This article first appeared in The Edge Financial Daily on November 17, 2017

KUALA LUMPUR: Sime Darby Bhd, the world’s largest palm oil planter by land size, is expecting crude palm oil (CPO) prices to trade between RM2,600 and RM2,700 per tonne until year end, according to the chief executive officer of its plantation business Datuk Franki Anthony Dass.

At the time of writing, Malaysian palm oil futures were trading at about RM2,729 a tonne.

Dass, who will lead the group’s soon-to-be-listed Sime Darby Plantation Bhd (SD Plantation), told reporters yesterday that SD Plantation anticipates fresh fruit bunch production for its financial year 2018 (FY18) to rise by 6% to 7% from the previous year.

Looking ahead, SD Plantation, as a pure plantation company, will need to focus on water management, which is crucial to mitigate both the El Nino and La Nina effects, said Sime Darby chief financial officer Datuk Tong Poh Keow.

“La Nina is good for us. You’ll have flash floods here and there which will disrupt harvesting, but it won’t disrupt production like what El Nino does. When the rain subsides, we can go in and harvest. We don’t have significant labour shortage and we are well mechanised, so that helps to keep harvesting rounds done,” said Dass.

As for Sime Darby Property (SD Property), Tong shared that upon listing, it would be one of the largest property players in the country in terms of land bank size.

SD Property plans to launch four major property projects in FY18, which have an estimated total gross development value of RM687 million. The first of them is Lot 15, located in Subang Jaya City Centre, valued at RM269.2 million, this coming weekend.

Separately, Sime Darby announced it is selling the redeemable loan stocks (RLS) it holds in Permodalan Nasional Bhd’s (PNB) unit Prolintas Expressway Sdn Bhd to PNB for RM333.24 million.

The RM500 million nominal value zero coupon RLS are held under its wholly-owned Kumpulan Jelei Sdn Bhd, that invested RM166,000 in the RLS some 10 years ago.

“The consideration was arrived at based on the unaudited fair value of the RLS carried in the financial statements of Jelei as at Oct 31, 2017,” said the group.

There is no expected gain or loss from the sale and transfer, which should be completed by next month. Proceeds from the transaction will be used to repay borrowings, it said.

The RLS were issued by Prolintas (then known as Guthrie Corridor Expressway Sdn Bhd) as part of the settlement of inter-company balance owed by Prolintas to Jelei, when Kumpulan Guthrie Bhd sold its stake in Prolintas to Project Lintasan Kota Holdings Sdn Bhd for RM5 million.

At the time, Jelei was wholly-owned by Kumpulan Guthrie, who later merged with three other plantation groups to form Sime Darby.