May 11 12:20 AM - PPB Oil Palms Bhd, which may not achieve last year'sgrowth due to the softening palm oil prices, is planning to build fivepalm oil mills in Kalimantan, Indonesia, for possibly more than RM360million over a 10-year period, says its managing director Khoo Eng Min.

The company has identified Kalimantan as the location for its expansionplan due to its suitable climate and fertile land for oil palm, as well asplenty of labour supply. Towards that end, it has also more than doubledits capital expenditure.

With the five new mills, the company will be able to increase its crudepalm oil (CPO) production to five million tonnes per year from two millioncurrently. It now has nine palm oil mills.

"A plant would cost around RM32 million, but that would depend on the costof raw materials such as steel and cement. It would probably cost overRM360 million to build all five plants in the next 10 years," Khoo toldreporters after PPB’s AGM in Kuala Lumpur yesterday.

Khoo said PPB Oil Palms was looking at increasing its land bank inKalimantan. He said PPB’s capital expenditure due to its expansion wouldincrease to RM300 million this year from RM128 million last year.

On its projected financial performance for the current financial yearended Dec 31, 2005, Khoo said: "We doubt we could meet last year’s growth,it would depend on the price of CPO."

He said the CPO prices were expected to be stable for the first half ofthe year, hovering around RM1,400 per tonne. "It's anybody’s guess, butCPO prices in the second half would depend on the soy oil production,"Khoo said.

He said PPB Oil Palms' impressive performance in 2004 was mainly due tothe premium CPO prices of over RM2,000 per tonne in the early part of theyear.

It posted a 38% surge in net profit to RM186.87 million in FY04 fromRM135.61 million in the previous year, while revenue jumped 31% toRM588.44 million from RM449.28 million. Net earnings per share rose to41.95 sen from 30.49 sen, while net tangible assets per share increased toRM2.71 from RM2.43.

The group last year acquired about 50,322ha of land in central Kalimantanfor oil palm plantation development and together with the 16,867haacquired early this year, the group’s gross land area in Indonesia totals130,771ha.

Khoo said PPB Oil Palms' total land bank in Malaysia and Indonesiaincreased to 210,000ha as of Jan 31, 2005. In Indonesia, 18,061ha havebeen planted, of which 7,948ha are in production.

The company has said the latest acquisition will enable the group tofurther increase economies of scale and improve efficiency of operations.It says development of the group’s land bank in Indonesia is progressingsmoothly and is scheduled to be completed over the next five years.

Khoo said the company would depend on volume production to offset anyfluctuations in prices. He said PPB Oil Palms produced 1.25 million tonnesof fresh fruit bunches (FFB) per annum and expected a 10% increaseannually due to maturing plants.

The group's estates have an age profile comprising 41% immature and youngpalms and 50% prime palms, providing a rising yield trend in coming years.