21/03/07: (The Edge News)  -  Plantation firm Kuala Lumpur Kepong Bhd plans to expand its plantation business in Indonesia as it expects palm oil prices to rise, its chief said in an interview on March 21.

"Currently we are focussing on Indonesia, we are looking for more land," Lee Oi Hian, the company's chairman, told Reuters.

Lee said crude palm oil prices are likely to average around RM1,950 per tonne this year and could touch a high of RM2,200 in the second half, depending on global output of vegetable oils.

Malaysia's crude palm prices averaged around RM1,500 in 2006. The benchmark third-month June contract on the Bursa Malaysia Derivatives Exchange fell RM2 to RM1,975 per tonne on March 21.

Palm oil prices are set to jump more than 20% by year-end as global oilseed stocks get depleted and demand from the food and fuel sectors surges, industry officials said at a price outlook conference in the Malaysian last week.

Malaysian palm oil, which gained almost 40% last year, could move slightly downward in the near term, but surging Indian food demand and Europe's insatiable appetite for biofuels will ensure the commodity holds on to the gains this year.

The company owns around 100,000ha of plantation land in Indonesia, which will mainly be used for oil palm plantations. The firm owns more than 160,000ha of palm and rubber plantation land in Malaysia and Indonesia.

KL Kepong also plans to expand its downstream business and invest an additional RM200 million in a project coming up near Port Klang.

"We have justed started a fatty alcohol plant in Port Klang. We are planning to develop other related oleochemical plants in this area," he said.

The firm expects higher earnings per share this year. "In 2007, I expect much higher EPS, it still early to say as it depends on several factors, but plantations will have a reasonable increase this year," Lee said.

The firm expects its crude palm oil output to increase by 10% this year from around 500,000 tonnes in 2006.

The group posted a net profit of RM436 million in 2006, up 3.5% from 2005. - Reuters