21/1/07 (The Star)  - KUALA LUMPUUR: LISTED plantation companies with large oil palm estates in flood-struck Johor expect the disaster to have a negligible impact on their full year earnings for 2006 and 2007.

Industry players contacted by StarBiz said the situation was well under control despite the two recent rounds of severe floods that had resulted in harvesting disruptions and crop losses.

Johor accounts for about 18% of Malaysia's total crude palm oil (CPO) production of 15.9 million tonnes last year.

Johor Corp's investment arm Kulim (M) Bhd, which has 30% of its total planted oil palm hectarage located in Johor, was spared from the worst, as none of its young matured fields were flooded.

Managing director Ahamad Mohamad said the two major impacts to the estates' operations from the recent floods in Johor would be the loss of potential earnings and damages to physical properties.

Datuk Lee Yeow Chor
“As with every year, Kulim had made the extra effort to ensure that its harvesting rounds were short towards the year-end in preparation for such an eventuality.”

“Besides our estates having adequate workers, there will be minimal loss of crops,” Ahamad added.

Of the group's total planted area of 80,300ha, Johor accounted for about 27,500ha as of September last year.

Ahamad said Kulim would quickly carry out road and bridge repairs and accelerate its harvesting as soon as the weather improved.

“We are confident that 2007 will still be a high-yielding year in terms of yield per ha, similar to last year,” he added.

Last year Kulim's estates in Johor averaged about 25.61 tonnes per ha of fresh fruit bunches (FFB).

According to Ahamad, the plantations in Johor contributed about 30% to Kulim group's operating profits in 2005.

However, from 2006 onwards, he said, the contribution would gradually decrease following the inclusion of its fast food based QSR Brands Bhd's results for the full year, the expansion of areas for its Papua New Guinea, Indonesia and Solomon Islands' estates, and the higher capacities oleochemicals operations.

IOI Corp Bhd group executive director Datuk Lee Yeow Chor, meanwhile, said the floods in Johor were not expected to have a significant impact on the performance of IOI Group's plantations this year.

“Only a few of our Johor-based estates are affected by the floods, and even then, this is limited to pockets of low lying areas and areas along the river banks.

 
“The total size of these pockets is estimated at less than 1,000ha, which is about 0.6% of our total planted area,” he added.

Lee noted that there was no damage to the oil palm trees as “their height is well above the water level.”

He said the group's total oil palm plantation hectarage in Johor was about 25,000ha, which represented about 16% of the group's total planted hectarage.

“The contribution of our Johor-based plantations to the IOI group's profit was in proportion to their size in percentage terms,” he added.

However, there were some damages to the estate roads and bridges but the cost of repairing or replacing is not material.

Lee said the immediate effect of the flood within and surrounding the estates would be the delay in the delivery of the oil palm fruits to the mills and, subsequently, the CPO to the refineries.

“This has caused a temporary shortage in CPO delivered to the refineries, and the quality of the CPO is also poor,” he added.

Asiatic Development Bhd chief operating officer Yong Chee Kong said the severe flooding in Johor had made harvesting difficult, resulting in some crop loss from two of the group's four southern estates.

Since December and January were seasonally low production months, he said, the effect of the flood to the group’s FFB production was minimal. 

“We expect crop loss of not more than 0.1% of the group’s total production in 2006, and negligible impact to the group’s 2006 revenue,” he added.

So far, other than the loss of crops, no major physical damage to the estates has been reported. 

“However, we are currently unable to fully assess the extent of the damage, not at least until the flood waters have receded,” he said.

Asiatic's Johor estates, covering some 8,000ha, account for about 14% of the group’s total planted hectarage whereas areas affected by the flood in Johor make up about 1.3% of group’s total planted hectarage.

According to Yong, the Johor estates contribute about 15% to Asiatic's plantation profits annually.