Business

Monday August 27, 2007

IJM Plantations to launch first biodiesel module next year



SUBANG: IJM Plantations Bhd expects to launch its first 30,000 tons of biodiesel module by the second half of next year, said chief executive officer and managing director Velayuthan Tan.

"Our Sandakan plant is based on a modular concept with a combined capacity of 90,000 tons. There are three modules with 30,000 tons capacity each," he said after the company AGM and EGM Monday.

He said the group was likely to go into full-scale operations by the end of 2008 once it was familiar with the processes as well as the biodiesel market.

The biodiesel subsidiary, IJM Biofuel Sdn Bhd, is a 60:40 joint venture between IJM Plantations and US company CTI Biofuels Malaysia LLC.

Tan said CTI had already secured the demand for the first biodiesel production, which would mainly be exported to Europe and the United States.

Contribution from the new operations was likely to flow in during the fiscal year ending March 31, 2009, he added.

Meanwhile, IJM Plantations has started a nursery on its first 4,000 ha in northeast Kalimantan. It owns about 32,000 ha of landbank in that area.

"We hope to start the first planting around the middle of next year and the rest in the next five to six years," Tan said, adding that the quality of soil should produce higher yields than its plantation in Sabah.

The company still intends to buy another 8,000 ha of land close to its plantation in north-east Kalimantan.

"Ideally we're looking at 40,000 ha. We hope to secure the rest by year-end," he said, adding that it had allocated an initial investment of RM250mil for its Indonesian venture.

IJM Plantations owns about 30,000 ha in Sabah, of which some 25,000 ha have been planted. According to its 2007 annual report, close to 47% are prime trees, 42% young while the remaining are immature palms.

Tan said based on the age profile, production of fresh fruit bunches was anticipated to grow in double digits next year. "If crude palm oil (CPO) prices remain sustainable, we will register very positive earnings," he said, noting that industry experts estimated CPO prices to range RM2,000 to RM2,200 per ton next year.

The company would consider paying higher dividends if profitability improved, he said, adding that dividend payout in the past two years was on a progressive trend.

Given the scarcity of agriculture land in Sabah, IJM Plantations would also consider merger and acquisitions "when a good outfit that is not too far away comes along", Tan said.

The company is expected to release its first quarter results this week.

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