Strong palm oil prices will lift net profit by 35 percent for Malaysia's top planter, IOI Corp Bhd, in the year to June 2007, but will also blunt the firm's acquisition prospects, a top company official said.
Lee Yeow Chor, group executive director, said the firm aimed to boost yields at palm plantations and developing estates in the eastern Malaysian state of Sarawak on the island of Borneo.
"For the first nine months, net profit was 35 percent better than last year, I think we will maintain it for the whole year," Lee told Reuters in an interview on Wednesday. IOI, Malaysia's largest listed plantation company, has seen its share price soar more than 40 percent this year on the back of high palm oil prices. Its shares closed up 1.9 percent in a broader market down 0.9 percent.
The firm, which has interests in property development and investment, booked a net profit of 843.79 million Malaysian ringgit ($244.7 million) in 2006. Lee said the company was weighing options on biodiesel but has not firmed up plans on setting up production units. "We will look at it seriously in the long-term but we have not set any timeframe when to start biodiesel."
A global rush to build vegetable oil-based biofuel plants has boosted palm oil prices more than 70 percent in the past year, making mergers and acquisitions more expensive, he said. "We are looking at acquisitions but I must say that the opportunity is quite limited and people are reluctant because of high palm oil prices."
Malaysia's plantation index trades at about 18 times this year's forecast earnings, above the wider market multiple of 16 times. Palm oil prices are off last month's all-time high but experts forecast they will hold up over the next year or so. IOI has not invested in setting up palm estates in neighbouring Indonesia, unlike many of its rivals such as Kuala Lumpur Kepong and Kumpulan Guthrie, but was looking at developing plantations in Sarawak state where it already owns 9,000 hectares (22,240 acres), Lee said.
"We are talking to some parties who have invited us to form joint ventures and we are looking at more land there," he said. The company is also replanting a large portion of its plantations every year, which will raise crude palm oil yields to 7 tonnes per hectare by 2010 from 6 tonnes now. Malaysia's national yield is around 3.9 tonnes.
IOI has 79 estates with a total plantation area of 167,875 hectares (414,600 acres), with most of the land being planted with oil palm and just a small portion with rubber.
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