12-03-2008: IOI eyes plantation land, European plants

PUTRAJAYA: IOI Corp, the world’s third-biggest listed palm oil firm, plans to buy large tracts of plantation land in Malaysia and set up processing plants in Europe to boost revenues and take advantage of the global commodity boom.

Executive director Lee Yeow Chor said soaring palm oil prices would boost IOI Corp’s net profit in the year to end-June and, buoyed by strong cash flow, the company would continue to pay out higher dividends.

Lee told Reuters in an interview yesterday that IOI had been approached by privately-held companies offering to sell palm plantation land in Sarawak. “We will try and get a big chunk, if we can,” he said.

“Our preferred targets are partly planted areas or land that has already been cleared and is ready for planting.” IOI, which also has interests in property development and investment, had a net cash flow of RM1.32 billion in the year to June 2007.

Its total cash balance at end-December was RM1.64 billion. Profit in September-December rose 52%. “In the first half, we had RM1 billion in net profit, and we expect it to be good during the rest of the year,” Lee said, adding: “We will continue the trend of the first half.”

The price of palm oil has risen 25% so far this year, hitting a record RM4,486 a tonne on March 4, on soaring demand for vegetable oils, both from the food and fuel sectors.

IOI has embarked on a downstream expansion drive, and plans to build palm oil processing facilities in Europe and the United States. It plans to start a second refinery in the Dutch port city of Rotterdam to process 300,000 tonnes of palm oil a year, and a unit to produce 100,000 tonnes of margarine by 2010.

“We already have 800,000 tonnes refinery (capacity), now adjacent to it we are going to put up another refinery and a processing plant for margarines,” Lee said, adding that construction would begin early in the calendar second half.

In the United States, IOI is looking for land to build a 180,000 tonnes per annum speciality fats plant to cater to the confectionery industry.

“We should buy land in the next few months, and operations will start in two years time,” Lee said.

IOI will start planting in Indonesia where it has a joint venture company that owns 170,000 hectares of plantation land. Last year, IOI signed a pact with Indonesia’s Harita Group for a US$130 million (RM419.9 million) venture to cultivate palm oil. — Reuters

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