Annual Report 2016
27
Group Managing Director’s Report
(Cont’d.)
Higher farming cost is expected for the 2nd half of FY2017
due to the recovery of commodity grain prices as well as
weak Ringgit.
We expect our feed raw material trading unit margin to
maintain in FY2017, and trading volume to increase in
FY2017 as we expand our regional trade in Indonesia and
Vietnam.
Overall, going forward, we remain optimistic for ILF’s
FY2017 outlook.
Palm Oil Activities (POA)
Under Palm Oil Activities, QL has two independent Crude
Palm Oil (CPO) mills servicing small and medium sized
estates in the Tawau and Kunak regions of Sabah, East
Malaysia, and one CPO mill in Eastern Kalimantan,
Indonesia. QL also owns a 1,200-hectare mature palm oil
estate in Sabah, as well as 15,000 hectares of plantation
(9,000 hectares mature) in Eastern Kalimantan, Indonesia.
This division also has approximately 42% equity interest in
Boilermech Holdings Berhad, which is one of Southeast
Asia’s largest biomass boiler manufacturers.
POA Key Developments
The weather phenomenon experienced cut both ways
depending on the core activity. El-Nino which had a positive
effect on the MPM division where fish catch improved,
conversely caused a lower production of FFB in the palm oil
activities division.
This in turn had a domino effect on the downstream activities
which then faced shortage of FFB for processing. Adding on
to the stress of decreased FFB production and lack of
processing activity, was the lower CPO prices which
fluctuated between RM1,947 and RM2,472 per metric tonne
during the financial year under review.
Collectively, these also adversely affected the performance
of QL’s associate company in POA, Boilermech Holdings
Berhad, where its earnings are mainly derived from
plantation industries. Earnings contributed by this company
fell 20.1%.
On a brighter note, our plantations are increasing in maturity
profile, making it ripe time for harvesting the years of sowing.
The timing of this increase in FFB production taken together
with a stabilising CPO price put this division on a contribution
growth path.
