Fahmy Ismail
Chief Executive Officer
25 February 2016
OUTLOOK
We are fortunate to have a wide talent
pool of experts in the plantations sector
who are working tirelessly to improve our
production and effectively manage the
usage of our land bank.
In order to improve our yield per ha, we
maintain a replanting programme for
palms between the ages of 23 and 25
years old as well as low yielding palms
with high oil yielding tissue culture ramets
and semi-clonal hybrid DxP seeds. We
aim to carry out the replanting of 2,000
ha in 2016.
In line with our strategy to expand
our land bank to complement existing
operations, we recently acquired 533 ha
of a prime mature oil palm plantation
adjacent to our estates in the Sugut
region.
Optimising the value of our land bank is
a foremost consideration. On this score,
we expect to complete the disposal of
a further 230 ha of non-core land bank,
which will allow us to achieve gains of
approximately RM120 million in 2016.
We will continue to assess the effective
usage of our land bank while keeping in
mind the objective of staying true to our
core business.
Shortage of skilled harvesters is a major
concern for the sector. To address this
we look to continue advancing the
mechanisation of our field operations.
The year under review was a challenging one for the sector. CPO
prices have bottomed out and are expected to transact at RM2,200
to RM2,600 per tonne in 2016 as demand is supported by a weaker
Ringgit.
CPO prices reaching RM2,600 for a brief period is anticipated if the
Ringgit drops to below RM4.50 against the USD. This is not expected
to be sustained unless Brent crude oil rises to above USD60 per barrel.
Nevertheless, analysts anticipate that competition from soy oil will
prevent palm oil from rallying too high.
While analysts are expecting prospects for the sector to improve in
2016, assessing how CPO prices will actually fare remains a complex
undertaking.
We are encouraged that the Governments of both Indonesia and
Malaysia have introduced measures to assist the palm oil industry.
Indonesia is targeting biodiesel consumption of 5.4-7.9 million kilolitres
for 2016 under its B20 target.
The Malaysian government targets to implement the B10 biodiesel
programme with the aim of one million tonnes of CPO usage per year.
This effort is expected to contribute to increased domestic consumption
of CPO, a reduction of stock build-up and the strengthening of domestic
CPO prices. In addition, Malaysia plans to restrict CPO imports to reduce
stocks.
Keeping in mind the need to be focused on our long-term growth plans,
we will implement cost-saving measures and heighten productivity
while keeping a keen eye for prospects that will benefit the Group
holistically.
an n ual repo rt 2015
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