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101 CORPORATION BERHAD (9027-W)
INCORPORATED IN MALAYSIA I 024
The high palm oil prices were a result of lower availability of palm oil in the global market
caused by the continued effect of El Nino and by lower Indonesian exports which pushed
prices up from the usual USD500 level to almost USD700 per MT, as well as a result of the
exchange rate effect of a weaker Ringgit.
Apart from the above factors affecting CPO, PK benefited from increased demand from the
local oleochemical industry which has seen significant increase in production capacity over the
last two years.
The overall operating margin for our Plantation Division for the year under review was 53% as
compared to 48% for 1998. The full effects of price increase were not reflected in operating
margins because on the flip-side, production cost went up by about RMlOO per MT of CPO or
approximately 9% because of the higher cost of imported fertilisers, chemicals and equipment
as well as contributions towards the local cooking oil stabilisation scheme.
101 CORPORATION BERHAD (9027-W)
INCORPORATED IN MALAYSIA I 025
After the several acquisitions in 1998, there was no significant acquisition in 1999. Total
planted area increased by 2,031 hectares to 88,374 hectares as at 30 June 1999, through new
planting; of which, oil palm accounted for 85,706 hectares.
The total matured area for oil palm increased by 6,437 hectares or about 100/o to 69,323
hectares as at fiscal year end. The average mature area under harvest during the year, which
takes into account the actual month immature areas are brought into harvesting and which is
a more relevant denominator for yield computation, showed a more pronounced increase of
32% from 50,526 hectares to 66,958 hectares.
Past Prime FFB production increased by 35% to l,279,149MT reflecting an average
7.6%
6 , 5 2 4 H a ‘1 Prime
yield of 19.10 MT per hectare (vs. 18.80 MT for 1998) which is still on
Due
6.3% ‘\\i‘\ 32.7% the low side because of the carry-over effect of El Nino as well as the
28,008 Ha
dilution effect of a sizeable portion of low yielding young fields
brought into maturity.
Young
34.3%
1 29,394 Ha
Oil palm operating profit per average mature hectare increased by 28%
to RM5,758, with higher palm product prices more than adequate to
compensate for the 9% increase in production cost.
Oil Palm Hectarage...By Age On the processing side, the 45/90 MT per hour Ladang Sabah palm oil mill
(total oil palm area = 85,706 Ha)
was commissioned during the year. With this, the Group has a total of 9
CPO mills with a combined processing capacity of about 1,900,OOO MT of
FFB throughput per annum. Another mill with a 40/80 MT per hour
capacity is under construction at Sakilan Estate, Sabah.
Mature
92.7%
29,142 Ha
Sabah - 63% Oil Palm Hectarage...By Region Peninsular - 37%
(total oil palm area = 54,263 Ha) (total oil palm area = 31,443 Ha)
101 CORPORATION BERHAD (9027-W)
INCORPORATED IN MALAYSIA I 026
FFB throughput for the year was 1,445,085 MT which was 25010 higher than the previous
year. Extraction rates at 19.49% for CPO and 5.17% for PK, showed scant improvement; on
the low side for similar reasons as those affecting FFB yields.
As for rubber which contributes only about 1% of plantations earnings, the production for
the year was 4,278,OOO kg (vs. 4,097,OOO kg, for 1998) even though total planted area
decreased further from 2,750 hectares to 2,348 hectares.
On capital expenditure, the Group spent RM39.9 million on new planting (vs. RM68.0
million in 1998) and RM25.0 million (vs. RM65.9 million in 1998) on other capital
equipment including mills, agriculture equipment and vehicles, staff quarters and other
amenities. The trend for CAPEX is expected to be on the decline as most essential spending
has already been done.
101 CORPORATION BERHAD (9027-W)
INCORPORATED IN MALAYSIA I 027
During the year, the Group paid the following cess contribution and special taxes to the
relevant authorities:
PORIM and PORLA cess R M 3,098,OOO
PORLA’s cooking oil
stabilization scheme R M 8,277,OOO
Windfall Profit levy RM 764,000
Sabah Sales Tax R M 2,314,OOO
RM 14,453,OOO
Rubber cess RM 537,000
RM 14,990,OOO
The Division employs about 13,000 employees for the entire plantation operation. For an
industry that is labour intensive with numerous remote sites, having sufficient motivated and
well trained personnel at all level remains the most important task in estate management. In
order to ensure we have the strength in depth, continuity and sufficiency for the future, the
Group is setting up a cadet training centre and stepping up on the recruitment of fresh
graduates as planting cadets.
On the Research Et Development front, the focus is on breeding better planting material,
enhancement of propagation techniques including tissue culture, seedling production,
enhancement of cost effectiveness of fertiliser applications and recycling or bio-mass waste
for fibre production.
Overall, estate management is challenged to ensure we continue to improve on yields and
extraction rates and to lower costs so as to ensure we remain the most efficient producer.
101 CORPORATION BERHAD (9027-W)
INCORPORATED IN MALAYSIA 1 028
Prospects
The Group has been able to consistently obtain superior operating margins and returns on its
plantation assets even though a substantial portion of its palms are still below their optimum
yield potential or even not yielding as yet, mainly because of stringent cost effective agronomic
practices and productivity controls.
Looking forward, over this next five year period, we can expect a very substantial increase in
plantation earnings even if prices do not pick up, because of the following reasons:
(i) at least a 15% increase in overall average yield per hectare as the young palms
gradually peak;
(ii) a 24% increase in mature area when the 16,383 hectares are gradually brought into
harvesting;
(iii) at least a 10% increase in CPO extraction rates because of change in age profile as well
as process quality control measures adopted; and
(iv) at least loo/o reduction in unit cost as yields improve and also because of our continuous
relentless attention to cost effectiveness.
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