20/02/2013 (The Star) -  Plantation giant Kuala Lumpur Kepong Bhd (KLK), which has been quietly buying farm land in Australia as a diversification strategy, is now close to sealing a large land deal there, the Wall Street Journal reported.

KLK already owns more than of 25,000ha of freehold farm land in Australia enough to cover an area at least three times the size of Manhattan.

According to the news report, KLK wanted to invest in a large area of land in Dandaragan, about 160km north of Perth, said Simon Wilding, director of real-estate broker VNW Independent.

Wilding said that he expected to complete a deal with the Malaysian company's Australian subsidiary KLK Farms Pte Ltd in the next two weeks, adding to several big land deals by the company in Australia's biggest grain producing state in the past year.

The news report said low crude palm oil prices and rising wages in Indonesia were squeezing its palm oil profits.

StarBiz, however, could not confirm the land size or the value of the latest land deal in Australia.

Nevertheless, according to a source close to the company, KLK intends to buy more land in Australia if the right opportunity arises.

“KLK has been buying land in Australia since 1989, mostly planted with grain-based crop such as wheat. But, compared with its core-business in palm oil and rubber plantations, this investment in Australia is still very small.

“Although it's very small, the company is interested to make its investment in Australia more meaningful' and will continue acquiring depending on the price and land size as it has been doing since 1989,” said the source.

KLK owns more than 22,000ha of freehold farm land in Australia, while its palm oil acreage currently stands at more than 250,000ha.

It was reported that Australian farms contributed just 0.3% to KLK profits in the last financial year.

According to KLK's latest annual report, during the course of the financial year ended Sept 30 2012, its Australian subsidiary KLK Farms Pte Ltd took the opportunity to expand by acquiring 13,970ha of grain-growing properties in Western Australia.

“This acquisition adds diversity to our agriculture portfolio,” said the source in the report. KLK bought the land at RM83.1mil.

KLK chief executive officer Tan Sri Lee Oi Hian in the latest annual report said the contribution of plantations to the group's profit was RM1.19bil, a decline of 25.6% from 2011.

Weaker palm oil prices and higher wages pushed KLK's net profit down to RM1.2bil in 2012 from RM1.5bil in 2011.

A plantation analyst said the increasing investment in Australia might reflect the company's intention to balance out its dependency on palm oil.

“Many plantation players diversify their crops to lower the exposure risk on certain sectors.

“Whether it's a good investment or not, it's too early to tell as I do not know what kind of yield wheat is churning and it's still quite small,” she said.

KLK declined 8 sen to close at RM21.20 yesterday.