MARKET DEVELOPMENT
Kulim to exit plantation business in Indonesia
Kulim to exit plantation business in Indonesia
22/6/07 (Business TImes) - KULIM (Malaysia) Bhd will exit the plantation business in Indonesia by selling its four Indonesian subsidiaries for RM430 million and focus on Malaysia, Papua New Guinea and the Solomon Islands.
The divestment includes Kulim’s entire plantation land totalling 63,260 hectares located in Kalimantan and its 30 tonnes per hour palm oil mill, said its managing director Ahamad Mohamad.
Proceeds from the Indonesia plantation divestment will be used for replanting of palm oil in Malaysia, working capital for the group, loan repayment and as reserves for future business opportunities, he said.
Kulim first ventured into Indonesia in 1996 and has to date developed 25,000 hectares of oil palm.
The move to exit the plantation business in Indonesia is to search for higher returns on the group’s investments, Ahamad said.
According to him, the returns on investments from Indonesia have not been as encouraging compared to Malaysia, Papua New Guinea and the Solomon Islands where Kulim has invested about the same level of effort and funds.
“Our Indonesian operations are becoming increasingly challenging to manage. As we have alternative areas where we can increase our plantation size, the current interest in palm oil affords us an opportunity to exit Indonesia at a profit,” Ahamad said.
“It also allowed us to concentrate on the more profitable plantation operations, those with greater growth potential and where we have extensive management experience and infrastructure in place,” he said.
Kulim’s plantation revenue, which stood at RM831 million for the financial year ended December 31, 2006, saw Papua New Guinea and the Solomons contributing the most with 63 per cent, followed by Malaysia with 33 per cent and Indonesia trailing with four percent.
The divestment includes Kulim’s entire plantation land totalling 63,260 hectares located in Kalimantan and its 30 tonnes per hour palm oil mill, said its managing director Ahamad Mohamad.
Proceeds from the Indonesia plantation divestment will be used for replanting of palm oil in Malaysia, working capital for the group, loan repayment and as reserves for future business opportunities, he said.
Kulim first ventured into Indonesia in 1996 and has to date developed 25,000 hectares of oil palm.
The move to exit the plantation business in Indonesia is to search for higher returns on the group’s investments, Ahamad said.
According to him, the returns on investments from Indonesia have not been as encouraging compared to Malaysia, Papua New Guinea and the Solomon Islands where Kulim has invested about the same level of effort and funds.
“Our Indonesian operations are becoming increasingly challenging to manage. As we have alternative areas where we can increase our plantation size, the current interest in palm oil affords us an opportunity to exit Indonesia at a profit,” Ahamad said.
“It also allowed us to concentrate on the more profitable plantation operations, those with greater growth potential and where we have extensive management experience and infrastructure in place,” he said.
Kulim’s plantation revenue, which stood at RM831 million for the financial year ended December 31, 2006, saw Papua New Guinea and the Solomons contributing the most with 63 per cent, followed by Malaysia with 33 per cent and Indonesia trailing with four percent.