Results
1998 proved to be a successful year for plantation. The turnover increased by 22.5% from RM642 million in 1997 to RM787 million in 1998. At the same time, pretax profit improved by 23.2% to RM250 million in 1998 from RM203 million in 1997. In total, plantation accounted for 50% of the Group's turnover and 83% of the Group's pre-tax profit.
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Oil palm continued its good run In 1998, palm products contributed a total of RM681 million in turnover and RM258 million in pre-tax profit, As a comparison, 1997 saw palm products contributing a total turnover of RM502 million and a pre-tax profit of RM 188 million. Meanwhile, rubber contribution to Group's turnover declined from RM 140 million in 1997 to RM 106 million in 1998. It posted a loss of RM8 million in 1998 compared with a pre-tax profit of RM15 million in 1997.
The weakening of Ringgit in 1998 due to the regional currency crisis benefited palm products directly in terms of higher prices. Crude palm oil (CPO) realised an average price of RM 1,946 a tonne, up from RM1,296 a tonne in 1997. At the same time, palm kernel (PK) fetched an average price of RM 1,003 a tonne compared to RM744 a tonne in 1997. However, despite the weak Ringgit, the dampening of rubber prices worldwide resulted in an average price for all grades of rubber of 283 sen a kilogramme, down from 319 sen a kilogramme realised in 1997.
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Operations
The dry spell experienced in the first half of 1998 resulted in the drop of fresh fruit bunches (FFB) production. The Group produced a total of 1,297,456 tonnes of FFB in 1998, down from 1,451,472 tonnes produced in 1997. Inclusive of outside crop purchased, a total of 28(,102 tonnes of CPO was produced by our mills. In 1998, our mills produced 300,010 tonnes of CPO. Palm kernel production, inclusive of outside crop, was recorded at 94,670 tonnes in 1998 compared with 98,660 tonnes in 1997.The Group increased its rubber production to 21,58 1 tonnes in 1998 from 20,718 tonnes in 1997.
The Group's planted hectarage in 1998 was slightly down to 102,416 hectares from 102,938 hectares in 1997. Oil palm area accounted for 84,352 hectares or 82.3% of the planted hectarage of which 72,667 hectares were matured area. In 1997, only 82,987 hectares were planted with oil palm of which 70,076 hectares were matured area. The area planted with rubber shrunk from 19,951 hectares in 1997 to 18,064 hectares in 1998.
Oil palm yield per mature hectare was recorded at 17.9 tonnes of FFB, down from 20.7 tonnes of FFB in 1997. Oil extraction rate (OER) also decreased to 18.5% in 1998 from 19% in 1997. Rubber yield per mature hectare increased to 1,386 kilograrnmes compared with a yield per hectare of 1,262 kilogrammes recorded in 1997.
The Group's plantation venture in Indonesia expanded its operation in 1998. At the end of the year, a total of 11,329 hectares were freed for plantation development of which 4,415 hectares were planted with oil palm.
The end of the civil war in Liberia paved the way for the return the Group's plantation operation in 1998. A total of 7,300 hectares of rubber plantation were rehabilitated and some basic infrastructures destroyed during the seven-year long civil war had been rebuilt. A group of dedicated planters from Malaysia, are now in Liberia, rehabilitating the whole rubber operation.
The second rubber factory in Thailand, built using the Group's latest technology and owned by Muang Mai Guthrie Co. Ltd. (MMG) was commissioned in 1998, MMG continued to provide positive contribution to the Group's bottom line in 1998.
Prospects
Although the price of CPO has dropped from its high of RM2,400 a tonne recorded in 1998 to about RM 1,600 a tonne presently, the outlook for medium and longer term is still very promising. As such, the Group's expansion activity into oil palm plantation will continue unabated.
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 Nature's form of quality control; ensuring the best quality yield. |
The Group's Indonesian venture into oil palm plantation enters into an exciting phase in 1999 and 2000. Work will be speeded up to free the land up to 18,000 hectares for plantation development and by the end of 1999, 10,000 hectares will be planted. The first oil palm seedlings which were planted in late 1997 are expected to bear their first fruits some time by early year 2000.
Work to design and construct the palm oil mill in Palembang is on-going and when completed, will be the largest mill in the Group, capable of processing up to 80 tonnes of FFB in an hour. The Group is also building another mill in Padang. Sumatera on a joint venture basis with a cooperative to process the available crop within the area. This mill will go a long way towards establishing the Group's presence as a long term player in the Indonesian plantation industry.
The expansion of the plantation in Liberia from the existing hectarage will largely depend on the signing of the new concession agreement with the Government of Liberia. Until such time, work will be concentrated on crop extraction.
Since the return from each hectare of land planted with oil palm far outweighs the return of land planted with rubber, the Group has taken a decision to convert all existing rubber estates into oil palm estates. The Group is embarking on accelerated replanting which will turn it into a single crop producer by year 2002. All remaining rubber fields are on exploitation tapping which will further boost yield per hectare in year 2000.
The expertise derived from in-house research and development (R&D) will continue to play a major part in ensuring all oil palm seedlings planted are of superior quality. The tissue culture propagation to ensure uniformity and superiority of planting materials produced and enhanced technique of plant breeding will assist the Group in realising the Vision 25:25, namely a vision to achieve yield of 25 tonnes of FFB per mature hectare and oil extraction rate (OER) of 25% by year 2007.