04/01/2012 (The Star) - Mewah International Inc, Malaysia’s biggest palm oil refiner after Wilmar International Ltd, said its planned investment in Indonesia would diversify operations and increase processing capacity by 23%.

“With the current volume which we are doing, we are too big to depend only on one country,” chief financial officer Rajesh Chopra said by telephone from Singapore yesterday.

“So the idea was to diversify where we can source crude palm oil more reliably instead of sticking to one country.”

Malaysian refiners are planning to add capacity in the world’s largest producer of the edible oil after the Indonesian government cut export duties on processed palm oil and increased taxes on crude palm oil exports in October.

Mewah will boost its annual refining capacity by 630,000 tonnes when the East Java plant is completed, the company said in a statement to the Singapore stock exchange yesterday.

“This is a decision which was overdue,” Chopra said. “Tax or no tax, we would have moved.”

Mewah has a processing capacity of 2.8 million tonnes a year. With sales of about 3.8 million tonnes of refined palm oil and products, the company said it needed to source about 1.3 million tonnes of refined oils from other producers.

The Indonesian refinery may cost about US$145mil, and would be funded from the proceeds of Mewah’s initial public offering, internal accruals and bank borrowings, the company said. The plant may be completed by the end of 2013, according to the statement.

Mewah surged 6.5% to 49.5 Singapore cents, set for the biggest jump since Nov 17.

The stock slumped 55% in the past year, compared with the 17% drop in the benchmark Straits Times Index.

The company listed its shares in Singapore in November 2010, raising gross proceeds of S$249.7mil (RM575mil).

A refinery in Indonesia would also give customers a choice to buy from either country, Chopra said.

The company had indefinitely delayed the completion of a 525,000 tonne-a-year refinery in Sabah and packing plants in Zhangjiagang and Tianjin in China to prioritise its Indonesian operations, according to the statement.

The Sabah project would be revived when there was a gap between refining capacity and sales, Chopra said. Mewah obtained 55% of its revenue outside Malaysia in 2010, according to data compiled by Bloomberg.

Sime Darby Bhd, the world’s biggest listed palm oil producer, said in September it was building a refinery in south Kalimantan, Indonesia, with a processing capacity of about 900,000 tonnes a year. The plant may be operational in 2013. – Bloomberg