PUTRAJAYA, Sept 1 (Bernama) -- IOI Corp Bhd executive chairman, Tan SriLee Shin Cheng said crude palm oil (CPO), which is currently trading at adiscount of RM475 (US$125) a tonne to soy oil, was slowly narrowing thegap.

He said normally CPO was traded at a discount of RM76 (US$20) to RM114(US$30) a tonne to soy oil and "thus there is room for CPO price toimprove to about RM342 (US$90) a tonne more."

"Depending on the weather, we are looking at an average price of RM1,600(US$420) a tonne for the rest of the year," he told reporters after thegroup's extra ordinary general meeting (EGM) Wednesday.

He added that if the El Nino took place, it would be good for CPO price asproduction would decrease despite increasing demand.

On the proposed issue of up to RM1,311 million (US$345 million) nominalvalue five year unsecured guaranteed exchangeable bonds, the group todaygot the shareholders' nod to proceed with the issuance plan.

"The issuance of the bond is likely this year but subject to approval fromall relevant authorities," Lee said.

He said the bond would be issued at a fixed interest rate in order tominimise the uncertainty of interest rate fluctuation which in turn wouldallow the group to plan its cashflow requirements more accurately.

Some RM304 million from the proceeds would be used to part finance theconstruction of a palm oil refinery in Rotterdam, the Netherlands, ownedby its wholly owned subsidiary, IOI-Loders Croklaan B.V.

Lee said the refinery in Rotterdam was to cater partly for internal use bythe group's specialty oils and fats facilities in the Netherlands and alsofor the group's existing and potential European customers.

"By having a refining facility close to its customers, the group wouldhave a better sense of the prevailing palm oil market condition and itslogistical efficiency would be enhanced," he said, adding that presently,the group served its European customers from its refinery in Sabah.

The balance of the proceeds would be utilised to repay bank borrowings(RM494 million), working capital (RM152 million) and to fund investmentopportunities (RM361 million).

Asked on expansion plans, Lee said as a progressive group, IOI would lookinto areas that "would synergistic to our existing businesses either inplantation's upstream or downstream industry."

"We are confident that through expansion our profit margin woulddefinitely enhance but it is difficult to quantify at this point of time,"he said.

The group had earlier planned to issue RM1,140 million (US$300 million)bond but decided later to increase to RM1,311 million (US$345 million) asthe group expected "response to be good."

Meanwhile, on Budget 2005, Lee said that he expected the government to be"more friendly" to the agriculture sector, for the fact that agriculture"is a basic sector" for the country.

Furthermore, he said that Prime Minister Datuk Seri Abdullah Ahmad Badawihad placed greater emphasis on this sector way back. -- BERNAMA