31/07/2008 (The Star Online), Petaling Jaya - Kim Loong Resources Bhd is optimistic that the current downtrend in crude palm oil (CPO) prices will not hurt its profit for the financial year ending Jan 31 (FY09).

Executive chairman Gooi Seong Lim said the company had locked in 25% of total CPO production up to December at RM3,400 a tonne and was not under pressure at this juncture.

He said even if CPO price were to drop to below RM3,000 a tonne and sustain for six months, its overall average price would still be relatively higher than RM3,000 this year against RM2,500 last year.

“The company is confident that the current downtrend in CPO price is temporary and anticipates it (CPO price) would not take long to shoot up again,” he said after the company AGM and EGM yesterday.

With a relatively tight national palm oil stock and uncertain soybean production, coupled with poor weather in the US, the tight vegetable oil supply would push CPO price back to its high.

Asked if Kim Loong would further lock in its production, Gooi said: “We will not sell below RM3,000 per tonne and do not think it's necessary as the CPO price downtrend is unlikely to stay anyway.”

On its diversification into the palm nutraceuticals project, which involves the extraction of tocotrienol concentrates (a vitamin E concentrate), he said Kim Loong was currently busy building the distribution network to market the product.

“We are also in the process of capsuling the vitamin E product, which is in a soft gel form,” Gooi said, adding that the current production capacity of tocotrienols at its Kota Tinggi plant in Johor was 3,000 tonnes per year.

“We hope to find a niche market for tocotrienols in Japan, the US and China,” Gooi said.

The company also plans to sell in bulk to local pharmaceutical companies with strong network.

“We estimate a profit contribution from the palm nutraceuticals project of RM3mil to RM4mil yearly and return on investment in three to four years,” he said.

Meanwhile, Kim Loong is investing RM10mil each in a new solvent extraction plant for palm kernel in Kota Tinggi and another for fibre oil in Keningau, Sabah, for its downstream business.

On dividend payout, Gooi said Kim Loong had paid out 23 sen per share for FY09 to date, higher than its total dividend of 18 sen per share for FY08.