Archive for October 2014

Palm oil experts see continued price recovery

KUALA LUMPUR: OIL palm planters were a little happier at the recently-concluded Palm Oil Trade Seminar (POTS) 2014 when experts gave hopeful outlook on palm oil prices.

Hamburg-based ISTA Mielke GmbH executive director Thomas Mielke started off his forecast of palm oil pricing by assuring planters not to be carried away by bearish sentiment. “Price recovery is fundamentally justified.”

He explained that palm oil, which is mainly used for food, is increasingly influenced by petroleum prices as countries all over the world look to excess edible oils as substitutes to depleting fossil fuels.

“If crude oil prices were to fall to US$75 (or RM245.20) a barrel or lower, palm prices could drop, too. This would trigger the swing factor ... the demand in the energy sector that is not mandated,” said Mielke. 

With sustained demand for cooking oil and margarine from the global food industry, Mielke thinks palm oil prices are unlikely to drop below RM2,000 a tonne in the next couple of months.

He expects palm oil futures to climb further and trade between RM2,300 and RM2,500 a tonne by the first quarter of 2015. 

Yesterday, the third month benchmark palm oil futures on Bursa Malaysia Derivatives gained RM50 to close at RM2,263 a tonne.

This year, world production of palm oil is likely to rise to a record high of 59 million tonnes from last year’s 56 million tonnes. 

Mielke, a well-respected and authoritative vegetable oil analyst, once again, rejected calls by green activists for a moratorium on oil palm plantings.

“The environmental activists like to pretend or dream of a world without palm oil. It would be terrible for consumers, especially those in developing countries where two thirds of the world population resides. The truth is, we cannot replace palm oil, at least not in large volumes,” he said.

Jupiter Securities chartist Benny Lee said price recovery has already begun. “Palm oil prices are likely to be on the uptrend, supported by the strengthening of the US dollar and implementation of the B7 biodiesel mandate in the country.”

Godrej International Ltd director Dorab Mistry was also optimistic when he said the worst is over. “Planters can look forward to better times. I think palm oil is likely to trade in a range of RM2,100 to RM2,300 a tonne in the next several weeks.

“In December, I expect futures to rise steadily as production declines begin to bite and stocks decline. However, given the current macro economic outlook, I do not expect a runaway bull market. I think prices are likely to appreciate to RM2,500 a tonne by March next year,” he said. 

I'm smiling again

The clock is ticking and it is getting late in the evening. I'm grumbling to myself that I'm having to work night shift today. 

That means I would be crawling through the jam-packed streets to get back to office by dinner time. Uuugghh!

I was suddenly "woken" from the monotony of listening to speakers after speakers delivering their speeches when a newly met friend gave me a packet a chocolate. Yay!

This is the first time in my career as a journalist covering a palm oil conference when I'm suddenly surprised with a packet of crunchy chocolate wafers.

This newly met friend was rushing to get back to Singapore and he graciously gave me this lovely gift made from palm specialty fats.

It brought a smile to my face. Today's conference coverage is not so boring after all.

FGV sells more biodiesel to China

KUALA LUMPUR (Bernama): Felda Global Ventures Holdings Bhd (FGV) is expanding its biodiesel business in China with the second shipment of 6,000 tonnes of palm oil methyl ester (PME) to Dongguan Port, Guangdong.

The company successfully made a maiden shipment of 6,000 tonnes of PME to Nansha Port, Guangzhou, last month.

Group president and chief executive officer Mohd Emir Mavani Abdullah said the first shipment was a highly significant development for FGV’s biodiesel ambitions.

“By successfully penetrating the China market, FGV is on track to achieving its biodiesel global growth targets.

“China is one of the biggest biodiesel markets in the world. Given its huge energy requirements and reliance on biodiesel imports, we can meet this demand by virtue of being Malaysia’s largest PME exporter,” he said in a statement yesterday.

FGV currently accounts for 31.59 per cent of Malaysia’s PME exports, he said, adding biodiesel trade between China and Malaysia is poised to rise, based on the former’s rapidly growing interest in renewable energy.

From January to August, China had imported 590,777 tonnes of biodiesel from around the world.

The usage of PME is gaining popularity because the growing of the feedstock is sustainable from its economic, environment and social aspects. Fossil energy balance, which is the ratio between renewable energy output and fossil energy input is a good factor to compare biofuel sources. 

Topping the list is PME with a fossil energy balance of 9. This means that a litre of palm oil biofuel contains nine times the amount of energy as that required for its production. Sugar cane has values ranging from 2 to 8. Other feedstocks such as rapeseed, soya and corn have values which fall between 1 and 4.

When it comes to yield productivity, sugar cane and palm oil rank the highest. Sugar cane yields 6,000 litres of biofuel per hectare (l/ha), followed by oil palm and sugar beet (5,000-6,000 l/ha) but palm oil is superior as it has 27 per cent higher energy content (30.53 MJ/l) than ethanol from sugarcane (24MJ/l). 

Moderately efficient feedstock’s such as corn, cassava and sweet sorghum yield 1,500-4,000 litres of biofuel per hectare( l/ha). Rapeseed, wheat and soya are the least efficient, yielding less than 1,500 l/ha.

Joint efforts to tackle palm oil trade barriers

KUALA LUMPUR: MALAYSIA, in welcoming the inauguration of the Jokowi administration, looks to Indonesia for continued efforts in poverty alleviation by jointly tackling smear campaigns and barriers to palm oil trade. 

Indonesia President Joko “Jokowi” Widodo unveiled his Cabinet line-up recently to govern Southeast Asia’s biggest economy and the world’s big supplier of coal, rubber, palm oil and mineral ores. 

“As main producers of palm oil, contributing to the world’s food security, Malaysia is on the same page as Indonesia in developing agriculture in a way that balances the needs of people, planet and profits,” said Malaysian Palm Oil Council chief executive officer Tan Sri Yusof Basiron on the sidelines of the Palm Oil Trade and Seminar, here, yesterday. 

“We were informed that our ministry will be seeking to continue bilateral talks to address the opening of markets that are increasingly hindered by non-tariff trade barriers and protectionism,” he added.

A business-matchmaking session between palm oil buyers and suppliers, chalking up more than 100 appointments, was arranged in conjunction to this gathering of some 400 trade delegates.

“Oil palm planting and palm oil exports provide developing nations a path out of poverty. The growing of oil palms, the world’s most efficient oil crop, is helping the people of Malaysia and Indonesia to improve their standard of living,” said Yusof.

On striking a balance between the needs of people, planet and profits, Yusof said many tend to overlook that oil palms, just like other trees in the forest, contribute to carbon sinking. In times of surplus, excess palm oil also serves as an alternative to depleting fossil fuel.

Oil palm planting allows Indonesia and Malaysia to supply affordable and nutritious cooking oil and margarine to billions of people in developing nations such as China, India, Pakistan, Bangladesh and Vietnam. 

According to Oil World trade journal, Malaysia and Indonesia collectively export the bulk of 56 million tonnes of palm oil.

In the last five years, Malaysia earned between US$15 billion and US$20 billion (RM50 billion and RM70 billion) a year from palm oil exports. Indonesia Palm Oil Commission reportedly said the republic earns US$10 billion annually from palm oil shipments.

Malaysia’s annual palm oil exports worth US$20 billion support two million jobs along the sprawling palm oil value chain.

Despite its positive attributes, Yusof said the oil palm industry continued to face discrimination. “Environmental activists continue to dictate certification criteria and lobby for the European Union Renewable Energy Directive which discriminates against palm oil. This discrimination is against rules laid down by the World Trade Organisation.”

I'm smiling

I usually go to this place, that has a green mermaid logo, for coffee.

:) Just so you know ... there's healthy palm specialty fats in latte.  

People in the service industry, especially retail, are trained to be skillful in the art of making customers feel special. 

After I placed my order, the barista whipped out his marker pen and asked for my name. I smiled and replied, "today, I'm Snow White."

His eyes widened and he chuckled. "So, where are all your seven dwarfs?" he asked.

That got me laughing. Today's a special day for me. Love this!

Smile! You're on camera

I've put up a posting before on synchronised swimming and palm oil. This time, it is featuring Team Malaysia synchronised swimmers. Aged 15 to 25, these group of girls diligently undergo gruelling training of six hours a day, six days in a week at the Bukit Jalil Aquatic Centre, Selangor.

Synchronised swimming -- an aquatic sport that fuses flexibility, balance, endurance, strength and … palm oil? Yes, one of the critical elements of synchronised swimming that captures the judges' attention is the make-up.

Unknown to many, water-proof cosmetics such as lipstick, moisturiser, hair gel and sun bloc are oleochemical derivatives, which in turn are processed from palm oil.

To last for a whole performance — equal to at least four laps up and down the Olympic size pool — synchonised swimmers' water-proof make-up have to be “strong” enough to withstand a tough beating underwater. To get the right look ...

1. Apply a layer of primer on their eyes to help the eye shadow stay on.
2. Then apply layer after layer of shadow, caking it on so that it is bright and doesn’t get washed after one dunk in the pool.
3. Then come the layers of eyeliner and mascara — the more the better — to make their features stand out.

Synchronised swimmers also slick back their hair using super-sticky gel, made from oleochemicals. This gooey stuff helps keep their silky mane at bay throughout the competition. It only melts away after 30 minutes of hot shower.

Beneath these bright layers of make-up and pretty smiles are hours of insane athleticism exerted day-in-day-out to make synchronised swimming look delightfully easy on the eyes.

Bursa Malaysia Bull Run 2014

The New Straits Times is covering this event because parent Media Prima Group is the new partner of Bursa Malaysia's charity marathon. It takes place today in the heart of Kuala Lumpur.

Media Prima Television Network chief executive officer Ahmad Izham Omar and his chief operating officer Seelan Paul are there in their running shoes.

Among the more "sporting" representatives from publicly-listed plantation companies at this charity run are Felda Global Ventures Holding Bhd and Sime Darby Bhd.

Bursa Bull Charge tracks a 5km run following Kuala Lumpur’s Capital Market Trail, a route throughout the Central Business District that passes the headquarters of many of Malaysia’s capital market players in our community, a reminder of the sustainability of the marketplace.

The run categories include a 1.5km CEOs Run, a 5.0km Individual Run and a Corporate Relay Run.

Among the 1,300-odd enthusiastic participants from the capital market community include government agencies, regulators, brokers, listed companies, traders, remisiers, trading partners and the media. There's a special category of relay run among young executives.

Key sponsors are Maybank Investment Bank, SapuraKencana Petroleum Bhd, YTL Corp Bhd, IJM Corp Bhd, Berjaya Corp Bhd, Protasco Bhd and PESTECH Sdn Bhd.

At one point, Bursa Malaysia chief executive officer Datuk Tajuddin Atan's "running mate" is CIMB Group Holdings Bhd acting chief executive officer Tengku Datuk Zafrul Tengku Abdul Aziz. 

Tajudddin said this is part of the stock exchange’s initiatives towards building financial literacy, especially among young executives.

“This inaugural Bursa Bull Charge is a physical demonstration of marketplace inclusiveness that we have been working hard at building up and hopefully, reach out to the wider community. This is one way for Bursa Malaysia to raise awareness and remind us of our responsibility to give back and invest in local communities,” he said.

"We recognise the role of young executives as future leaders and entrepreneurs. By involving them in the Bursa Bull Charge to run alongside CEOs and captains of the industry, we hope young executives would feel inspired of the possibilities and opportunities available in the marketplace, be it a career or in building wealth”, said Tajuddin.

All proceeds raised from the Bursa Bull Charge will be channeled to charity while Bursa Malaysia and the sponsor partners will absorb all costs incurred in organising the run.

CBIP: Good order flow for Modipalm mills

Subang Jaya: CB INDUSTRIAL Product Holding Bhd (CBIP), which holds the patent for constructing Modipalm mills, said its current order book of some RM500 million will keep it busy for another 18 months.

CBIP managing director Lim Chai Beng said while low palm oil prices were slowing oil palm estate owners’ investments, orders were still coming in for mill upgrades.

“We’re getting orders, although there may be slight delays here and there. Out of the RM500 million orders to put up new mills and upgrade old ones, 70 per cent are from outside Malaysia.

“Old mills in Malaysia need to be upgraded and our Modipalm technology has been proven to minimise oil loss. This helps contribute to better oil extraction rates at the mills,” Lim said after the company’s extraordinary general meeting held here yesterday. 

CBIP shareholders approved the company’s plan to issue 1-for-1 bonus shares and free warrants.

Lim said oil palm planters have everything to gain if they upgraded their conventional mills to an automated Modipalm. Its continuous steriliser system is compact, he said, as it took up less space, fuel and labour; produced more and higher quality oil; and therefore, the overall impact is kinder to the environment.

At a Modipalm mill, there is no need for tractors and hydraulic skid-steer loaders or wire-rope winches to move the fruit-cages around. There is also no need for monorail hoists to lift the cages to the threshing machine. 

This means less machinery to maintain and, in two shifts, the Modipalm mill needs only 30 workers, or half the staff strength to operate a conventional 60-tonne mill processing 300,000 tonnes of fresh fruit bunches in a year.

“Fewer workers also means less houses to be built on the plantation. So, you see, with tremendous improvement in safety and minimal oil wastage it is worthwhile to upgrade to a Modipalm mill,” Lim said.

On CBIP’s other sources of income, executive director Mak Chee Meng said the company’s oil palm landbank in Indonesia totalled 65,000ha, of which about 10 per cent is planted up. 

In Malaysia, CBIP has a joint venture with Tradewinds Group, with its portion of investment amounting to 7,500ha.

“We’re now working hard to top up the landbank in Indonesia. We may be slow (in land acquisition) but we are sure in our investments because we go through all the legal compliance step by step,” Mak said.

Smallholders urged to apply for replanting grants

KUALA LUMPUR: Plantation Industries and Commodities Minister Datuk Amar Douglas Uggah Embas urged smallholders to apply for replanting grants to replace ageing oil palms with higher yielding seedlings.

Last Friday, Prime Minister Datuk Seri Najib Razak, in his 2015 Budget speech, announced that RM41 million had been allocated for smallholders to embark on new plantings and replanting of their unproductive rubber and oil palm trees.

Smallholders are those who own 40ha or less. 

When asked on the portion for the replanting of oil palms, Uggah said the allocation worked out to RM7,000 per hectare for oil palm land in Peninsular Malaysia and RM9,000 a hectare in Sabah and Sarawak. 

This subsidy is meant to raise the annual national oil yield, which has been stagnating at below four tonnes a hectare over the last two decades.

It is hoped that by 2020, the annual fresh fruit bunch yield would improve to 26.2 tonnes a hectare from 21 tonnes currently. 

In response, Malaysian Palm Oil Association chairman Roy Lim Kiam Chye urged the government to extend and top up replanting grants for all oil palm planters and not just the smallholders.

“Incentives to accelerate replanting at current low prices will ensure future competitiveness of the industry. The replanting grant is good for the smallholders but what about estate owners? They need to replant, too,” he added.

Last Friday, the government also took a pre-emptive measure to extend the crude palm oil (CPO) export duty exemption until December.

“Although it is a good gesture from the government, it is common knowledge that at current price levels, CPO export duty is already zero. With the current global edible oils supply situation, prices are not likely to rise significantly to trigger the duty factor,” he said. 

Lim added that the exemption had levelled the playing field for Peninsular Malaysia exporters against those in Sabah and Sarawak. “If we look deeper, zero export duty has somewhat dented the advantage of producers in Sabah and Sarawak as they no longer enjoy the 30 per cent discount on duty.”

Maybank Investment Bank senior analyst Ong Chee Ting concurred with MPOA, saying Malaysia’s palm oil exports can be freely exported during these high production months until the end of the year. “It aims to quickly flush out incoming supplies to help a more sustained CPO price recovery next year.”

On price forecast, Ong said CPO had lost its price competitiveness due to the recent slump in crude oil price and narrowed price discount to competing soyabean oil.

CPO price, therefore, needed to trade lower at RM2,000 per tonne to stimulate demand and flush out incoming supplies during these peak production months, Ong said.

“We think CPO prices will be under near-term price pressure to stimulate demand. We expect CPO prices to continue trading sideways at between RM1,900 and RM2,200 per tonne until early December. Hopefully, it closes the year above RM2,400 per tonne,” he added.

‘FGV ending pursuit of NBPOL’

This is written by my colleague Zaidi Isham Ismail.

KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) will not pursue the acquisition of New Britain Palm Oil Ltd (NBPOL) after Sime Darby Bhd’s fresh RM5.63 billion offer for the planter.

A reliable source said FGV will not counter offer as it will be too expensive. “No, they will not continue to bid for NBPOL as it’s too pricey,” the source told Business Times. 

After Sime Darby pulled out of the deal, FGV took the opportunity to bid for NBPOL but now that Sime Darby has made an about-turn, FGV will not push for it any more.

Sime Darby launched a general offer to buy all shares in NBPOL for £7.15 (or RM37.52) each last Thursday, less than two weeks after it had turned down the chance to buy Kulim (Malaysia) Bhd’s 48.97 per cent stake in the London-listed NBPOL.

Sime Darby’s offer is a 30 per cent premium over Kulim’s previous offer of £5.50 a share to increase its stake in NBPOL.

“This acquisition is conditional upon Sime Darby obtaining 51 per cent voting rights in NBPOL,” said Sime Darby president and group chief executive Tan Sri Bakke Salleh last week.

NBPOL owns about 80,000ha of oil palm plantations, more than 7,700ha of sugarcane land and a further 9,300ha of grazing pasture in Papua New Guinea. It also owns 12 mills and two refineries — one in Port Moresby and the other in Liverpool, the United Kingdom.

Pricey offer for NBPOL justified

KUALA LUMPUR: SIME Darby Bhd may be paying a lot for New Britain Palm Oil Ltd (NBPOL), but this is justified by the latter’s valuable assets, analysts said.

Affin Hwang Capital calculated that Sime Darby's general offer price of RM5.6 billion for all NBPOL shares works out to be an enterprise value per planted hectare of RM84,200 for the Papua New Guinea-based planter.

Although this looks high when compared with Felda Global Ventures Holding Bhd’s proposed acquisition of Asia Plantations’ estates in Sarawak, Affin Hwang said NBPOL has a better oil palm age profile, higher fruit yield and plantable reserves of 22,000ha.

The research house is positive on Sime Darby for seeking board and management control in NBPOL, and had upgraded its rating on the conglomerate. It thinks Sime Darby’s shares can rise to RM9.31.

MIDF Research, too, is positive on Sime Darby buying NBPOL despite the £7.15 (or RM23) offer price representing a 85 per cent premium over NBPOL’s last closing price on Wednesday.

“NBPOL is one of the best performing palm oil companies in the world with consistent fresh fruit bunch yield of more than 23 tonnes per hectare,” it said yesterday.

While it valued Sime Darby’s shares at RM9.70, MIDF Research has kept a “neutral” stance on its overall performance due to the risks of other businesses not performing well. 

Sime Darby's net gearing is seen to be manageable. “We believe Sime Darby is able to increase its borrowings without jeopardising its credit risk,” said MIDF Research.

Hong Leong Investment Bank (HLIB), meanwhile, has recommended a “hold” call and maintained Sime Darby’s target share price at RM9.75. It noted that the high price tag of £7.15 per NBPOL share is justified, given the scarcity of sizeable brownfield plantation landbank. “NBPOL estates are seen to be a good platform for Sime Darby to expand into PNG’s palm oil industry,” it added.

HLIB said the acquisition would only raise Sime Darby’s net gearing from 0.22 times to 0.44 times. “Earnings-wise, we estimate that the acquisition will add 2.5 per cent to Sime Darby’s forecast earnings in the next financial year.”

AmResearch Sdn Bhd has maintained a “buy” call on Sime Darby while valuing the conglomerate’s shares at RM10.58. It viewed Sime Darby’s offer as “pricey” at 22 times of next year’s forecast earnings but admitted that this price tag had to be attractive enough to obtain a controlling stake of at least 51 per cent in NBPOL.

Sime Darby makes RM5.63 billion offer for NBPOL

KUALA LUMPUR: Sime Darby Bhd is finally able to make a RM5.63 billion offer for New Britain Palm Oil Ltd’s (NBPOL) hand in marriage, now that the Papua New Guinea (PNG) government has wholeheartedly given its blessing.

Sime Darby yesterday launched a general offer to buy all shares in NBPOL at £7.15 (or RM37.52) each. This was less than two weeks after it had turned down the chance to buy Kulim (Malaysia) Bhd’s 49 per cent stake in London-listed NBPOL.

The cash offer is a 30 per cent premium over Kulim’s previous offer of £5.50 a share to increase its stake in NBPOL.

“This acquisition is conditional upon Sime Darby obtaining 51 per cent voting rights in NBPOL,” said Sime Darby president and group chief executive Tan Sri Bakke Salleh, here, yesterday.

He explained that “right from the start, Sime Darby was not only focusing on Kulim’s block in NBPOL because ideally, we would like to end up with at least a 51 per cent stake so that we can assume both NBPOL’s management and board control."

“In the course of our negotiations with the stakeholders, we realised the key factor here is to get the support from the PNG Government. Right till the last day of our exclusivity agreement with Kulim, which fell on September 28, we still had not received any written letter of confirmation from the PNG Government.”

However, on October 1, Sime Darby finally obtained the support letter from PNG’s Prime Minister Peter O'Neill, which paved the way for it to reactivate its proposed offer for NBPOL. O’Neill emphasised that this deal must be in line with PNG’s national interest in relation to Rule 27A of the PNG Takeovers Code.

“It is not often that an opportunity such as this presents itself. The strategic fit between NBPOL and Sime Darby Plantation is the key factor that will ensure the success of this deal. We hope to complete this deal by year-end,” Bakke told reporters in a briefing.

He then dished out NBPOL’s vital statistics to support Sime Darby’s offer. Among them is ownership of about 80,000ha of oil palm plantations, more than 7,700ha of sugar cane land and a further 9,300ha of grazing pasture in PNG. NBPOL also owns 12 mills and two refineries — one in Port Moresby, PNG, the other in Liverpool, the United Kingdom.

Post-acquisition, the combined landbank of the two companies would be nearly a million hectares, he said, adding Sime Darby shareholders can look forward to around five per cent contribution to the bottom line in the next couple of years, if the merger with NBPOL is a success.

Bakke also said there are plans to delist NBPOL from the London Stock Exchange (LSE). “The stock is illiquid and its current market price is not reflective of the value of the company. In the last 12 months, the average cumulative trading volume on the LSE and the Port Moresby Stock Exchange represents less than 1 per cent of the float.

“We believe it will be good to move NBPOL’s listing from London to this part of the world, either to Bursa Malaysia or the Singapore Stock Exchange," he said. 

Last night, NBPOL’s largest shareholder, Kulim, told the stock exchange yesterday it intends to accept Sime Darby’s proposal, provided there is no higher offer. It will soon call for a shareholders’ meeting to decide on this. If the deal goes through, Kulim will gain RM2.75 billion from the disposal.

I want to hold your hand


Oh yeah I'll tell you something
I think you'll understand
When I say that something

I wanna hold your hand
I wanna hold your hand
I wanna hold your hand

Oh please say to me
You'll let me be your man
And please say to me
You'll let me hold your hand

Now let me hold your hand
I wanna hold your hand

And when I touch you I feel happy inside
It's such a feeling that my love
I can't hide, I can't hide, I can't hide

Yeah, you got that something
I think you'll understand
When I say that something

I wanna hold your hand
I wanna hold your hand
I wanna hold your hand

And when I touch you I feel happy inside
It's such a feeling that my love
I can't hide, I can't hide, I can't hide

Yeah you, got that something
I think you'll understand
When I feel that something

I wanna hold your hand
I wanna hold your hand
I wanna hold your hand
I wanna hold your hand


I was at Sime Darby Bhd's urgent press conference this morning when Tan Sri Bakke Salleh was dishing out the vital statistics of New Britain Palm Oil Ltd (NBPOL).

As I was listening in, this song came to mind. "It's such a feeling that my love ... I can't hide, I can't hide, I can't hide"

I guess Sime Darby couldn't contain its love for NBPOL when the Papua New Guinea government finally gave its blessings for this courtship to blossom.

Love affairs are seldom predictable. She loves me ... she loves me not ... she loves me ... she loves me not ... SHE LOVES ME!!!

Like all anxious parents, the government of Papua New Guinea would only agree to a hand in marriage if a suitor is ready and willing to cherish and love its daughter, NBPOL, at all times.

When so many livelihoods are at stake, it's crucial that the suitor of NBPOL is in for the long haul. That means he's committed to be Mr. Right, not someone who is unsure of his feelings and can only offer to be Mr. Right-Now.

Love is in the air. May there be many more happy unions in the oil palm industry.

'Condoms no more a dirty business'

What has condoms got to do with palm oil? Condom lubricant is still predominantly sourced from the petrochemical industry. This can change if and when oleochemical manufacturers are ready and willing to offer the prophylactics industry the right specifications for pharmaceutical lubricant at the right price.

As it is, Karex Bhd, the world's biggest condom maker, is already sourcing stretchy latex from Malaysia's plantation giants' rubber estates and that of smallholders.

While the big boys of Malaysia's rubber industry are the glove makers, there is a less heralded group generating expanding returns into our economy. With the right push from the government, Karex Bhd tells OOI TEE CHING condom exports can scale new heights.

GOH Miah Kiat is probably one of the few men in Malaysia whose wives merrily pack condoms into their luggages whenever they go overseas. “She wishes me fruitful return every time I go on a trip,” beamed the happily married man and father of three children.

As head honcho of the world’s biggest condom manufacturer Karex Bhd, Goh told Business Times that while the prophylactics industry is small compared with the glove manufacturers in Malaysia, there is actually better opportunities for condom makers to penetrate more markets and move up the value chain.

In the medical world, Foley catheters and surgical gloves are classified as Class 2A. When it comes to condoms, healthcare practitioners categorise them under higher safety requirement of Class 2B. This is because as a life-saving tool, condoms need to be produced in a clean environment and thoroughly tested as a safe-to-use product.

But unlike rubber gloves, more investment is needed in quality control to ensure the condoms do not leak and comply with other specifications of strength, length and visual properties. Also, every piece has to be hermetically sealed to prevent contamination.

Goh explained that a lot of investment goes into ensuring condoms comply with stringent requirements under the ISO 4074, World Health Organisation (WHO) specifications and ASTM D3492-03 standards.

In order to meet the ISO 4074 standard, each condom is subjected to 100 per cent electronic testing. There are also random samplings of the condoms to test the quality and elasticity of the rubber.

In an electrolyte water test, condoms are filled with water before they are submerged in a water tank. If there are pinholes in the condom, the machines detect them automatically. 

Then, there is the burst test where air is pumped into condoms like it is done for balloons. A condom must be able to hold a minimum 18 litres of air and record air pressure of at least one kPa before bursting.

The condom’s width uniformity is measured by laying it flat across a ruler. Condoms are sold at varying widths of between 49mm and 60mm, of which 52mm is the most popular. The ISO 4074 standard requires a minimum length of 160mm, but the WHO mandates longer condoms of a minimum 180mm for their targeted markets. Indeed, one size does not fit all.

Since condom manufacturing is an integral part of the medical device sector, such businesses are seen as hi-tech and knowledge-based.

In the last decade, Karex pumped in a lot of money, time and effort in automating as many processes along its productions lines. “Automation is key to ramping up productivity. However, further capital expenditure is required. Government incentives, such as re-introduction of reinvestment allowance, is vital,” Goh said.

As the world’s biggest condom maker by volume, Karex produces four billion annually, more than any other single manufacturer. Industry consultants estimate the global condom market is worth US$6 billion (RM19.68 billion) in 2015, or about 27 billion condoms.

Karex’s condoms make up 15 per cent of the global market. With heightened awareness of safe sex, global demand is expected to grow at eight per cent annually. 

When it comes to brand recognition, leading labels Durex (marketed by Britain’s Reckitt Benckiser Group), Trojan (owned by the United States firm Church & Dwight) and Lifestyles (by Australian giant Ansell Ltd) make up 25 per cent of the world’s condom market. 

Apart from selling on volume, like all businesses, it is far more strategic to add value so as to sell at premium pricing. 

“This is underpinned by product development. We strive to produce our condoms in an assortment of colours, texture, shapes and flavours,” he said.

Among premiumly-priced condoms are those that “glow-in-the-dark”, resembling the Star Wars lightsaber. A cheeky marketing pun suggests that in preparation for a night to remember, one gets to “rise-and-shine” and play “hide-and-seek” with his lover.

While glowing looks can be eye-catching, Goh said it is the “feel” of the condom that keeps the customers coming back. The challenge is for manufacturers to come up with thin and yet durable condoms that can withstand accidental punctures from long fingernails and body piercings.

According to the Guinness World Record, the Aoni condom is the world’s thinnest rubber measuring just at 0.036 millimetres. China’s Guangzhou Daming United Rubber Products Ltd, that makes 200 million Aoni condoms annually, snagged this “barely-there” tantalising title from Japan’s Okamoto Industries Inc’s thinnest variant of 0.038mm.

The Bill and Melinda Gates Foundation recently awarded US$100,000 in grant to the University of Manchester to develop nano composite materials for next-generation condoms. They are experimenting with a “miracle material” called graphene to make thinner and stronger condoms. 

Goh added that Karex is also in the thick of action to come up with “super-duper condoms” that are more desirable to use, which could stimulate global usage to prevent unwanted pregnancies and curb the spread of sexually transmitted diseases.

“Graphene is 1 atom thick and 200 times stronger than steel. We’ve been running several experiments on our own to see if graphene can be combined with stretchy latex to produce a new material that can be thinner, thus enhancing the natural sensation,” he said.

Karex, founded by the Goh family in Johor in 1988, started off in the rubber processing back in the 1960s. Since hitting the headlines as the world’s largest condom maker during the last few years, it continues to thrill investors by plunging into the lucrative pool of condom branding.

Last week, Karex bought a 55 per cent stake in Boston-based Global Protection Corp for US$6.6 million. 

As brand owner of the ONE condom, Global Protection Corp granted exclusive rights to Karex to expand this “fun-loving” sensation into Asia, North Africa and the Middle East. ONE condom is now the fourth most popular brand after Durex, Trojan and Lifestyles. 

Global Protection Corp founder Davin Wedel, who is also a popular thought leader in sexual health, highlighted ONE condom is gaining fast acceptance among young adults as it is marketed as fashionable and socially conscious. 

“Asia is going to create a lot of demand because our population is young. When we got into the condom business about 25 years ago, it was pretty much a dirty word. Today, things have changed,” said Goh.

“We want to roll out ONE condoms in Southeast Asia by the first half of 2015. We’re also looking into brand-building. Specific government tax breaks in this direction would be much welcomed,” he added.

In ramping up its capacity to six billion pieces by the end of 2015, Karex’s RM80 million eco-friendly factory is being built on a 7.3ha plot in Pontian, Johor. “We’ve designed it to save on electricity and water usage compared with conventional factories. There will be natural lighting, strategic sun-shading, good ventilation and rainwater harvesting features.

“When we combine these utility savings and convert them to the all familiar carbon calculation, it’s a staggering 9,900 tonnes of carbon dioxide avoidance into the air. That’s equivalent to the emissions of 29,000 cars in a year,” Goh said.

FGV back in for NBPOL

This is written by my colleague Zaidi Isham Ismail.

KUALA LUMPUR: FELDA Global Ventures Holdings Bhd (FGV) has initiated talks with Kulim (M) Bhd to buy the latter’s stake in London-listed New Britain Palm Oil Ltd (NBPOL), said people familiar with the matter.

FGV has emerged as the next preferred candidate for the 48.97 per cent stake, which could cost up to RM5 billion, after Sime Darby Bhd turned down the chance to acquire it. FGV had previously submitted its bid in June.

“Yes, they are in the running now that Sime Darby has pulled out. Yes, they are in talks,” a source told Business Times yesterday.

The source did not elaborate but said the FGV management has issued a gag order over the matter. When asked whether FGV is concerned about buying the stake without management control, the source said: “They have calculated the risk.”

Top FGV officials declined to comment.

Sime Darby, arguably the world’s largest oil palm planter by land size, announced on Tuesday it had opted against buying the stake but no reasons were given. 

Its 60-day exclusivity period to finalise the deal ended four days ago. If this deal was successful, it would have allowed Malaysia’s oldest conglomerate to expand its planted area by 15 per cent to 607,218ha.

Meanwhile, analysts think the inability to exert control over NBPOL is the key stumbling block for Sime Darby. They noted that it would be pointless to spend RM5 billion on the stake if management ontrol was not in Sime Darby’s hands.

“We think that the failure in taking a leading role in NBPOL despite being a major shareholder could be the major stumbling block for Sime Darby,” said Public Investment Bank Bhd in its notes to investors, yesterday.

HwangDBS Research also said the key to enhancing NBPOL’s earnings was for Sime Darby to assume full operational and management control.

CIMB Equities Research said the decision might be negative for Kulim, which would probably need to settle for a lower price for NBPOL.

AmSecurities noted that at the current price of £4.175 (RM22.14) per share, NBPOL was trading at a price-to-earnings ratio of 16 times the consensus earnings per share (EPS) for financial year 2014. “At a premium of between 30 and 50 per cent over the current price (£5.40-£6.30/share), NBPOL would be valued at between 21 and 24 times its financial year 2014 forecast EPS. 

"That is on the steep side and would have translated into a purchase price of between RM4.3 billion and RM5 billion for Sime Darby to assume full control of NBPOL.”

Sime not buying NBPOL

This is written by my colleague Cheryl Achu.

KUALA LUMPUR: Sime Darby has aborted its plan to buy Kulim (M) Bhd's 49 per cent stake in London-listed New Britain Palm Oil Ltd (NBPOL).

Sime Darby, which was chosen as the preferred bidder for the stake in July, had a 60-day exclusivity period that ended two days ago on the acquisition but decided not to go ahead with it.

Its decision has now paved the way for previous suitors, which reportedly included Felda Global Ventures Holdings Bhd (FGV) and a consortium comprising the Sultan of Johor and a Singapore-listed China entity, to put in a new bid for NBPOL.

“We have decided not to proceed further at this time on the proposed acquisition of Kulim’s stake in NBPOL,” Sime Darby said in a filing to Bursa Malaysia yesterday, without revealing the reason for the withdrawal.

Kulim, NBPOL’s single-largest shareholder, wants to sell its stake as it is unable to exert management control over the plantation group that is a source of significant employment in Papua New Guinea (PNG).

NBPOL, which is listed on the London Stock Exchange, has a market capitalisation of £750 million (RM4 billion) and is managed by a group of professional managers who own a 4.49 per cent stake via Pacific Rim Plantations Services Pte Ltd, PNG’s West New Britain provincial government has an eight per cent stake.

NBPOL, which produces palm oil exclusively in PNG and the Solomon Islands, has 77,000ha of oil palm plantation, 12 palm oil mills and one refinery each in PNG and the United Kingdom.

The group is also PNG’s largest sugar and beef producer via its more than 7,718ha of sugar cane plantations and 9,282ha of grazing pastures.

Besides Sime Darby, FGV were among the shortlisted companies for Kulim's stake, which is up for sale after Kulim failed to raise its stake from 49 per cent to 69 per cent in July 2013. Kulim first acquired interest in NBPOL in 1996.

Landing NBPOL stake would help FGV attain its 2020 targets, namely to achieve 8.7 million tonnes crude palm oil (CPO) production as well as a plantation landbank to 925,000ha.

Several others then entered the fray, including two plantation groups from Indonesia, Singapore’s Wilmar International Ltd and plantation giants IOI Corp Bhd and Kuala Lumpur Kepong Bhd.

Yesterday, Sime Darby share price fell three sen to close at RM9.15 on Bursa Malaysia.