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Johor Plantations Group Bhd (KL) is exploring alternative revenue sources from its unutilised land, diversifying beyond traditional plantation uses. According to managing director Mohd Faris Adli Shukery, the company is considering converting unused land for energy purposes to boost revenue.
Key Highlights/Takeaways
Exploring Solar Ventures:
- Johor Plantations plans to lease unutilised land for large-scale solar (LSS) projects.
- The company owns 56,000 hectares of plantation land and is evaluating the optimal scheme for solar power generation.
- Maybank Investment Bank Bhd estimates that LSS could generate up to 54 times more operating profits per hectare compared to oil palm.
Financial Performance:
- For the financial year ended December 31, 2023 (FY2023), the company saw a 66.2% drop in net profit to RM167.31 million, due to lower delivery volumes from adverse weather and lower crude palm oil prices.
- In the first quarter of 2024, net profit more than doubled to RM49.97 million, with revenue rising to RM294.91 million, driven by higher sales of crude palm oil and palm kernel.
Impact of Windfall Profit Levy:
- The proposed windfall profit levy (WPL) on palm oil is expected to impact Johor Plantations’ earnings. The exact effect will depend on the levy rate imposed by the government.
- The WPL currently imposes a 3% rate on palm oil priced above RM3,000 per tonne in Peninsular Malaysia and above RM3,500 per tonne in Sabah and Sarawak.
- Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani mentioned that data collection from industry players is ongoing before a final decision on the WPL is made.
Risks
- Financial Impact of WPL: The proposed windfall profit levy could significantly affect the company's earnings, depending on the final levy rate imposed by the government.
- Market Competitiveness: The imposition of WPL could make Malaysia less competitive compared to other palm oil-producing countries.
- Operational Shifts: Transitioning to alternative revenue sources like solar energy requires careful planning and investment, which could pose operational and financial risks.
Conclusion
Johor Plantations Group Bhd is strategically looking to diversify its revenue streams by utilizing unproductive land for energy projects, particularly large-scale solar ventures. While this move holds potential for substantial revenue increases, the company must navigate the implications of the proposed windfall profit levy on palm oil. The success of these initiatives will depend on regulatory developments and the company’s ability to effectively manage the transition.
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