09/07/2012 (The Star) - Felda Global Ventures Holdings Bhd (FGV) is in talks with the relevant parties and is optimistic of entering the African market early 2013.

Group president Datuk Sabri Ahmad said Africa would be challenging but the business expansion would be crucial to FGV's eight-year plan to grow eight times by 2020.

The venture into Africa, he said, would be very challenging because political stability and funding were key.

“Whether the World Bank, the Islamic Development Bank and also private banks (will be supportive), we will explore all possibilities. These are good, bankable projects,” he said.

Sabri added that FGV had started talking with private banks and the response had been positive.

Sorting time: Workers picking palm fruit bunches at Felda’s palm oil mill in Besut 1, Perak

 “We still have to work out details such as (how much) funding is needed, the agro-climatic condition, infrastructure cost and talent selection,” he said, adding that “this is quite tricky and is quite a specialised job. Only Felda can do it. No other company in the world has the experience.”

He said FGV was already providing plantation management advice to planters in Sierra Leone.

FGV will look at African countries around the tropical belt, about seven degrees north and south of the equator, such as Ghana, Cameroon and Gabon, and build a business based on the Felda planter-settler model.

“We have 50 years' experience in social engineering, giving opportunities to landless farmers and jobless people. It has been successful,” he said at a dialogue session.

“Malaysia can share that experience with other countries. At the same time, we can expand our business.”

The Felda model was started in 1956, selecting and training people to manage plantations as their own while developing a community with a proper social structure.

“We can help the Africans because this is a food programme that helps eradicate poverty and improve the quality of life among planters,” he said. “We will be careful not to seek high conservation-value forests. It has to be areas designated for agriculture.”

One of the strategies FGV has in mind is to enter the African nations by building oil mills first.

Sabri said as land in Asean was getting scarce, Africa would be important to the group. Currently, it has started plantations in west Kalimantan on 15,000ha and looking at a further 30,000ha of brownfield land within the same area.

FGV has a total of 355,000ha plantation land, not including the 500,000ha owned by settlers who contribute to Felda's palm oil operations. Owning plantation land in Africa would raise its ranking higher among international palm oil contenders.

Other palm oil companies like Sime Darby Plantations Sdn Bhd and Wilmar International Ltd have also been eyeing African land since last year.

On the shrinking export tax on palm oil in Indonesia, Sabri said that “(Indonesia and Malaysia) should work together”.

“Malaysia and Indonesia combined produce more than 85% of the world's palm oil. We are not each other's competitor. Our competitors are soybean oil, sunflower oil and rapeseed oil,” he said.

FGV now has 37% young and immature trees and 50% old trees which are due for aggressive replanting to correct the age profile of the palm trees and correct the mistakes done in the earlier plantings.

The group has set a RM70mil capex for replanting and RM20mil for housing this year. The cost allocated for replanting will work out to be RM14,000 per ha for three years.

“In Felda, we focus on the settlers. The settlers' tree age profile right now is very good and in time to come, yield from the settlers will be better than our plantations,” he said, pointing out that FGV's biotechnology centre in Bandar Enstek had cultivated enhanced planting materials that provide better yield and were more disease-tolerant.

Moving forward, Sabri said FGV was also looking to amalgamate the 149 estates wherever possible to achieve economy of scale. This year, FGV has collapsed 50 estates to 25.

“Maybe we can reduce (the 149 estates) to 100 by amalgamating the smaller estates into bigger ones so that we can enjoy the economy of scale,” he said, noting that FGV could then deploy and mobilise the plantation workers more efficiently while saving on logistics costs.

The amalgamation will be done on FGV's 70 oil mills as well.

“All this has been studied carefully to ensure optimal utilisation of the milling capacity,” he said.

He added that the current palm oil yield was 19.8 tonnes per ha per year, above the Malaysian average but still to catch up with the “best yield in class about 25 tonnes per ha per year”.

“Our target is to increase one tonne per year so that in three to four years' time, we are at 23 tonnes per ha per year,” he said, adding that FGV had also set a goal to increase the oil extraction rate (OER) from the current 20.5% by 1% every year.

“One per cent increase to the Felda group in plantation alone means an extra RM80bil of profit,” he said, adding that the Jengka 21 oil mill in Pahang was the most efficient at the moment with an OER of 24%.

Aside from the core business in oil palm plantation and refining, FGV has non-core businesses. Its travel unit recently bought a hotel in Malacca for RM24mil, and is expected to start receiving guests in September.

About RM4.1bil, more than 50% of the RM9.93bil raised from FGV's initial public offering, will be pumped into upstream operations.

On FGV as a listed concern, Sabri joked that the one worry the group now had was accommodating the 140,000 shareholders for its AGM.

“If all were to come for the AGM, even Bukit Jalil Stadium cannot fit all of them,” he chuckled. “So, we are saying settlers should send proxies.”

FGV's share price, which closed at RM5.30 or 16.5% premium to its offer price of RM4.55 on the day it was listed, ended last week's trade at RM5.44.