Friday, 15 February 2008

IJM Plantations to go big in Indonesia

The Star Online. Malaysia
Monday February 11, 2008

IJM Plantations to go big in Indonesia


It plans to invest RM600mil to develop newly acquired land in East Kalimantan
IJM Plantations Bhd (IJMP) has transformed into one of the fastest growing oil palm plantation companies in Malaysia with strategic oil palm-related investments in Indonesia and India.

Within a short span of two years, the group doubled its plantation hectarage to about 60,000ha and will be on the lookout for suitable land bank for oil palm cultivation, particularly in Indonesia.

IJMP is also embarking on the oil palm upstream and downstream operations with the Godrej Group in India.

Managing director and chief executive officer Velayuthan Tan told StarBiz that IJMP's immediate focus would be to develop its newly acquired 30,000ha of land in East Kalimantan with high-yield oil palm trees.

While the group is busy scouting for more land in the vicinity, he said: “We plan to invest about RM600mil within the next five years to develop the existing areas (in Indonesia) inclusive of processing facilities.”

Between Nov 2006 and June 2007, IJMP acquired three companies in East Kalimantan with a combined area of 32,634ha.

Tan said: “The acquisition of these companies is part of our long-term strategy to expand the operations in Indonesia.

“The identified sites are strategically located and fit the group's plan of enhancing its existing infrastructure in Sabah.” Currently, of IJMP's total land bank, about 27,000ha are planted.
Tan said the group's investment in Indonesia was significant as “it represents our move to continue maintaining fresh fruit bunches (FFB) production growth in IJMP through the doubling of hectarage in Indonesia.”

He said East Kalimantan was located near Sabah and has large tracts of land suitable for oil palm cultivation.

As for IJMP's foray into India, Tan said the strategic alliance between IJMP and Godrej involves the cultivation of oil palms and processing of palm oil in the states of Karnataka and Goa.

“We believe our upstream experience in plantation management can synergise with the downstream strengths of Godrej Group in India,” he added. Godrej is a well-known household brand in India.

Tan said the alliance between both parties would offer IJMP with an entry point into the lucrative palm oil trade and consumption market in the highly populated continent.
He noted that IJMP's current focus would be to smoothen the progress of cultivation of oil palms in the two states in India.

“We will subsequently set up palm oil milling facilities there to buy back and processing the FFB,” he said.

On the progress of IJMP's biodiesel plant in Sabah, Tan said: “We are in the process of setting up the first module of 30,000 tonnes per annum capacity in Sandakan.”

Despite the feedstock (CPO) for biodiesel production had risen to above RM3,000 per tonne, Tan said: “The macro scenario for biofuel is obvious as its medium- to long-term prospects continue to remain sound and intact.”

He said the demand for more environment friendly fuel, diminishing supply of fossil fuel and the projected increase in global consumption of fuel in the transportation sector were factors that will continue to sustain the development of the biofuel industry.

Furthermore, the prices of biodiesel have not moved in tandem with the feedstock prices because of the relatively young and immature trade.

Against such backdrop, Tan said IJMP's entry into biodiesel production was part of the group's business plan, which incorporates integration between both upstream and downstream activities. “Our outlook is towards a long-term business undertaking,” he added.

On the CPO outlook, he said the current bullish prices were due to lower supply of global vegetable oil and continued strong demand from consuming countries.

He said biofuel demand in the European Union and the US continued to support the bullish CPO prices against the backdrop of higher crude oil prices.

Tan stressed that the increasing global palm oil production would help the current debate on the use of vegetable oils as food versus fuel.