their planned privatisations. This is an important milestone because unless and until the definitive agreements are signed, only then the various extraordinary general meetings can be called for Kulim, QSR and KFC shareholders to vote on.

QSR and KFC also announced that Kamaruzzaman Abu Kassim, who is currently JCorp chief executive officer and president, had resigned from his position as chairman and director in both QSR and KFC to reflect good corporate governance. Datuk Ayub Mion has been redesignated and appointed chairman of QSR and KFC.

QSR is the franchisee for Pizza Hut with more than 260 restaurants in Malaysia and Singapore. Through its unit KFC Holdings, the cash rich QSR is also the operator of more than 640 KFC restaurants in Malaysia, Singapore Brunei and India.

More using palm oil vitamin E

A LIFE-SAVER: As more medical researchers all over the world discover the unique ability of palm oil vitamin E in seeking and killing cancer cells, Malaysia steps up funding for such studies in the hope of saving more lives. Ooi Tee Ching writes.

SINGAPORE: Dr Fong Chee Wai picks up a test tube of Vitamin E and recounted that many people think the Vitamin E is singular when this oil soluble nutrient is actually a family of eight siblings.

"The complete vitamin E family is made up of four tocopherols and four tocotrienols. Soft oils like olive, soya, canola and sunflower only contain tocopherols. Tropical oils like palm, rice bran and coconut, however, have both tocopherols and tocotrienols," he said.

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

In an interview with New Sunday Times, he explained that the difference between tocotrienols and tocopherols is the "tail" on the vitamin E molecule.

"Tocopherols have long saturated tails while tocotrienols have unsaturated tails," said the scientist from Davos Life Science Pte Ltd, which is fully-owned by Ipoh-based plantation company Kuala Lumpur Kepong Bhd.

The unique structure of tocotrienols enables them to do many things that tocopherols cannot do.

This includes easier access to all types of cells, more powerful anti-oxidative function in cells, the ability to penetrate internal organs, and the activation of a wide variety of gene signals.

"It is these unique biological activities in tocotrienols that help in body cell regeneration and make it able to protect healthy cells. More importantly, there is also increasing evidence of these potent antioxidants possessing warrior-like ability to zealously hunt down and kill cancerous cells."

It is this life-saving prospect from cancer that prompted the government via Malaysian Palm Oil Board (MPOB) to boost funding for palm oil vitamin E trials.

In a separate interview, MPOB chairman Datuk Seri Shahrir Samad said, "We're encouraged that more medical researchers are looking into the potential of palm tocotrienols in the prevention and eventually, treatment of cancer."

He had just returned from a working visit to the Peter MacCallum Cancer Centre (PMCC) in Melbourne with Davos Life Science which is supplying palm tocotrienols for the cancer trials.

PMCC is Australia's only public hospital dedicated to cancer treatment, professional oncologist training, research and education. It is one of the few cancer treatment facilities in the world that has a fully-integrated clinical and laboratory programme situated alongside a hospital.

Last year, Breast Cancer Network Australia estimated that 14,300 women and men in Australia were diagnosed with breast cancer, making it the most common killer disease.

Until now, the cure for cancer seems elusive because cancer cells are known to mutate and manoeuvre around drugs.

In a pioneering move, PMCC is embarking on fluorine labelling on palm tocotrienols to trace how this nutrient travels in the body.

"By marking the tocotrienols and using high resolution imaging, we hope to see how this team of super-soldiers fight and block the many pathways of cancer cells. It is through such collaboration with PMCC we can gain a deeper understanding of the health benefits of palm oil vitamin E," said Shahrir.

Tocotrienols are usually extracted from palm oil because the oil palm tree is able to produce the highest concentrate compared to other oil crops.

Every year, Malaysia exports some RM50 million worth of palm oil health supplements, mainly to Europe, the United States, Canada and Japan. A kilogramme of palm oil vitamin E sells for US$500 (RM1,570).

'These palm fats are all natural'

MALAYSIAN Palm Oil Board chairman Datuk Seri Shahrir Samad answers a few frequently asked questions.

1. What food products contain palm oil?
Food scientists like palm oil's natural semi-solid feature because they can fractionate and come up with many kinds of food ingredients like cooking oils, margarine, shortening, vegetable ghee, bakery fats, chocolates, hot beverages, coffee creamers, and ice-cream.
The best part is these palm fats are all natural. They need not be hydrogenated and therefore, do not contain the deadly trans-fat. Due to its excellent stability, palm olein is the world's No.1 frying oil for instant noodles, French fries, potato crisps, doughnuts and snacks.

2. Does palm oil contain cholesterol?
No. Palm oil, like most other vegetable oils and fats, contain only traces of cholesterol (<50 μg/gram or <5 ppm). This amount is so low that it has no significant physiological effects on health. Therefore, it is considered "cholesterol-free".

3. Will palm oil consumption raise my blood cholesterol level?
No. Peer-reviewed studies conducted in the United States, Europe, Australia and Asia have firmly established that palm oil tends to be "neutral". What this means is palm oil does not raise nor lower blood cholesterol levels.
It only has traces of the cholesterol-raising lauric plus myristic acids, as well as possesses a unique fat molecule configuration involving its major saturated fatty acid, palmitic acid, which renders the oil non-cholesterol raising.
Besides, palm oil has a high content of vitamin E variants called "tocotrienols" which have a statin-like cholesterol lowering action.

4. What are tocotrienols?
Tocotrienols make up half of the vitamin E family of eight siblings. The other four family members are tocopherols. Over the last 30 years, scientific studies have shown that tocotrienols is the more potent antioxidant than tocopherols.
This is because tocotrienols, and not tocopherols, are able to:
-- lower blood cholesterol levels (statin-like action),
-- regress atherosclerotic plaques in stroke patients,
-- inhibit entry of white blood cells into arterial wall to become devouring phagocytes, thereby preventing early plaque formation,
-- inhibit blood clot formation in the bloodstream (anti-thrombotic effect),
-- protect skin from damage by ultra-violet rays of the sun (prevent pre-mature ageing), and
-- kill cancer cells (apoptosis)

5. Where can you find tocotrienols?
Tocopherols are sourced from oilseeds such as soya oil, canola and sunflower, while tocotrienols are only available in high concentrates in palm oil.

Felda Global identifies foreign partners

This is written by my colleague in London, Zaharah Othman.

LONDON: FELDA Global Ventures Holdings Bhd (FGVH) has chosen heavyweights Louis Dreyfus Commodities Asia Pte Ltd and Vitol Group as its strategic partners in trading and logistics.

The agreements with the two global trading houses were signed during Prime Minister Datuk Seri Najib Razak’s working visit here yesterday.

The Prime Minister said the collaborations will help FGVH emerge as one of the world’s biggest and respected commodity companies. 

“We want FGVH to emerge as a commodity company that is among the biggest in terms of plantation to marketing,” Najib said.

Headquartered in Rotterdam, the Netherlands, Louis Dreyfus companies are present in more than 53 countries. 

While it has agreed to take a minority stake in FGVH, the trading giant said, this is conditional on a successful initial public offering (IPO) of FGVH at Bursa Malaysia next month.

Louis Dreyfus did not mention the amount of stake it would take up in FGVH but it was recently reported that this major global trader of cotton, grains, sugar, coffee and oilseeds, is likely to take up no more than 5 per cent. 

FGVH's public debut, slated for end-June, promises to be the world’s second largest IPO this year, after Facebook Inc’s estimated valuation of up to US$100 billion. 

“This strategic partnership with FGVH is a major step in Louis Dreyfus Commodities’ development in Asia. It spells a unique opportunity to cement its role as one of the largest integrated players in palm oil activities,” Louis Dreyfus said.

The proposed transaction involves both a strategic cornerstone investment in the IPO and the creation of two joint ventures, it added.

Meanwhile, FGVH and Vitol Group is set to establish a joint-venture company in Kuala Lumpur with the former as the majority shareholder.

"This strategic alliance between FGVH and Vitol is line with FGVH's growth strategy in energy trading. This is one of the channels for both upstream and downstream marketing that is intended to transform FGVH into a truly global player," said FGVH group president and chief executive officer Datuk Sabri Ahmad.

Vitol group president and chief executive officer Ian Taylor said: "This collaboration enhances our already significant presence in Malaysia, which is currently focused on our existing energy trading business and terminal operations."

QSR, KFC buyout looms as JCorp chief quits boards

This is written by my colleague Adeline Paul Raj.

KUALA LUMPUR: Johor Corp Bhd president and chief executive officer Kamaruzzaman Abu Kassim has resigned from his post as chairman and director of both QSR Brands Bhd and KFC Holdings (M) Bhd, paving the way for the buyout of the two listed entities.

JCorp, which is Johor state government’s investment arm, owns 55.9 per cent of Kulim (Malaysia) Bhd.

Kulim, in turn, has a 53.9 per cent stake in QSR. KFC is a 51 per cent unit of QSR.

“With Kamaruzzaman’s resignation, they have moved closer towards the target sales and purchase agreement by May 21. 

"The privatisation of QSR and KFC, however, will be a long journey and will take many steps,” a source told Business Times in a phone interview yesterday.

In December 2011, JCorp and London-based CVC Capital Partners Asia III, via Massive Equity Sdn Bhd, announced their intention to buy QSR shares at RM6.80 each and RM3.79 per warrant. They also offered RM4 per KFC share and RM1 per warrant.

The source said with the latest developments, JCorp together with its partners are at arm’s length with each other to take the privatisation exercise further.

“The resignation is a gesture of good corporate governance on JCorp’s part as it is the majority shareholder,” said the source.

KFC Holdings (Malaysia) Bhd is involved in the fast food and other related businesses, which include poultry processing and distribution, commissary and bakery.

The US Kentucky-based Yum! Brands Inc is the licensor and owner of the KFC and Pizza Hut brand names.

The privatisation had run into some delays due to concerns by Yum!Brands that the exercise would stunt revenue and profit growth.

However, at a media briefing recently, Kamaruzzaman said Yum! Brands is happy with the privatisation plan. “They understand our proposal and are assured of further growth in the business. In fact, Yum! Brands sees this region as one of their most profitable,” he was quoted as saying.

Labour shortage hits palm oil export earnings

KUALA LUMPUR: MALAYSIA is losing billions of ringgit in palm oil exports because there is not enough foreign workers to harvest fruit bunches in the oil palm fields.

The Malaysian Palm Oil Board (MPOB) estimates that the industry need to hire another 40,000 foreign workers to harvest the riped fruit bunches in order to achieve the 19.3 million tonnes of oil output target. 

"Current planting materials are already capable of producing six tonnes per hectare in a year, but the country's annual oil yield average is still stuck at four tonnes per hectare," said IOI Corp Bhd executive chairman Tan Sri Lee Shin Cheng. 

"The trees are fruiting, but there's acute shortage of harvesters and this is affecting the country's palm oil export earnings," he told reporters on the sidelines of MPOB seminar titled "Labour - Key Driver For Continued Sustainability of the Oil Palm Industry" held here yesterday.

"If the government approves of another 40,000 foreign workers, we can reduce wastage and surpass the 19.3 million tonne output target easily," Lee said. 

It is estimated that millions of tonnes of fruit bunches rot in the fields because planters are not able to hire enough foreign workers to harvest them. 

Assuming there is a five per cent wastage or loss of a million tonnes of crude palm oil, that works out to five million tonnes of fruit bunches left rotting across the country's oil palm fields. At a conservative pricing of RM3,000 per tonne, it translates into at least RM3 billion loss in export opportunity and millions of ringgit in tax loss to the federal and state governments. 

Many oil palm planters are already mechanising agricultural practices wherever possible and offering better wages in the estates. Despite this, many locals continue to shun plantation jobs. 

Lee highlighted the industry's wastage in the fields is also the government's loss in tax collection.

Deputy Plantation Industries and Commodities Minister Datuk Hamzah Zainuddin, who officiated at MPOB's seminar, acknowledged that the oil palm industry is the most heavily tax sector in the country. 

Planters are paying windfall tax, cooking oil cess, research and marketing cess, sales taxes to the Sabah and Sarawak governments, on top of the usual corporate tax and foreign worker levies.

He pledged support that his ministry will continue to forward the oil palm industry's appeal to the Home Affairs and Human Resources Ministries for an additional 40,000 foreign workers, so the industry can achieve the RM80 billion target in exports again.

"Last year, we did well as palm oil prices were high," he said, adding that MPOB had recently updated 2011's palm oil exports amounted to RM83.4 billion.

In the last five weeks, palm oil prices have been on the decline from a peak of RM3,600 a tonne. Yesterday, the third month benchmark palm oil futures on the Malaysian Derivatives Exchange closed RM125 lower, or 3.8 per cent, at RM3,150 per tonne, the worst single-day loss since February last year. 

When asked to comment, Hamzah replied, "I don't see palm oil dropping below RM3,000 per tonne, this year. Palm oil prices are likely to stabilise in the immediate term as global edible oil supply is still lagging behind demand."

Indonesia wants more refineries

Indonesia, the world’s biggest palm oil producer, recently restructured its tax incentives to woo cooking oil, oleochemicals and biodiesel investments to its shores. OOI TEE CHING talked to engineers building refineries there.

EVERY process engineer is fighting for a piece of the pie in Indonesia, said Lipochem Sdn Bhd managing director Koh Pak Meng. In an interview in Kuala Lumpur, he said his company recently won a bid to put up a refinery there.

While the situation in Indonesia is like 30 years ago in Malaysia, he said clients now want super-sized refineries so as to reap economies of scale.

Energy efficiency and water-saving features are also incorporated into the plant design. "While increasing capacity, our engineers improve the process by reducing water usage and stepping up on heat recovery," he said.

Another differentiating feature in modern refineries is that they are now designed to be fail-safe and fully-automated. "Refiners cannot tolerate any breakdown that spells margin loss. Also, the new plants are multi-fed. It can take in feedstocks like palm fatty acid distillate or sludge oil," he added.

"We're working on one refinery in Sumatra and we've to do a fast-track job.

The client wants it to be up and running in 10 months. Since the client is expecting fast returns, my staff are working overtime to meet this short deadline," Koh said.

A seasoned chemical engineer in the edible oils industry, Koh recalled that 30 years ago, Malaysia's downstream sector was started by independent refiners.

It was only later on that big plantation companies decided to go downstream.

"Back then, the profit margin was so good that the refineries were like money-printing machines to the independent owners," he said.

Now, it's a different ball game. New refineries are a lot bigger and erected at a faster pace.

Indonesia's current annual refining capacity is estimated to be at 23 million tonnes. By the end of 2013, another 12 million tonnes are expected to come onstream, bringing the total annual capacity to 35 million tonnes.

Eight months ago, the Indonesian government raised export taxes on crude palm oil drastically to encourage higher refining capacity and downstream activities. The tax hike made crude palm oil and crude palm kernel oil very cheap for downstream producers there.

Indonesian refiners also have an added advantage as processed products such as cooking oil, soaps and detergents shipped out from Indonesian shores are tax free.

This tax restructure had also unlevelled the playing field, causing refiners in Malaysia like Wilmar Group, Mewah Group, IOI Corp Bhd, Kuala Lumpur Kepong Bhd, Sime Darby Bhd and Felda Group to lose out.

Following this, some of these plantation giants, with estates in Indonesia, have decided to invest in Indonesia's refining sector to leverage on the cheap feedstock.

Desmet Ballestra, the global leader in edible oils technology, sees both Indonesia and Malaysia as its biggest markets to put up refineries and upgrade existing oleochemicals, specialty fats and biodiesel plants.

In a separate intervew, Desmet Ballestra Malaysia managing director Khoo Kiak Kern "We're putting up new plants in Indonesia. Here in Malaysia, we're doing some expansion and upgrading works for the refiners."

He then grinned and said, "our order book is growing" but stopped short of revealing the value of jobs his company had won.

Another European-headquartered entity benefiting from the job rush in Indonesia is Alfa Laval Malaysia Sdn Bhd. It has an added advantage over others because it doubles up as an equipment manufacturer.

"Apart from designing processing plants, we also manufacture the equipment and components which we supply to other engineering companies," said Alfa Laval Malaysia managing director Daniel Ng.

He added that the group's engineering forte lies in three areas; namely, heat transfer, separation and fluid handling.

In the 1960s, Alfa Laval was known to have pioneered the processing technology of palm oil, transforming the business landscape from just small soap-making activities to include modernised commercial scale cooking oil facilities.

"The need to grow has not changed but the processing technology landscape has. We leverage on opportunities that will reinforce our position in the world for our engineering solutions in the energy and food industry," he said.

"Good chemical engineers are always trying to improve their processes, make them safer, more efficient and more cost competitive," he added.

He said refineries are almost built for chemical engineers. This is because the types of equipment in a refinery - reactors, distillation columns, heat exchangers - are all the sophisticated trappings that a typical chemical engineer is specifically trained to evaluate, design and use.

The current rush to build up Indonesia's palm oil processing industry has prompted a sudden demand for experienced chemical engineers.

"Those who are good and very skilful can command top dollar, whether in Malaysia or Indonesia. Chemical engineers are very much in need now to build and later, to operate the refineries and other downstream add-on plants," Ng said.

Has RSPO's objectives been derailed?

This is written by my colleague Zaidi Ismail.

SINCE its establishment in April 2004, the Roundtable on Sustainable Palm Oil (RSPO) has one main objective - to champion the sustainability and viability of the world's oil palm industry.

RSPO, an international body grouping all stakeholders in the industry, has been able to rally all stakeholders to team up for the betterment of the oil palm sector. The stakeholders - from producers, bankers, processors and consumers to traders and non-governmental organisations - are all grouped under one banner with a common rallying call to ensure that the industry practises what it pledges to do.

However, of late, the group has been at the short end of the stick, having been lambasted even by some of its members, especially the growers for being piggy-backed, manipulated and controlled by non-governmental organisations (NGOs) and the processors.

So much so, Indonesia and Malaysia, which are the world's top two oil palm producers, are setting up their very own dedicated RSPOs - the Malaysian Sustainable Palm Oil and Indonesia Sustainable Palm Oil, respectively.

Felda Global Ventures Holdings Bhd president and group chief executive officer Datuk Sabri Ahmad, who was one of the founding directors, said: "The main objective and guiding principle of the roundtable is to provide a platform for members to engage in constructive engagement.

"Over time, oil palm growers' role has diminished while NGOs and processors have taken the main lead."

Sabri noted that NGOs and processors have taken over control, while the principle of a win-win situation was not practised and smear campaigns became the norm.

"Demand for sustainably produced palm oil is not taken seriously and the cost of certification became a burden for growers. Plantation owners have no voting power and their influence has waned over the years," he explained.

TH Plantations Bhd chief executive officer and executive director Datuk Zainal Azwar Zainal Aminuddin said the RSPO should not be used by select stakeholders for their own agenda.

"NGOs impose further penalties on producers under the pretext of allegations that the industry is killing orang utans and involved in illegal clearing of jungles. These claims are untrue because Malaysia is committed to preserving 50 per cent of its land under natural forest cover and does not condone illegal timber clearing," Zainal said.

He added that the actual situation on the ground is that these NGOs are slanted in protecting their interest in competing oils rather than upholding the sustainability of the oil palm industry.

"To me, the RSPO is detached from reality and its days are numbered. The group is not vocal enough in supporting premium value in palm oil and will be taken over by the MSPO and ISPO," he added.

Zainal, however, said in terms of technical compliance and other related aspects, RSPO has carried out its job well. "RSPO-certified members go through tedious processes to ensure sustainability according to criteria. RSPO has changed a lot of mindsets and a lot of opportunities to embrace good processes along the entire value chain," he said.

However, Zainal reiterated that the industry does not want to see stakeholders with self-serving agendas. "It's better to have engagements rather than seeing some stakeholders impose further penalties on producers on the pretext of killing the orang utans or the clearing of jungle. These claims are not true and does not hold water."

He added that oil palm is a very resilient crop and it is difficult to reject its oil in view of its good properties and ability to overcome non-tariff trade barriers.

In a separate interview, London-based Godrej International Ltd director Dorab Mistry said the more-than-500-member group is a bridge between the growers, processors and the western NGOs. "Sometimes each side feels the other is being unreasonable. RSPO provides the platform where both can meet and talk and arrive at win-win solutions," he said.

Up to August 2011, the global production of RSPO-certified palm oil has reached five million tonnes or 10 per cent of global palm oil production.

Cabinet to decide on gas, power tariff hike, says Chin

KUALA LUMPUR: There is a need to raise gas and electricity tariffs but it is for Cabinet to decide, Energy, Green Technology and Water Minister Datuk Seri Peter Chin said.

"The six-month interval of tariff revision for gas and electricity has not changed. The policy was not scrapped. The ultimate decision on whether or not to raise the tariffs lies with the Cabinet," he answered when asked if the government intends to raise gas and electricity prices from June 1 2012.

"Right now, gas supply to the power-generation sector is priced at RM13.70 per mmBTU (one million British Thermal Units), while the international market price is around RM40 per mmBTU. 

"So, you can see how much gas subsidies the government is shouldering," he added. "So, while there is a need to revise the tariffs, my ministry can only act on Cabinet's decision," he told reporters after officiating at the EU-Asia Biomass Best Practices and Business Partnering Conference 2012 here yesterday.

The last price hike in gas and electricity was on June 1 2011. At that time, natural gas price sold to the power sector was raised 28 per cent to RM13.70/mmBTU from RM10.70/mmBTU. The average electricity tariff went up 2.23 sen/kWh (kilowatt hour), or seven per cent, to 33.54 sen/kWh.

Electricity rebate by the government for residential households with a monthly bill of up to RM20, however, was maintained.

Last week, an explosion at the Penampang main intake substation caused a major blackout throughout Sabah and Labuan. When asked what had caused the explosion, Chin said: "I've been told that due to frequent fluctuation in electricity flow there, the equipments were subjected to extreme stress. The explosion, somehow, escalated tripping throughout the state grid.

"We're now looking at how best to prevent such tripping in the future. There's not enough capacity in the east coast. It takes time to plant up, it cannot be solved overnight," he said. 

He added that if the initial plan for a 300MW (megawatt) coal-fired plant at Felda Sahabat estate in Lahad Datu had proceeded, it would have been up and running by 2010. 

"Now, we'll have to wait for the 300MW gas-fired plant in Kimanis, Papar to come on-stream by December 2013," Chin said. Upon commercial operations then, he said, the Kimanis Power Plant will be the biggest in Sabah.

On average, Sabah's daily supply of electricity for consumers is 780MW. He noted that Sabah's current spinning reserve is too low at less than 10 per cent. "It should be more than 20 per cent."

Palm oil, still misunderstood

HEALTHY OIL: Many avoid foods high in saturated fats, fearing the onset of artery-clogging diseases such as heart attack and stroke. Experts tell OOI TEE CHING the facts on palm oil nutrition.

A lot of people worry that if they eat cakes, biscuits, pastries and chocolate made with palm oil, it will be detrimental to their health. They believe that the saturated fat content in palm oil is too high to be part of a healthy diet, said Malaysian Oil Scientists and Technologists Association president Tan Sri Dr Augustine Ong.

A former Malaysian Palm Oil Board director-general, Ong recalled the first negative attention palm oil received was in the 1980s when outraged millionaire industrialist Phil Sokolov suffered a heart attack and started campaigning against the ubiquitous use of tropical oils -- such as palm and coconut oil -- in ready-to-serve foods.

Sokolov's campaign themed "The Poisoning of America" featured nationwide full-page newspaper advertisements describing the dangers of saturated fats found in palm oil. Many of his supporters repeatedly linked palm oil consumption to increasing blood cholesterol levels and heart disease risk; a misconception that still looms to this day.

Ong acknowledges that palm oil contains a higher percentage of saturated fat compared with other vegetable variants like olive, soy, canola and sunflower oils. But it must also be highlighted that half of palm oil's fat content is monounsaturated and polyunsaturated -- known to increase good cholesterol and benefit the cardiovascular system.

He then said Sokolov, however, did not mention an important fact that in contrast with meat and dairy fats, palm oil does not contain cholesterol.

Three decades later, countless studies have proven that animal sources of saturated fats pose far higher heart disease risk than palm cooking oil -- another fact that Sokolov's campaign was not aware of.

Ong explained that since palm oil was a plant-based saturated fats, it metabolises differently in the body and therefore does not promote plaque build-up in the arteries.

"In fact, there are now more than 100 studies proving that tocotrienols, a vitamin E variant in palm oil, lowers bad cholesterol," he said.

"Saturated fats are a necessity in our daily diet. The real villain in cardiovascular diseases and diabetes are the artificial trans fats brought on by the hydrogenation of soft oils like soy, canola and sunflower oils, which are then made into margarine."

Dr Luisa Gambelli, who is Loders Croklaan Europe Nutritional Affairs and Project Manager, lists down 10 interesting facts about palm oil. Loders Croklaan is a specialty fats company supplying confectionery and bakery fats, margarine and large-scale frying oils to the global food industry. 

FACT 1: Palm oil is a fruit oil.
Palm oil is obtained from the flesh of the oil palm fruit. Like olive oil, palm oil is a fruit oil. Palm oil should not be mistaken for palm kernel oil which is extracted from the kernel or seed of the palm fruit.
Each palm fruit yields 90 per cent palm oil and 10 per cent palm kernel oil. Palm oil has a balanced composition of both saturated and unsaturated fats, coupled with high content of vitamin E.

FACT 2: Palm oil has been in our food since 5,000 years ago.
According to archaeological findings, traces of palm oil were found in an Egyptian tomb in Abydos. Since the country does not produce palm oil, this evidence suggests that palm oil had already been widely traded during the time of the Pharaohs.

FACT 3: Palm oil is the world's most consumed vegetable oil.
Palm oil is consumed worldwide as cooking oil and constituents of margarine and shortening. Last year, leading industry journal Oil World showed that global consumption of vegetable oils totalled 178.2 million tonnes.
Of that volume, palm oil accounted for 30 per cent of the global market share, while rivals like soya oil only command 24 per cent and rapeseed oil, 13 per cent.

FACT 4: The oil palm is the world's most efficient oil crop.
Only 0.26 hectares of land planted with oil palms is required to produce one tonne of palm oil while soybean, sunflower and rapeseed require 2.22, 2.0 and 1.52 hectares, respectively, to produce the same amount of oil.

FACT 5: Palm oil is rich in carotenoids.
Palm oil is high in carotenoids, which include carotene and lycopene -- more than in carrots or tomatoes. It is these carotenoids that give the oil its red colouring.
Vitamin A, or retinol, is an important nutrient for vision, the immune system and gene expression in the formative years of young children. Lack of vitamin A can impair development in children, cause eye and skin problems and decrease immune system functions.

FACT 6: The vitamin E in palm oil can kill cancer cells.
Palm oil contains the complete vitamin E family of tocopherols and tocotrienols. Studies on breast cancer cells showed that palm oil vitamin E inhibited the growth of the cancer cells of as much as 50 per cent. Cancer cells death was also observed.

FACT 7: Palm oil vitamin E may save brain cells from dying in the event of a stroke.
Tocotrienols are a naturally occurring vitamin E nutrient in palm oil. Studies published in the journal Stroke in 2005, show that brain cells treated with tocotrienols were 100 per cent more likely to survive in the event of a stroke.
Only a small amount of tocotrienol is needed to achieve these effects -- about 250 nanomolar, which is 10 times lower than the average amount of tocotrienol circulating in humans who consume vitamin E regularly.

FACT 8: Palm oil is nutritionally balanced.
One tablespoon of processed palm cooking oil contains 120 calories and 13.6 grams of fat. With a balanced combination of polyunsaturated, monounsaturated and saturated fats, palm oil is made up of 44 per cent oleic, 10 per cent linoleic, 40 per cent palmitic and five per cent stearic acids.

FACT 9: Saturated fats are not necessarily bad.
Tropical oils have a bad reputation in cardiovascular health because they contain high levels of saturated fats compared with other vegetable oils.
Nevertheless a recent analysis published in the January 2010 issue of the American Journal of Clinical Nutrition showed that there was no evidence to show that dietary saturated fat was associated with an increased risk of cardiovascular disease.
The effect of saturated fat should be seen in the context of a person's overall diet and environment.
High intake of saturated fat associated to low intake in polyunsaturated fatty acids, consumption of sugary and salty foods, excessive alchohol intake, smoking and stress collectively trigger the onset of cardiovascular diseases.

FACT 10: Poly-unsaturated oils are unhealthy when hydrogenated.
Many foods, like baked pastries and confectioneries, require solid fats to give them structure and texture. This is achieved either by using saturated fats or partially hydrogenated polyunsaturated fats containing artificial trans fats.
     For more than 50 years, artificial trans fats was the preferred choice. But following increasing awareness of the negative effects of these artificial trans fats in the last decade, many food scientists have turned to alternatives.
      Health-conscious food producers have switched to palm oil and its solid fractions as they become convinced of its versatility and natural image. Food scientists confirmed that palm oil does not need to be hydrogenated to bake well. For products requiring very high heat, such as frying, palm oil combines good performance with high stability and shelf life, both lacking in other vegetable variants like olive, soy, canola and sunflower oils. 

Boustead-KLK unit spreads roots to Indonesia

KUALA LUMPUR: SEED producer Applied Agricultural Resources Sdn Bhd (AAR), an equally-owned unit of Boustead Holdings Bhd and Kuala Lumpur Kepong Bhd (KLK), has spread its roots to produce oil palm seeds in Indonesia.

"We'll cater to the increased demand for high-yielding seeds there as farmers plant up their greenfields and replant unproductive areas," said Boustead deputy chairman and group managing director Tan Sri Lodin Wok Kamaruddin (pic).

PT AAR Nusantara, which will undertake seed breeding in Medan, is a joint venture between AAR, Kuala Lumpur Kepong Plantation Holding Bhd and Indonesian government-linked company PT Perkebunan Nusantara II.

In a typical seed garden, hundreds of mother palms are planted to produce the desired hybrid seeds. There, agronomists climb up the matured mother palms, and place plastic bags over the chosen flowering bunches. They then seal it tightly and hand puff the desired male pollens into the bag, one by one.

Lodin said in an interview with Business Times that the plastic bag cover is meant to prevent weevils from reaching the nice-smelling female flowers and accidentally pollinating it with other unwanted male pollens.

When these fertilised bunches become fruitlets, they are harvested and prepared for germination, he said. "Over the years, KLK and our group have invested heavily in oil palm breeding and cloning. This has enabled us to improve the seeds for higher yields. Our semi-clonal seed production technology ensures clients get consistent quality in every seed they buy from AAR," he added.

To safeguard intellectual property rights of its planting materials from competitors, Lodin said AAR and University of Nottingham Malaysia Campus had come up with markers to identify the genetic make-up of their seeds, seedlings and ramets.

In Indonesia, AAR's semi-clonal seeds command a premium of RM3.50.

Asked on business outlook for the year, he replied that AAR aims to sell ten million seeds after having sold 8.5 million last year. In 2009, it bred and sold 7.2 million oil palm seeds.

Lodin noted that AAR is the pioneer from Malaysia to carry out seed breeding in Indonesia. "We're setting aside RM10 million for this venture in the next five years. Although Boustead recently sold its estate in Sumatera, AAR takes a long term view on Indonesia. There's bright prospects of sustained seed sales there as AAR's hybrids have an edge over that of the other seed companies there," he said.

Lodin explained that the distinctive features that separate AAR from its rivals are its super oily fruits and smaller sized oil palm trees that allow for high-density planting.

AAR's hybrids have proven track records of producing more than 35 tonnes of fresh fruit bunches with 23 per cent oil extraction rate. That works out to be about nine tonnes of oil per hectare in a year, or three times higher than Indonesia's average yield.

Another compelling feature of the AAR's hybrids is its dwarf stature, which allows for higher density planting. "Clients who buy our seeds can plant up 148 trees in one hectare compared with the current standard of 136. That will translate to about 10 per cent more oil per hectare," he said.