22/08/05 (The Star) - PLANTATION giant, the Felda group, is believed to beon an acquisition trail for more plantation land bank abroad.

A source close to Felda said the group was recently advised by thegovernment to aggressively explore the possibility of expanding itsplantation land bank worldwide, particularly in the Asia Pacific region.

This was also in line with efforts to maintain Felda's stronghold in theoil palm plantation and palm oil-related products operations.

Felda is the world's largest fully integrated palm oil-based group with 92factories in Malaysia and overseas. It is also Malaysia's biggestplantation-land owner with over 853,000ha nationwide.

The source told StarBiz in Kuala Lumpur that Felda currently did not ownany plantation land overseas, unlike private plantation groups likeKumpulan Guthrie Bhd, Golden Hope Plantations Bhd, Kuala Lumpur Kepong Bhd(KLK) and PPB Oil Palms Bhd.

These companies have been actively accumulating large parcels of land foroil palm plantations in Indonesia over the past five to six years.

Guthrie, a government-linked company (GLC), was among the first Malaysianplantation groups to go big into land acquistions. This was mainly for oilpalm cultivation in Indonesia, where it has about 216,000ha. Golden Hopeowns about 8,500ha of oil palm estates.

Indonesia has become the favourite destination among Malaysian plantationcompanies due to its proximity and abundant labour supply.

The source said: "I believe Felda has, since last year, started talks withseveral plantation owners from Kalimantan and was even offered to buy someplantation land in Aceh, Indonesia."

However, there were several issues including unattractive land tenure,customary land conditions and restrictions to bring in new machinery,which needed to be ironed out before Felda could acquire the land.

Other attractive plantation land being considered by Felda are those inCambodia, Columbia and the African countries, the source added

"As an efficiently run conglomerate, Felda is likely to transfer itssimilar management techniques and practices to the country in which itplans to have operations, in this case, Indonesia."

The group's plantation operations is among the most efficient in Malaysiawith average crude palm oil (CPO) cost of production of below RM600 pertonne, the source added.

Of the total land area of over 853,000ha, subsidiary Felda Holdings Bhdmanages a total of 360,956ha commercial land and 492,363ha settlers’land.

Felda Holdings, in fact, manages 169 oil palm estates that cover346,400.64ha.

It has 72 oil palm mills nationwide that refine the fresh fruit bunches(FFB) produced by its estates and it also buys FFB from the settlers'estates.

Besides palm oil milling and refining, the group also manufacturesstandard Malaysian rubber, latex concentrates, rubber gloves, cocoapowder, compound fertilisers, molasses and refined sugar.

It also offers services like engineering, construction, propertydevelopment, information technology, retailing, security and travel.

Recently, Felda group chairman Tan Sri Mohd Yusof Noor, was quoted assaying that Felda's highly diversified business activities were poised tobe the benchmark for those in the global palm oil industry.

"This is a remarkable achievement for a Malaysian group and our maintarget now is to further raise the quality and standards of our operationsto be at par with those in the developed countries," he said.

A plantation analyst with a bank-backed brokerage pointed out that Feldahas a commitment to increase the income of its settlers by beefing updomestic plantation operations and venturing into more downstreamactivities in the country.

He said that was why the Felda group has identified integrated farming,timber production and commercialised tree planting as three new growthareas.

These form part of its efforts to maximise the use of its vast plantationassets.

"These activities will help generate stronger profits for the giantplantation group and Felda smallholders in the long-term," he said, addingthat this will also help to reduce reliance on palm oil.

For financial year ended Dec 31 last year, Felda Holdings registeredRM340.7mil in pre-tax profit on a turnover of RM7.8bil.

Stronger contributions were generally from the group's palm industries,rubber and manufacturing divisions.

Palm oil industries contribute more than 60% to the group's turnover,manufacturing about 25%, and the remaining from other support services.

''The focus this year will be to improve the Felda group of companiesthrough efficiency in work processes and cost-control measures,'' theanalyst added.

Felda Investment Co-operative, which is the largest shareholder of FeldaHoldings, has also consistently given Felda settlers generous dividendpayouts of between 11% and 12% annually.