26/06/2008 (The Star Online), Kuala Lumpur - Tradewinds Plantation Bhd needs to own a sizeable oil palm land bank of about 200,000ha before it can fully embark on downstream operation.

Managing director Chan Seng Fatt said 200,000ha would be the ideal size for Tradewinds or any other plantation company with the intention to start downstream operation such as a refinery.

“However, how fast we can do it (go into downstream) will also depend on the board's decision,” Chan told reporters after the company AGM yesterday.

He also said the group, which currently has 140,000ha of oil palm plantation, would continue to keep an open mind on new land bank acquisitions but preferably in Malaysia rather than Indonesia.

“As a young plantation player, Tradewinds can be described as aggressive in terms of its oil palm planting activities but cautious and will only take calculated risks,” he added.

Chan said the group would allocate over RM200mil in capital expenditure per year in the next three years for its plantation operation and construction of new palm oil mills.

Operation-wise, he said the group had locked in 18% of its total 2008 crude palm oil (CPO) production of 1.3 million tonnes at an average price of RM3,300 per tonne.

Chairman Datuk Wira Syed Abdul Jabbar Syed Hassan said that he was confident that Tradewinds' performance this year would be better than in 2007.

“Besides the bullish CPO price, the group is increasing its productivity and efficiency,” he said.

However, Chan said the group's cost of production in 2008 would jump to an estimated RM1,075 per tonne of CPO compared with RM939 in 2007 given the record high prices of fertilisers, fuel and building materials.

Plantation director Hasib Ahmad said Tradewinds was also enhancing the efficiency of its palm oil mills by focusing on oil extraction rate (OER), which is an important indicator for an oil palm plantation operator.

“We have reached an OER of 20.6 so far this year versus 19.94 in 2007. We believe we are close to hitting our full year OER target of 21 based on current performance,” he added.

Tradewinds also has an 11,000ha rubber plantation in Kedah.

Chan said: “We made the right decision in acquiring these rubber plantations two years ago. At that time, the price of SMR 20 was about RM7.50 per kg but the commodity now has crossed RM10 per kg.”

On another note, he said Tradewinds would be looking at zero borrowings by 2013 despite its aggressive plantation development programme.

“We are currently a net borrower with loans outstanding about RM600mil.

“I think this is acceptable and understandable because Tradewinds, as a young plantation group, is on the fast track of development,” he added.