By YVONNE TAN | Mar 6, 2010

PPB to expand flour mill, property businesses

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yvonne@thestar.com.my

KUALA LUMPUR: Diversified company PPB Group Bhd hopes to utilise its RM1.29bil in proceeds from the sale of its sugar business to expand its existing businesses of flour milling and property.


Its managing director Tan Gee Sooi said after paying its shareholders about RM600mil in special dividends from the total sum, the remaining would be used to build more flour mills overseas as well as to enlarge its landbank here.

“Out of Malaysia, for example in Indonesia where the population is huge and consumption is growing, there are a lot of opportunities for the flour milling business while for property, we will look for suitable landbank here,” Tan said after chairing a press and analyst briefing here yesterday.

Based on the group’s latest financial results for the year ended Dec 31, 2009, 20.71% of operating profit came from its grains trading, flour & feed milling segment while the property segment contributed a mere 2.77%.

The largest contributor to operating profit was the sugar and cane segment, coming in at 62.85%.
PPB Group proposed last October to sell its entire stake in two sugar units and land used for sugar cane cultivation to Federal Land Development Authority for RM1.29bil.

At the same time, its 49%-owned associate Grenfell Holdings Sdn Bhd also said it would sell its stake in plantation group and sugar refiner Tradewinds (M) Bhd for RM207.53mil.

With the sugar business out of the group’s operations, Tan expects this year’s financial performance to be “satisfactory”, backed by contributions from its grains trading, flour & feed milling segment, particularly from its Indonesia operations which Tan said “has expanded very fast”.

PPB recently commissioned a 1,000-tonne flour mill there. Tan said production capacity for the plant was expected to reach 65% by year-end and that the company had plans to establish more mills there.

Analysts are generally positive on the company’s Indonesia plan given that wheat prices have come off 40% from its peak and there is no controlled pricing in Indonesia.

On new downstream activities, Tan said PPB expected to commission a RM105mil bakery in Pulau Indah by the end of this year, producing loaf bread and subsequently a variety of buns.

It also hoped to form joint ventures to go into the frozen food business in Japan, Tan said.

PPB Group Bhd’s net profit for the fourth quarter Dec 31, 2009 fell 3.2% year-on-year to RM351.53mil as lower selling prices of flour resulted in lower revenue contribution from its grains trading, flour and feed milling segment.

However, net profit for the entire year rose 25.6% to RM1.62bil mainly due to higher contribution of RM1.21bil from its 18.4% associate Singapore-listed Wilmar International Ltd.