KUB upbeat on agro division’s performance
SHAH ALAM: KUB Malaysia Bhd, whose shareholders approved its land acquisition in Sabah yesterday, expects better performance in its agro business this year driven by higher fresh fruit bunches (FFB) production and contribution from the new estate.
“Last year and the year before we were affected by El Nino. At the same time we’ve been able to tackle some of our resource requirements. We had some difficulty in securing plantation workers so we’ve been able to improve on that.
“We’ve also implemented mechanisation programmes to reduce the reliance on labour,” its president and group managing director Datuk Abdul Rahim Mohd Zin told reporters after its EGM yesterday. The group expects crude palm oil price to average about RM2,500 per tonne for the rest of 2017.
Abdul Rahim said it is optimistic on the Sabah land acquisition, which will enhance its earnings immediately upon completion of the acquisition in the fourth quarter of this year. The average yield recorded for 2016 was 24 tonnes/ha, higher than the industry average for Sabah of 17 tonnes/ha.
The land is a 1,534ha brownfield oil palm plantation land in Sungai Kinabatangan acquired for RM100.4 million cash from Kwantas Plantations Sdn Bhd, a subsidiary of Kwantas Corp Bhd.
“If you look at the earnings contribution from this asset in 2016 to Kwantas, we are expecting about 21% contribution in terms of revenue to the agro group. In terms of total revenue for the entire group, it is only about 3% because a large proportion of our revenue, 70% in 2016, came from our energy sector through the sale of our LPG gas cylinder distribution business,” he said.
The acquisition increases KUB’s plantation landbank from 7,332ha to 8,866ha, bringing it closer to its 10,000ha target.
Abdul Rahim said they have been receiving land acquisition proposals but have not identified any deals that it deems attractive. It is also finalising a replanting programme, which involves 100ha to 200ha per year for the next few years.
Last month, the group started replanting 200ha in one of its estates in Kluang. It has allocated up to RM3 million for replanting this year.
On its expansion plans in Indonesia, he said it has not locked in any deals yet due to regulatory and financial requirement issues.
On its A&W franchise, KUB is in the final stage of obtaining the development order for the redevelopment of the land on which A&W PJ Drive-In is located. It hopes to have its proposal discussed and approved at the final committee meeting this month.
For the first quarter ended March 31, 2017, KUB’s net profit rose 44.06% to RM8.02 million from RM5.57 million a year ago while revenue rose 21.07% to RM148.59 million from RM122.73 million a year ago on the back of improved financial performance of the energy, agro, power and food sectors.
Its share price fell 0.97% to close at 51 sen yesterday with a total of 635,100 shares traded, giving it a market capitalisation of RM283.80 million.