Friday 29 Mar 2024
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KUALA LUMPUR (Jan 31): Chin Teck Plantations Bhd expects fresh fruit bunch (FFB) output to be flat due to the age profile of its trees in its financial year ending Aug 31, 2018 (FY18).

Its executive chairman Goh Wei Lei said more than one-third of the group's oil palm trees are over 16 years old.

Despite a “big gap” between its existing matured trees and new planting, Goh said the group has no plans for any major replanting schemes this year and would stick to its average replanting rate of 4% to 6% per year.

Separately, the group is confident it will be able to see better contribution going forward from its joint ventures in Sumatera, Indonesia, whose contributions had been affected due to unrest in surrounding villages.

“We are fairly optimistic that we can recover our land bank there,” Goh told reporters after the group’s annual general meeting today.

Yesterday, the group reported a drop in net profit by 13.62% to RM13.59 million for its first quarter ended Nov 30, 2017 (1QFY18), led by foreign exchange translation losses and losses from the joint venture.

Goh said decline in crude palm oil prices (CPO) over the past one year had affected net profit, as did the appreciation of the ringgit.

“If prices continue to dip, we will definitely not be doing as well as we did (before),” he said. He added that a stronger ringgit could result in lower revenue as CPO is traded in US dollar terms.

Meanwhile, Goh said about RM900,000 worth of costs had been incurred, pending the resumption of normal operations in Sumatera.

Revenue in 1QFY18 increased by a marginal 0.11% to RM42.51 million, although the average selling prices of FFB, CPO and palm kernel were lower, as sales volumes of FFB and palm kernel were higher.

The group has no plans to go downstream or to diversify into any other sector, Goh said.

“There is no acquisition target, but we are constantly looking for opportunities to buy more land,” he added.

Despite sitting on a RM264.31 million cash pile as at Nov 30, 2017 and zero debt, Chin Teck is not in any rush to acquire land.

Goh stressed suitable land is difficult to find. He added that having a large cash reserve is important in the event such ‘big ticket’ opportunities come by.

However, he noted he understood shareholders are hankering after returns, which is why the group gives out “pretty decent dividends” despite having no dividend policy.

For FY17, the group’s dividend payout ratio was 43%. It had declared a single tier dividend of 10 sen per share, paid yesterday.

Separately, Goh said a stronger ringgit would most likely be reflected on the CPO prices. Since most of their exports are quoted in US dollar, prices would have to be adjusted according to the stronger ringgit.

Shares in Chin Teck closed down 16 sen or 2.01% at RM7.80 today, giving it a market capitalisation of RM712.63 million.

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