FGV expands landbank in Indonesia

KUALA LUMPUR: FELDA Global Ventures Holdings Bhd (FGV) is spending RM44 million to expand its plantation landbank in Indonesia by 21,037ha, or 27 per cent.

FGV yesterday signed agreements to buy a 95 per cent stake each in PT Temila Agro Abadi and PT Landak Bhakti Palma in West Kalimantan.

PT Temila owns 8,193ha in Sebangki district of Landak, neighbouring FGV's existing 14,385ha held by PT Citra Niaga Perkasa. PT Landak Bhakti owns 12,844ha of rubber land in Sekadau province, a two-hour drive from the other two oil palm plots.

These purchases are funded by FGV's initial public offering proceeds of RM4.46 billion. Pending yesterday's deals, FGV still has RM3.85 billion in its kitty.

"It's a strategic investment in two core commodities that is expected to enhance future earnings and shareholders' value," said FGV chairman Tan Sri Mohd Isa Abdul Samad.

"Since PT Temila and PT Citra are next to each other, we can reap economies of scale in lower labour costs by sharing the nursery and palm oil mill," he told reporters after the signing of the agreements here yesterday.

Also present were FGV chief executive officer designate Dr Mohd Emir Mavani Abdullah, chief operating officer Datuk Khairil Anuar Aziz and head of global plantations Fairuz Ismail.

Upon completion of the land buys, FGV's landbank in Indonesia will total 77,422ha. 

As at March 2013, there were 343,521ha of oil palm estates leased in Malaysia by Federal Land Development Authority (Felda) to FGV.

As the world's largest crude palm oil producer, FGV harvested 4.91 million tonnes of fresh fruit bunches (FFB) in 2012. Its oil extraction rate averaged at 20.51 per cent, while its FFB yield amounted to 19.13 tonnes per hectare.

One way to improve yields is to replace unproductive oil palms with higher-yielding hybrids. Asked on FGV's replanting progress, Fairuz said the group is committed to its aggressive plan of replanting 15,000ha a year. 

If this plan is consistently executed, FGV is expected to achieve the ideal age profile for its oil palm plantations by 2025.

FGV is one of largest plantation companies in Malaysia but it is unique because it leases and manages 500,000ha of oil palm land for 112,635 smallholders. 

Meanwhile, the group's sugar business is held via MSM Malaysia Holdings Bhd. Its refineries in Perlis and Penang are capable of producing 1.1 million tonnes of refined sugar a year. These are then packed and retailed under "Gula Prai" and "Gula Perlis" brands.

Last year, FGV achieved a RM905.1 million profit after Land Lease Agreement liability, tax and zakat. The group paid out 14 sen a share, or 64 per cent of profit, as dividends.