IJM Eyes Downstream Activities in India Venture

PETALING JAYA: IJM Plantations Bhd’s recent oil palm plantation ventures in India hold bigger things for the group, which is eyeing downstream business opportunities in the world’s second-largest edible oil market after China, says chief executive officer Velayuthan Tan. He told StarBiz that the group would initially develop oil palm estates and palm oil mills in India and later venture into related downstream activities. However, he ackowledged that the land conversion process to oil palm estates in India would take time. “Slowly but surely, there will be more enthusiasts venturing into the cultivation of oil palm in India,” he said. Godrej-IJM Palm Oil Ltd (GIPOL), the joint-venture company between IJM Plantations and India’s Godrej Group, is actively promoting oil palm cultivation among growers in Goa and Karnataka. “GIPOL initially targets to develop about 10,000ha with nurseries and extension teams to reach out to oil palm growers,” Tan said. IJM Plantations, which is Malaysia’s ninth-largest plantation group with about 29,031ha in Sabah, is also expanding into Indonesia. “Our plan is to establish 30,000ha to 40,000ha oil palm plantation over time in Indonesia,” Tan said, noting that the group would need RM600mil to RM700mil capital expenditure (capex), if all the landbank were greenfields. “The capex would be incurred over six to seven years,” he added. The group’s latest endeavour is a 10,252ha landbank in Lampung, south Sumatra, that is partially (1,300ha) planted.
Tan noted that the scale of IJM Plantations’ landbank expansion was relatively not very large when compared with the the local big boys in Indonesia. “Theirs are totalling about six-digit (in) hectarage expansion when ours are still within the lower five digits,” he said.
Furthermore, IJM Plantations is not going further down the supply chain and would remain a pure plantation grower with the expansion programme. “By this, we still consider ourselves a boutique plantation group despite the recent expansion to Indonesia,” Tan said, adding that the company’s landbank size in Sabah and Indonesia were about the same. “In the mid-term, Indonesia will start to contribute as the palms mature while Sabah will continue with sustained contribution against the backdrop of its current hectarage and age profile. “In the longer term, Indonesia will eventually overtake Sabah’s contribution,” he said. On the impact of El Nino on its Sabah estates, Tan observed that “like many other plantation counterparts, the fresh fruit bunches and crude palm oil production to date are lower than the same period last year, given the unfavourable weather and tree stress, especially on the older palms.” But going forward, Tan said “our observations and census are showing that we can look forward to high crops in the ensuing months. As such, we will meet our production targets.” This was because two thirds of IJM Plantations oil palm trees in Sabah were of a younger age, Tan said.

Source : The Star by Hanim Adnan

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