KUCHING: Subur Tiasa Holdings Bhd, which records a strong growth in its oil palm plantation business, has increased the group’s landbank for oil palm estate and tree plantation by 15,000 hectares with the completion of the acquisition of Simunjan Estate in southern Sarawak.
The company paid RM150 million cash to acquire the Simunjan estate from Rimbunan Sawit Bhd. The deal was completed on Oct 25, this year.
Following the acquisition, Subur Tiasa’s total plantation landbank has increased to about 44,000 hectares from nearly 29,000 hectares.
‘The management has also made progress in implementing Malaysian Sustainable Palm Oil (MSPO) certification for all our oil palm estates.’
The Simunjan Estate has some 5,775 hectares of oil palm trees aged mostly between five and 11 years old. In 2016, the estate produced about 31,500 tonnes of fresh fruit bunches (FFB) and generated a revenue of RM14.8 million.
Subur Tiasa expects to incur up to RM13 million for plantation improvement and RM10 million more for the purchase of
plantation machinery and equipment over the next five years, according to its senior independent director Ngu Ying Ping in an earlier circular to shareholders on the proposed acquisition of Simunjan Estate.
The company plans to plant commercial tree species on some 5,000 hectares of the Simunjan Estate that has remained undeveloped to provide long-term supply of logs for the group’s downstream timber processing business.
The tree planting activities is expected to commence next year until 2032.
According to Subur Tiasa group managing director Datuk Tiong Ing, the group registered a 33 per cent increase in FFB production and 14 per cent increase in FFB sales revenue to RM101.7 million in financial year ended July 31, 2018 (FY2018). The FFB sale revenue rose by 77 per cent to about RM90 million in FY2017 from FY2016.
In FY2018, the oil palm plantation segment increased its contribution to group revenue to 32 per cent from 19 per cent in FY2017.
However, the segment’s pre-tax profit fell to RM27.8 million from RM36.7 million in the same period due to a 15 per cent drop in crude palm oil (CPO) price.
Tiong said as the weighted average palm age of the group’s 29,000 hectares (excluding the Simunjan Estate) was 8.6 years, the group expects improvement in yield per hectare in line with the growth of the palm age profile from young mature to prime age.
“We will continue to improve our estate management system with best agricultural practices. The management has also made progress in implementing Malaysian Sustainable Palm Oil (MSPO) certification for all our oil palm estates,” she added in the company’s newly released 2017 annual reports.
Subur Tiasa’s traditional core business is in logging, reforestation and downstream timber manufacturing. The group’s logging operation and reforestation projects are in Sibu, Bintulu and Kapit regions while its downstream manufacturing hubs are located in Sibu, Bintulu and Tanjung Manis.
In FY2018, the timber segment contributed the bulk or 67 per cent to group revenue of RM322.2 million, which was significantly lower than RM492.6 million in FY2017.
Tiong attributed the lower revenue to a 79 per cent drop in the export sales volume of logs, arising from the reduction in log export quota imposed by the authorities from 30 per cent to 20 per cent.
Plywood’s export sales volume was down by 35 per cent due to lower production as log supply was tight.
“Log sales contributed 9 per cent to the total revenue of the group. The strong export selling price for logs was backed by firm market demand and weakening of Malaysian ringgit against US dollar.
“The group’s downstream manufacturing faced rising of production costs due to higher prices of logs and tight supply of raw materials,” she added when reviewing the group’s yearly performance.
The group exported its plywood to key markets of Taiwan, South Korea and China. Domestically, Subur Tiasa commands a market share of 11 per cent in panel products.
Plywood accounted for 22 per cent of group revenue while that of particleboard chipped in 19 per cent.
Tiong said the group, which manages some 200,000 hectares for reforestation, continued its investment in research and development of tree species cultivation, nursery and new planting method to improve the quality of its tree plantation.
“Reforestation remains integral to ensure sustainable supply of raw materials for downstream manufacturing in the long run.”
Four months ago, Subur Tiasa entered into a memorandum of understanding (MoU) with Sarawak Timber Industry Development Corporation (STIDC) on the development of a pilot bamboo plantation project and bamboo integrated industry on 89 hectares in Sabal, Simunjan.
The state government, in its effort to enhance the existing forest policy, allows bamboo plantations to be set up in the existing licence for planted forest areas which are not able to be planted with commercial trees.
For the third consecutive years, Subur Tiasa had been bleeding. The company suffered a group net loss of RM18.8 million in FY2018, and loss of RM16.5 million and RM32.9 million in FY2017 and FY2016 respectively.
Group revenue had shrank from RM554.6 million in FY2016 to RM492.6 million in FY2017 and further to RM322.2 million in FY2018.
On prospects going forward, Tiong said: “The prices of timber and timber products will sustain with the firm demand from the market. India, South Korea, Taiwan and Indonesia are our major purchasers of round logs, plywood, particleboard and sawn timber of the group.”
Expecting the oil palm segment to continue its positive contribution to the group, she is confident that the group’s FFB production and oil extraction rate could be boosted through operational efficiencies.
