21/11/2011 (The Star) -  KL Kepong Bhd (KLK) planned to expand its downstream and upstream business segments for its palm oil businesses amidst sustained palm oil prices above RM3,000.

The company which derives 80% of its net profits from upstream business planned to increase its landbank for oil palm estates from 250,000 ha to 300,000 ha in Indonesia, Papua New Guinea, South America and Africa.

“In the upstream we are a price taker. We also don't want to be too dependent on our upstream that's why when prices drop we have our downstream business and our property division which will help us to sustain any downturn in commodity prices,” said chief executive officer Tan Sri Lee Oi Hian yesterday.

KLK is also planning to build another palm oil mill in Indonesia which would cost about RM120mil in three years in addition to the three mills being built there presently.

“The three new palm oil mills in Indonesia are under construction to meet the growing fresh fruit bunches production from fast maturing areas,” group plantations director Roy K. C. Lim told a media briefing here yesterday.

The refineries in Indonesia have passed the plannnig stage and were about to commence consruction.

KLK had upgraded its two palm oil mills in the country, increasing the capacity in one of the mills.

In the oleochemicals business segment, KLK planned to expand its alcohol plant in Westport, Port Klang which was recently moved from Singapore to Malaysia.

“We have a gearing ratio which is very low with essentially good cashflows and this would give us space to fund our expansion,” Lee said.

“So far fundamentals look good, despite the economic problems in Europe.

Most people are still quite friendly towards palm oil so let's hope that the situation would be able to stay this way. It is a very good basis to believe palm oil prices would stay above RM3,000,” Lee said.

The company's CPO yields per mature ha had dropped in its latest 3QFY2011 to 3.4 tonnes per ha from 4.7 tonnes per ha in FY2010 ended Sept 30, 2010.

However, costs of producing FFB had been on a rising trend since FY2007 to RM200 per tonne in its 3QFY2011.

The company said that it expected to reduce this figure by increasing productivity and efficiency of its manpower.