Palm oil firm says bottom line will gain

ARANEE JAIIMSIN

Chumporn Palm Oil Industry Plc (CPI), the country’s largest palm oil producer, will invest 100 million baht next year to improve production efficiency, says managing director Karoon Nuntileepong. He said the new investment would involve upgrading facilities and machinery at its palm oil refinery to improve fuel consumption efficiency.

This will be the next part of its fuel consumption reduction programme. Last year the company completed a new biogas plant that uses sludge waste from its own palm oil production. The project generates a total of 6.48 million cubic feet of biogas a year, reducing its fuel costs by 17 million baht a year.

”We are focusing on energy because to save energy costs should be a key strategy to help reshape our financial results next year,” he said.

CPI targets revenue in 2007 of four billion baht with net profit of up to 1.25 million. Revenue in 2008 was targeted at between four billion to five billion baht, with better net profit projected as a result of the energy programme.

Due to the dilemma of poor decision in previous expansion projects, CPI’s financials are not in good shape, said Mr Karoon.

In 2005, the company upped capacity to 600 tonnes a day from 300 tonnes for 420 million baht. This pushed up its debt to 945 million baht from 525 million baht prior to the expansion.

In the third quarter of this year, the company reported a net loss of 34.64 million baht with total debt of 1.69 billion baht. Of the total debt, 536.2 million baht, or nearly 32%, is from long-term loans. CPI’s debt-to-equity ratio is 1.2 times at present.

Meanwhile, the company has been unable to reduce its cost per unit by increasing output due to an inadequate supply of fresh palm needed for crude palm oil refineries.

The average utilisation rate of palm oil refineries in Thailand is as low as 50% because of insufficient supply of crude palm oil amid rising demand for biodiesel, a mix of palm oil-refined biofuel and diesel.

Mr Karoon said the state allows crude palm oil to be exported freely and prohibits imports, leading to a supply shortage and forcing up local palm oil prices.

Crude palm oil prices this month were 31 baht per kilogramme, compared with 18 baht in the previous year. CPI’s refinery is now producing only half of its full capacity of 600 tonnes a day.

The company buys around 5,000 to 6,000 tonnes of crude palm oil from local farmers each month, accounting for 60% of total supplies.

Recently, the energy ministry signed a deal with the Bank for Agriculture and Agricultural Co-operatives (BAAC) to provide seven billion baht in low interest rate loans to palm planters.

BAAC president Thirapong Tangthirasunan said the package should promote additional palm plantations covering 700,000 rai in the next three years.

However, Mr Karoon said that although palm oil plantations would expand to 2.9 million rai in 2010 from 2.2 million rai this year, most of the new plantations would be only 10-20 rai.

”The small planters would find it hard to obtain a good yield unless their operations are managed professionally,” said Mr Karoon.

CPI shares closed yesterday on the SET at 3.44 baht, up two satang, in trade worth 175,000 baht.

This entry was posted on Friday, December 21st, 2007 at 10:59 am and is filed under Palm Oil Biofuel News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.