Boustead Plantations sees a “challenging” year ahead for the palm oil industry and that crude palm oil (CPO) prices could decline further in the second half of the year.
Vice-chairman Lodin Wok Kamaruddin said the price was hovering around 2,200 ringgit (US$595.46) per tonne now.
He said although inventories had come down substantially from late last year, excess supply from soy oil in the market and slower demand from China and India have kept prices in check.
“We hope things may change in the next seven months. But in a nutshell, there may be some improvement in prices in the first six months but the second half we will probably see further decline on increased stocks,” he said.
Despite the outlook, the company said it was still able to make a comfortable margin and that its costs were still under control.
“The lower CPO price if compared against our average cost of production of about 1,700 ringgit per tonne, is still good business. If CPO prices hover at 2,200-2,300 ringgit per tonne, the contribution from the plantation business will be a little bit better than last year (FY14 ended December 31),” Lodin said at a press conference after its AGM yesterday.
Lodin said the company was doing “a lot” to address its cost competitiveness to ensure that it was able to withstand the low CPO price now.
“First thing is we have to be cost-efficient. Second is to improve the methods, techniques and systems of operating the estates. Malaysia is too dependent on foreign workers to work in our estates and we are finding ways to reduce dependency by lowering the number of workers,” he said.
He added that the company’s Cantas programme was a technology that it was slowly adopting which could perform work equivalent to that of three workers.
On its planned landbank expansion, Lodin said the company was still on the lookout for suitable parcels of plantation land noting that it preferred local land than overseas land for ease of management.
“We hope that by 2017 we can get 100,000ha but it is not easy to get plantation land nowadays as there are not many tracts of plantation land available. But the plan is to expand eventually.
“We give priority and want to contain the expansion in Malaysia because the country is stable politically. We have received offers for (expansion) in the Philippines and Papua New Guinea but we are cautiously looking at these offers,” Lodin added.