MARKET DEVELOPMENT
TSH Expects FFB to Hit 20% CAGR Over Next 3 Years
TSH Expects FFB to Hit 20% CAGR Over Next 3 Years
04/06/2014 (The Sun Daily) - TSH Resources Bhd, which fresh fruit bunch (FFB) production stood at 543,000 metric tonne in 2013, expects the group's FFB production to grow at a compounded rate of 20% over the next three years.
TSH group managing director Datuk Tan Aik Sim said FFB production in Sabah will grow a few percent each year while FFB production in Indonesia is expected to grow at a compounded rate of 20% to 30% over the next three years as a result of more planted area coming to maturity and reaching peak production age, as well as good agronomist standards.
Tan said TSH's total landbank measured 105,000ha and its unplanted areas of 55,000ha is enough to keep TSH busy for many years. In the planted areas of 50,300ha, 10,000ha is fully matured while 82% of plantation is immature and young matures which will contribute to the future production growth.
"The next two to four years will be interesting. Those young trees will come into fruition and young matured trees about five to six years will hit its peak production in two to three years," Tan told a press conference after the group's AGM here yesterday.
The group planted about 4,500ha last year and will continue its new planting at 4,000ha to 5,000ha annually to sustain growth.
"We're always on the lookout for more land in Indonesia. It's harder and harder to find good land. If we can get a few thousand hectares every year (in Indonesia) to replenish (landbank), we'll be happy," said Tan.
Tan said TSH plans to invest RM45 million to RM50 million to set up its eighth palm oil mill, which will be erected in 18 months in Sumatra with a capacity of 60 tonnes per hour. TSH currently has four mills in Sabah and three mills in Indonesia.
"Every year, we allocate a capital expenditure of RM120 million to RM150 million for plantation," he added.
Tan said (the volatility of) crude palm oil (CPO) prices are beyond control but what it can control is its management and efficiency.
"We have good yield and cost structure and that make us a competitive producer. In any downturn, we're able to sustain (the growth)," he said, adding that production cost in Sabah is RM800 per metric tonne and RM1,050 to RM1,100 per metric tonne in Indonesia, which has younger trees.
The average CPO price was RM2,251 per metric tonne in 2013 and a better CPO outlook for 2014 is expected, premised on better domestic biodiesel consumption in Indonesia and Malaysia.
"We don't think CPO prices will go below the RM2,000 level and it will get better, especially with the El-Niño effects and CPO price is expected to appreciate," said Tan.
Meanwhile, TSH hopes to look at a dividend payout of 30% to 50% of its net profit in five years' time, from 20% to 30% of its net profit currently.
"We're still growing and we need over RM100 million every year for plantation and to sustain our growth going forward. In five years time, it (dividend policy) depends. Once we have a bigger base, our income is much higher and the amount we need to go into plantation is comparatively smaller, so we may pay out a little more " said Tan.
TSH group managing director Datuk Tan Aik Sim said FFB production in Sabah will grow a few percent each year while FFB production in Indonesia is expected to grow at a compounded rate of 20% to 30% over the next three years as a result of more planted area coming to maturity and reaching peak production age, as well as good agronomist standards.
Tan said TSH's total landbank measured 105,000ha and its unplanted areas of 55,000ha is enough to keep TSH busy for many years. In the planted areas of 50,300ha, 10,000ha is fully matured while 82% of plantation is immature and young matures which will contribute to the future production growth.
"The next two to four years will be interesting. Those young trees will come into fruition and young matured trees about five to six years will hit its peak production in two to three years," Tan told a press conference after the group's AGM here yesterday.
The group planted about 4,500ha last year and will continue its new planting at 4,000ha to 5,000ha annually to sustain growth.
"We're always on the lookout for more land in Indonesia. It's harder and harder to find good land. If we can get a few thousand hectares every year (in Indonesia) to replenish (landbank), we'll be happy," said Tan.
Tan said TSH plans to invest RM45 million to RM50 million to set up its eighth palm oil mill, which will be erected in 18 months in Sumatra with a capacity of 60 tonnes per hour. TSH currently has four mills in Sabah and three mills in Indonesia.
"Every year, we allocate a capital expenditure of RM120 million to RM150 million for plantation," he added.
Tan said (the volatility of) crude palm oil (CPO) prices are beyond control but what it can control is its management and efficiency.
"We have good yield and cost structure and that make us a competitive producer. In any downturn, we're able to sustain (the growth)," he said, adding that production cost in Sabah is RM800 per metric tonne and RM1,050 to RM1,100 per metric tonne in Indonesia, which has younger trees.
The average CPO price was RM2,251 per metric tonne in 2013 and a better CPO outlook for 2014 is expected, premised on better domestic biodiesel consumption in Indonesia and Malaysia.
"We don't think CPO prices will go below the RM2,000 level and it will get better, especially with the El-Niño effects and CPO price is expected to appreciate," said Tan.
Meanwhile, TSH hopes to look at a dividend payout of 30% to 50% of its net profit in five years' time, from 20% to 30% of its net profit currently.
"We're still growing and we need over RM100 million every year for plantation and to sustain our growth going forward. In five years time, it (dividend policy) depends. Once we have a bigger base, our income is much higher and the amount we need to go into plantation is comparatively smaller, so we may pay out a little more " said Tan.