KUB Plans to Exit Oil Palm Plantation Business in Sarawak

KUB Malaysia Bhd is targeting to dispose some of its assets, including oil palm plantation land and a mill in Sarawak, to improve cash flow.

President and managing director Datuk Abdul Rahim Mohd Zin (pic) said the group was in advanced stages of disposing its palm oil mill, KUB Maju Mill Sdn Bhd.

“We will make an announcement in the next two to three months,” he told reporters on the side lines of KUB shareholders meeting yesterday.

“The disposal would improve our cash-flow situation, especially since we have bank borrowings for the mill, and reduce our losses,” he added.

According to its 2018 annual report, the plantation estates in Sarawak are worth RM48.22mil, while the mill is estimated at RM45.48mil.

KUB’s total oil palm plantation area stands at 8,866ha, located in Johor, Sabah and Sarawak.

Since last year, KUB has been disposing its non-core assets, including some its investment properties and its food and beverage business, A&W Malaysia.

KUB sold its entire stake in A&W Malaysia for RM34mil to Inter Mark Resources Sdn Bhd last September.

Abdul Rahim said financial year 2018 was challenging for KUB due to the slump in crude palm oil (CPO) prices and floods in Sarawak.

“CPO prices plummeted from an average of RM2,800-RM3,000 per tonne to below RM2,000, causing a huge loss to our plantation sector,” he said.

“To make it worse, in Sarawak in particular, due to unfavourable weather patterns, there was a flood.

“This affected our operations and increased our production cost,” Abdul Rahim added.

He said the palm oil mill also faced difficulties in obtaining adequate amounts of fresh fruit bunches due to low CPO prices that had increased competition.

For this year, Abdul Rahim said KUB has allocated between RM40mil and RM50mil in capital expenditure.

He said the largest revenue contributor to KUB was its liquefied petroleum gas (LPG) bottling business, having more than an 80% share, followed by plantation with 11% and the remaining being the telecommunications, power and property businesses.

Abdul Rahim said the firm had recently completed the construction of its LPG bottling plant in Beranang, Selangor, which involved an RM11mil investment.

“Last year, profits from the LPG business were down due to intense competition in the market.

“We are working on strategies to improve our business by working with our existing dealers to improve and defend our market share.

“We have identified new dealers to penetrate into new markets. The new bottling plant in Beranang would cater for markets in the east and northern side of the Klang Valley,” he said.

Source: www.thestar.com.my