Palm oil recovers from El Niño 

Malaysia and Indonesia dominate palm-oil production. Source: Wikimedia
Since Zakaria Arshad took the helm of Felda Global Ventures Holdings, the world’s largest crude palm oil producer, it has turned from the worst Malaysian stock to the best.
The firm’s 28-per-cent increase this quarter makes it the strongest performer of Malaysia’s top 100 companies.
Zakaria, who took over as CEO on April 1, however, says shares are still 57-per-cent below the 2012 listing price, when it was the world’s third-biggest initial public offering during the year.
Zakaria, 56, a plantation settler’s son, said he was selling assets and cutting costs as drought reduced palm oil yields. The product is used food, cosmetics and in other consumer goods. One of the strongest El Niños on record starved crops of water earlier this year.
“I’m not satisfied with the share price, there’s still a long way more to go,” Zakaria said from his Petronas Towers office. “My yields will be reducing, I have to look at my cost of production, and I have to cut all these costs.”
Felda posted a 65.5 million ringgit (US$16.2 million) first-quarter loss from a 3.6-million ringgit profit the year before amid the drought. The stock fell by 62 per cent from 2014 until its removal from FTSE Bursa Malaysia KLCI Index last year, making it the worst performer on the nation’s benchmark gauge for the period.
Malaysian first-half crude palm-oil production was the lowest since 2007, according to the Malaysian Palm Oil Board. Malaysia is the world’s second biggest palm grower after Indonesia and the neighbours make up around 86 per cent of the world’s supply.
“Production is catching up, though still slowly” after “very, very bad” conditions for the oil palms, Zakaria said.
“I want to raise my cash reserve, sometimes it is easy to catch the opportunity with cash in hand,” he said. Felda’s reserves were 2.4 billion ringgit at the end of March from as much as 6 billion ringgit when it was first listed. The firm had 5.4 billion ringgit of borrowings as of the end of March.
Felda subsidiary, MSM Malaysia Holdings, which controls a 60-per-cent share of the federation’s sugar market, is looking to increase its exports and seeking to buy assets across the region.
“Global sugar consumption, particularly in the Asia-Pacific, is increasing at 5 per cent a year,” said new CEO Mohamad Amri Sahari.
“Currently, our annual refining capacity of 1.25 million tonnes per year is ranked within the [world’s] top 25. Construction work on our new factory in Tanjung Langsat, Johor Baru, will start next month. When this refinery is completed in 2018, our group capacity will almost double to 2.25 million tonnes,” Amri said.
“We aim to be a top 10 sugar company in the world by 2020. So, while we are focused on building our new refinery in Johor to better serve the export market, we are also open to acquisitions of sugar assets in Asia-Pacific.”