KUALA LUMPUR: Boustead Plantations Bhd has allocated a total of RM106 million in capital expenditure (capex) this year, mainly for its upstream expansion to generate better returns.
Of the total allocation, RM59 million has been set aside for the construction of workers quarters and equipping palm oil milss in the peninsula with more efficient equipment.
The remaining RM47 million will be invested in replanting efforts throughout its oil palm estates, spanning around 2,000 hectares, and maintaining the immature areas.
Chief executive officer Ibrahim Abdul Majid said Boustead Plantations' capital was better channelled on upstream expansion, given the substantial investment required to start a refinery (upstream).
"Furthermore, Malaysia is already faced with refining overcapacity and it will be a challenge, particularly for a small to the medium-sized downstream player to compete with the existing established players in the downstream arena," he told the New Straits Times recently.
In 2019, the group's total land bank stood at 98,200 hectares (ha) across 48 estates, comprising 19 estates in Peninsular Malaysia, 20 estates in Sabah and nine estates in Sarawak.
Ibrahim said Boustead Plantations' total area under cultivation stood at 79,400ha, with mature and immature oil palm areas comprising 72,900ha and 6,500ha respectively.
"Our average palm age is 16 years, with younger palms concentrated mainly in the Peninsular region. Through our replanting programme, which is now driven by a specialised Replanting Department, we aim to achieve a more balanced age profile going forward," he said.
Additionally, the group owns 10 palm oil mills of which three are in Peninsular Malaysia, five in Sabah and two in Sarawak.
Ibrahim said Boustead Plantations was committed to driving its productivity and performance over the long-term, backed by the group's transformation programme, which aimed at delivering sustainable value for its shareholders.
The first phase, which spans for 12 to 18 months, is aimed at revamping the organisation and increasing its operational efficiency and productivity of fresh fruit bunch (FFB) yield.
"Once the group is on a stronger footing operationally and financially and with additional cash flow, we will be able to commence the second phase of the transformation programme.
"This entails value creation plans including via dividends, paring down of debt and value accretive land bank acquisition," he said.
Ibrahim said the ongoing Covid-19 pandemic had been an unprecedented crisis, impacting markets and industries across the world including the plantation industry.
Although 2020 initially looked to be a better year, he said at this juncture, it would be premature to comment on specifics to the financial impact of the Covid-19 pandemic on the group.
Meanwhile, he said it did not intend to monetise any assets as they were producing good yield while ensuring that the crops to run the mill profitably.