United Melacca to expand land bank for growth amidst El Nino worries

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KUCHING: Crude palm oil (CPO) prices started contracting in mid 2012 and continued well into the current financial year under review and at the company level, United Melacca Bhd’s (United Melacca) pre-tax profit increased by six per cent to RM67.29 million compared with RM63.43 million in the preceding year mainly due to gains on disposal of Niro Ceramic Sdn Bhd.

Tan Siok Choo, chairman for the company said for the first half of the year, CPO prices hovered at RM2,300 per tonne level, recovered slightly to RM2,555 in the November 2013 to January 2014 quarter and improved further to RM2,693 per tonne in the February to April quarter.

After a 19 per cent jump in output of fresh fruit bunches (FFB) in the preceding year, the palms experienced a resting period in the current FY2014.

Coupled with dry weather in the fourth quarter, total FFB output was slightly lower at 333,703 tonnes compared with 336,734 tonnes in the preceding year.

Increase intake of FFB from third parties to the Bukit Senorang Oil Mill in Pahang helped boost processing for this mill.

Together with that from the Meridian Oil mill in Sabah, total processing output jumped to 88,896 tonnes from 32,333 tonnes, a development that helped reduce unit processing cost and boosted milling income.

United Malacca’s earnings per share rose by three per cent to 34.77 sen from 33.64 sen in the preceding year. During the financial year, the Company’s paid up capital increased from RM205,109,201 to RM206,503,101 due to the issue of 1,393,900 ordinary shares under the Employees’ Share Scheme.

“In the financial year 2014 (FY14), an additional 360.22 hectares of oil palms reached maturity, boosting the total matured hectareage to 15,940 hectares or 71 per cent of the total.

“Having completed planting in the 8,080 hectare Millian-Labau estate in Sabah, I am pleased to report that facilities in the estate now include housing for all employees, workshops, stores, three kindergartens/ pre-schools and five crèches,” said Tan.

Additionally, Meridian Plantations, also in Sabah, has completed planting its recently acquired 508 hectares (1,255 acres). Connecting Paitan Estate with Tengkarasan Estate, this strategically located and flat piece of land has boosted Meridian Plantations’ planted area to 7,188 hectares (17,761 acres).

During the current financial year, 94 per cent of United Malacca’s oil palms have yet to attain peak productivity. Of the total planted hectareage, 48 per cent are in prime production, 17 per cent are on an increasing yield trend and 29 per cent are immature palms of less than four years old.

Volatility in CPO prices is likely to be the watchword in the short term, Tan remarked, adding that at end-May this year, palm oil stocks inched upwards by 4.2 per cent to 1.840 million tonnes, a five month high as higher output outstripped demand for the vegetable oil.

While export data for May showed a welcome 10.7 per cent increase in exports, the rise is slower than that for the previous year.

Despite market uncertainties, the gradual recovery in the US and Europe as well as the resilience shown by India and China are favourable trends for exports of palm oil.

Although the political turmoil in Iraq has caused a spike on oil prices, if the unrest is sustained, this could have a knock-on impact on global economic growth.

“However, the biggest uncertainty is El Nino, a phenomenon that causes hot weather and drought. While El Nino is likely to occur in East Asia and the Pacific in September this year, whether its impact will be moderate or severe is uncertain. On balance, medium and long-term prospects for palm oil are bright as the vegetable oil.

“To ensure continued growth and sustainability of the Group’s plantation activity, the Board is continuously exploring opportunities overseas to expand its land bank as well as to reduce its reliance on a single commodity for earnings growth.”