Kim Loong’s cost of production to ease in FY25
Sarawakian palm oil producer Kim Loong Resources Bhd’s (Kim Loong) cost of production is likely to ease from an estimated RM2,400 per tonne in its financial year 2024 (FY24) to RM1,900 per tonne in FY25.
Analysts at AmInvestment Bank Bhd (AmInvestment Bank) in a company report guided that the drop in cost of production is expected due to normalising fertiliser costs.
“According to Bloomberg, average price of US corn belt granular potash dived by 41.5 per cent to US$424 per tonne in 2023 from US$726 per tonne in 2022,” said the analyst.
This would bode well for Kim Loong in the coming year as they replenish their fertiliser stocks every 6 months.
For fresh fruit bunch (FFB) production, AmInvestment Bank reckoned that it will be softer in FY25 as the group’s FFB production will only expand by a mild four per cent.
This is based on an assumption of an average FFB yield of 22 tonnes per ha compared to 21.8 tonnes per ha in FY24.
Despite heavy rains in Sabah and Johor in December 2023 and January 2024, AmInvestment Bank opined that their FY24 forecast of a FFB production growth of 15 per cent will stay intact as the group’s FFB growth had already climbed by 16 per cent y-o-y in the first 11 months of FY24 (11MFY24).
The group is also estimated to replant about 1,000ha of ageing oil palm trees in the upcoming period.
On a separate note, Kim Loong’s 1.5MW Telupid biogas plant which is expected to be commissioned soon is anticipated to allow the group to enjoy an annual revenue of RM15 million from its three biogas plants.
“The sale of electricity from the biogas plants is estimated to account for 5 to 6 per cent of Kim Loong’s annual net profit.
“Kim Loong’s biogas plants in Kota Tinggi, Keningau and Telupid command an export capacity of 5.3MW in total,” the analyst reported.