CHINA is set to overtake Pakistan as Felda Global Ventures Bhd’s (FGV) biggest export market following its deal worth hundreds of millions of ringgit annually with Sinograin Oils Corp.
China is currently FGV’s second-biggest crude palm oil (CPO) market with 308,040 tonnes exported.
Group president and chief executive officer Datuk Zakaria Arshad said the deal was expected to double its CPO and olein (cooking oil) production and contribute significantly to its revenue starting the next two months.
“We want to expand our business in China and we believe FGV and Sinograin can complement each other.
“FGV hopes to explore the opportunity to integrate the operations of our existing subsidiary, FGV China Oils Ltd (FGVCO) in Dongguan, Guangdong, with Sinograin’s domestic operations to bring value and cost savings to both parties,” said Zakaria after subsidiary MSM Malaysia Holdings Bhd’s annual general meeting, here, yesterday.
The collaboration, he added, would allow FGV to explore expansion in its downstream activities such as supply, processing, packaging and distribution of blended oils, shortenings and specialty fats.
“We are looking at doubling our CPO production to 600,000 tonnes yearly and olein at 300,000 tonnes to China. It will contribute significantly to FGV’s revenue starting this year to around a few hundred million ringgit annually,” he said.
MIDF Research analyst Alan Lim said he was long-term positive on the news as FGV could determine higher CPO selling prices in the future.
However, he said, FGV’s rating remained “neutral” this year with earnings forecast unchanged as the plantation company’s earnings growth driver — CPO price — stayed unchanged.
Yesterday, FGV signed a memorandum of understanding with Sinograin to penetrate China’s midstream and downstream markets.
Zakaria said China’s palm oil consumption would continue to grow, driven by the rise in the population’s disposable income and demand for healthier edible oils.
China consumed 5.05 million tonnes of palm oil last year, compared with 2.02 million tonnes in 2001, making it the third-largest palm oil consumer in the world.
Sinograin Oils is a wholly-owned subsidiary of China Grain Reserves Corp, a national organisation specialising in the operation and management of China national grains and oil reserves, with integrated functions to purchase, store, transport, process and trade.
Sinograin Oils produces edible oils from soya beans, palm oil and other oils. It sells its own brand of consumer edible oils directly to the domestic market.