Boustead expects up to RM600m from asset disposals

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KUALA LUMPUR: Boustead Holdings Bhd is expected to net around RM500 million to RM600 million from the disposal of low yielding or non-performing assets, including its 80% stake in BH Insurance (M) Bhd, and some land bank this fiscal year.

Its group managing director, Tan Sri Lodin Wok Kamaruddin, said the disposals would be made as the group prepared to weather the economic uncertainties and strengthen its balance sheet.    

“We have planned these disposals more than two years ago, and are in various stages of discussion with potential buyers, and would not rush into conclusion in order to get the best deals from our asset sales.

“The disposal of these assets is part of our consolidation strategy to emerge stronger and to face the current challenging economic environment,” Lodin told reporters after the company’s AGM here on April 2.

Its plantation division, Boustead Plantation Bhd, is disposing of a total of 17,000ha of plantation land, including 8,000ha of planted areas in Sumatera, as the company prepared to wind down its plantation operations in Indonesia.  

The tough operating climate and low yielding estates in Indonesia are a drag on the group’s otherwise good performing plantation division. “We have disposed of a piece of land there, and are in the process of finalising the sale of the remaining one,” Lodin said.

With the consolidation, Lodin said the group hoped to trim its debts, which stood at RM3.5 billion as at the end of last year.   

Plantation and property divisions were the key profit contributors for the group, with gross earnings of RM270 million and RM147 million respectively in the financial year ended Dec 31, 2008.

According to Lodin, the group recorded an average CPO (crude palm oil) selling price of RM2,794 per tonne last year, compared with RM2,279 in 2007 despite the lower CPO prices at the end of 2008.

Lodin added that the plantation division was expected to continue its good performance, as the demand for CPO was expected to rise while supply tightened, judging from the stock level which was expected to fall from 2.3 million tonnes to 1.56 tonnes million currently.

“We are comfortable with the current price level of CPO and expect the benchmark of above RM2,000 per tonne to stay for at least the second half of the year, when new production starts to flow into the market,” he said.

Going forward, Lodin said the group would be expanding its trading division with the opening of 10 to 15 new BHP petrol stations, with the focus on strategic secondary towns in Malaysia. The group currently has 330 stations and each new station would cost around RM1 million to RM7 million, said Lodin.

The 178-year-old conglomerate has grown to comprise more than 80 listed and non-listed subsidiaries and associate companies, with core businesses in plantation, property, finance and investment, trading, manufacturing and services and heavy industries.