Southern Acids strikes cautiously optimistic note

By Ooi Tee Ching

Published: 2012/09/27

SUBANG JAYA: Southern Acids (M) Bhd is cautiously optimistic of its business prospects as its oil palm estates in Indonesia and oleochemical operations in Malaysia suffer from the impact of Indonesia's palm oil tax restructure.

Since August 2011, the Indonesian government has raised palm oil export taxes drastically to boost refining capacity and downstream activities there.

"With cheaper feedstock available to Indonesia's oleochemical producers, the playing field is no longer level," said chairman Tan Sri Low Boon Eng.

"Our oleochemical manufacturing business here suffered substantial margin erosion," he said after the company's shareholders' meeting here yesterday.
Southern Acids operates a 100,000-tonne-a-year oleochemical plant in Kapar, Klang. Its products are mainly exported to Europe, East Asia and South Asia.

Last month, the Palm Oil Refiners Association of Malaysia (Poram) highlighted that the Malaysian government, in allowing five million tonnes of duty-free crude palm oil exports and remaining indifferent towards the plight of palm oil refiners here, had risked the loss of further investment and talent in its oleochemical, specialty fats and biodiesel sectors.

Poram said the government's indecision for the past 12 months had eroded investors' confidence to further value add Malaysia's palm oil downstream sector. This also meant opportunity loss in retaining and attracting highly-skilled knowledge workers.

Low concurred with Poram that the government needs to take a more discerning approach. "The government must do something about the current situation. It has been more than a year already," he said.

Southern Acids, via PT Mustika Agro Sari and PT Wanasari Nusantara, has 7,870ha of oil palm plantations in Indonesia.

Low noted the Indonesia's palm oil tax restructure, in encouraging downstream investment there, had pulled down palm oil prices. "So, our oil palm plantation and milling business had to contend with lower selling prices," he said.

Despite operating in challenging circumstances caused by the restructure of Indonesian palm oil taxes, Low said the group is cautiously optimistic of remaining profitable in the current year ending March 2013.

"We'll continue to focus on our Indonesian operations. So far, we've planted up around 4,700ha. We'll continue to embark on new planting and replanting in Riau," he said.

Read more: Southern Acids strikes cautiously optimistic note http://www.btimes.com.my/Current_News/BTIMES/articles/sab/Article/#ixzz27gA0jrqB

Southern Acids up 8.93% on hope of bonus issue, corporate actions

Hot Stocks Southern Acids up 8.93% on hope of bonus issue, corporate actions
Business & Markets 2012

Written by Cindy Yeap of theedgemalaysia.com
Thursday, 27 September 2012 14:35

KUALA LUMPUR: Tightly-held oleochemical processor Southern Acids Malaysia Bhd rose 8.93% in the morning session, a day after its chairman told shareholders the board will consider having a bonus issue to help improve trading liquidity.

Southern Acids’ chairman Tan Sri Low Boon Eng told shareholders present at the company’s annual general meeting (AGM) that the board will consider their suggestion of a bonus issue in response to questions over the company’s thin share volume, theedgemalaysia.com reported yesterday.

At midday today (Thursday), Southern Acids added 20 sen or 8.93% to RM2.44 with 26,700 shares done. Its latest unaudited net assets stood at RM3.16 per share.

The counter is rarely traded as close to 85% of its shares are in the hands of its top 30 shareholders. Prior to today’s trades, Southern Acids last closed at RM2.24 on September 19.

At yesterday’s AGM, shareholders had also asked if the group would go into property development with Paramount Corp Bhd.

They also asked if Southern Acids would build more hospitals or dispose of the Sri Kota Specialist Medical Centre (SKMC) in Klang and use proceeds to raise dividend payouts.

Low told shareholders no firm decision had been made on these matters but said Southern Acids has no intention of disposing its investment in Paramount as it sees “synergies” in the investment. Southern Acids owns 4.57% of property developer Paramount as at April 13, according to Paramount’s latest annual report.
However, Southern Acids’ largest shareholders -- Southern Palm Industries Sdn Bhd and Southern Realty (Malaya) Sdn Bhd –which own some 40% of the group, are deemed interested in about 16% of Paramount.

In response to persistent questioning by minority shareholders, Low yesterday also said Southern Acids is still evaluating its options, including going into property development to unlock value of the 644.49 acres of PLANTATION [] land called the “Thangamallay Estate” in Klang. The land borders Kota Kemuning in Shah Alam and is carried at RM141.94 million in its books.

As it is, oleochemical is Southern Acids’ largest revenue contributor accounting for 67% or RM376.3 million in the last financial year but the plantations and milling business brings in the biggest profits.

In the year ended March 31, 2012, plantations contributed RM25.2 million or 61% of the group’s pre-tax profits while oleochemical contributed RM10.6 million. Healthcare, meanwhile, brought in RM3.3 million for the group and warehousing another RM3 million.