Business

Wednesday January 2, 2013

KLK expects to see six plants running, Indonesia factories to commence ops this year


<B>Lee:</B> ‘The immediate challenge for the group is to ensure timely commissioning of those plants.’ Lee: ‘The immediate challenge for the group is to ensure timely commissioning of those plants.’

PETALING JAYA: Plantation giant Kuala Lumpur Kepong Bhd (KLK) expects to see operations kick off for three new palm oil mills along with three new refineries in Indonesia this financial year.

“We will further commence work for one new mill in east and and another in central Kalimantan.

“Implementation of favourable value-added projects such as methane capture for energy and enhancing oil recovery using hexane and other solvents will also be continued,” said KLK chairman Raja Muhammad Alias in its annual report released last week.

The group said the construction of the three palm oil refineries, of which two are located in Sumatra and one in Belitung Island, has progressed well and were expected to be commissioned early to mid 2013.

He said given the prevailing uncertainties arising from the global economy shake-up, the group was cautiously optimistic of its performance for financial year 2013.

“We remain fundamentally confident on the account of projected double-digit growth in fresh fruit bunches (FFB) production on expectation of recovering FFB yields, increases in oil palm mature areas in Indonesia and improvements in our oil extraction rate (OER),” he said.

The group was also committed to its new planting programme in Indonesia, as well as numerous major capital expenditure projects for both the plantations and oleochemical business, he said.

“The projected expenditure of about RM1.3bil should augur well to the sustainability and long-term growth of the group,” he said.

He said the Malaysian government's lauded move to introduce a new export tax schedule for palm products to be implemented in 2013 looks to level the playing field and ease the pressure of stockpile.

“We believe palm oil, as a food item, will be able to demonstrate some degree of resilience to weather the choppy period.”

Chief executive officer Tan Sri Lee Oi Hian said the group embarked on a series of capacity expansion projects in 2012, with earlier announced projects expected to come on-stream in stages in 2013 namely in the fatty acids, fatty alcohols and fatty esters business.

“The immediate challenge for the group is to ensure timely commissioning of those plants for commercial production as per plan whilst for the business, to expedite the sales realisation of these new capacities,” he said.

He expects that in the next two years, a substantial quantity of fatty acids would come on-stream throughout the world, especially in Indonesia.

“This will include our 165,000 tonnes in PT KLK Dumai and 100,000 mt from KLK Emmerich, Germany coming up in the new year,” he said.

He said similarly for fatty alcohol, total world capacity would be increased and this includes 80,000 tonnes from KLK Oleomas.

“The worldwide overcapacity for merchant market fatty acids and fatty alcohol is estimated to be 40% and 30% respectively.

“We acknowledge that this could put more pressure into the already over-built capacity market, however, it would offer us greater flexibility in production planning to meet customer requirements,” he said.

As such, he said the emphasis for the group is to continuously drive for further cost efficiency and value chain addition as well as improving logistics support worldwide, in the group's efforts to optimise capacity utilisation.

“In China, we will carry on our volume push strategy, at the same time focus on improving operational efficiencies whilst developing more direct and key accounts,” he said.

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