Archive for March 2013

Sabah RE producers set to enjoy FiT rates soon

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

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

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

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

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

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

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

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

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

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

Wage rule has small impact on money outflow

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

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

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

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

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

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

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

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

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

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

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

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

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

RM342m gain for FGV from stake sale

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

'Explain to foreign workers about minimum wages'

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

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

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

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

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

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

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

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

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

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

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

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

Mobile hospital set up at Felda Sahabat

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

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

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

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

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

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

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

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

'Palm oil shipments unaffected'

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

KDF eyes bigger share of derivatives

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

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

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

A more specific example would be the equity index futures.

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

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

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

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

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

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

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

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

Biofutures buys Malaysian biofuels firm

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

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

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

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

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

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

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

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

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

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

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

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

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

FGV's two refineries in Sabah not affected

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

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

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

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

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

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

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

Oleochemical firms invest more in Europe

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

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

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

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

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

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

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

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

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

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

Malaysia going the bio-oil way

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

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

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

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

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

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

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

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

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

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

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

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

Experts expect CPO to peak at RM2,600

This is written by my colleague Zaidi Ismail.

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

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

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

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

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

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

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

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

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

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

SOPB expects bigger harvest

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

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

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

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

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

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

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

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

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

Kenanga Deutsche Futures bags top award again

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

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

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

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

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

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

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

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

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

Call to boost competitiveness

This is written by my colleague Zaidi Ismail.

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

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

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

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

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

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

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

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

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

Prolonged Lahad Datu crisis may affect CPO output

This is written by my colleague Zaidi Ismail.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Govt urged to abolish duty free quota on CPKO

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

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

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

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

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

Last year, only 258,640 tonnes of RBD PKO were exported, 40 per cent less than 363,690 tonnes in 2011.
Jaaffar was speaking to Business Times on the sidelines of the Palm and Lauric Oils Outlook Conference (POC2013) here yesterday. "Since we have not been able to export our RBD PKO competitively, there's less demand for CPKO. This continues to pull the CPKO prices down," he explained.

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

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

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

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

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

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

POC2013 to see solid turnout

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

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

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

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

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

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

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

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

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

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

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

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

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

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