Having announced strong half-yearly results, Malaysian Palm Oil producer Golden Hope says that it will be looking to markets such as China to exploit its growing oleochemicals division in an effort to increase its presence in the growing international market for palm oil, writes Simon Pitman.
The announcement comes off the back of strong first half results ending December 2003. The figures revealed that Golden Hope's net profits lept from RM 118.8 million (€26.8m) for the same six month period in 2002 to RM 180 million in 2003. Equally sales turnover grew from RM 1.25 billion to RM 1.53 billion during the same period.
The company attributed the rise in income to growing international demand for palm oil, which has been matched by rapidly rising prices for the commodity.
Palm oil is derived from the fruit of palm trees, native to tropical West Africa and cultivated in Africa, Indonesia, Malaysia, and tropical America. Growing to a height of 15 m, the palms produce fleshy fruits, 3 cm long, containing a white kernel within a hard black shell. Palm oil is extracted from the pulp and kernel and used in making soaps, margarine, and lubricants.
When used in soaps, palm oil creates a hard, long lasting bar of soap that is mild and cleanses well. Palm oil has similar characteristics to tallow in soaps, and has been used in soap-making since about 1850 when the quantity of available tallow was insufficient to meet the demand for soap.
China has become a huge market for oil - so much so that it is now expected to overtake India as the world's largest market for the commodity. But with the rising cost of soy oils, Chinese food processors in particular, are now starting to turn towards palm oils, which they are increasingly sourcing from Malaysia.
Although the company's oleochemicals division only attributes around 10 per cent of its annual income, the firm says that it believes rapid growth in demand from a number of Asia's rapidly developing nations is expected to feed further growth. Speaking at a press conference in Kuala Lumpur earlier this week CEO Sabri Ahmad said he expected that both China and India would prove to be particularly strong markets for future oleochemicals growth.
Oleochemicals are derived from palm oil and provide a host of vital raw ingredients for various sectors of the food and cosmetics industry, including fatty acids and esters.
The company said that while the big Asian markets are of primary importance for the expansion of its oleochemicals industry, it would also be looking at new markets such as South Africa, Ukraine and Russia.
"In certain countries we cannot compete with our own customers such as Unilever, but we can complement them," Ahmad said. "When we go for alliances we don't go for the greenfields but with those who have the brand and marketing distribution."
Although Golden Hope is planning to expand its presence on a global basis - having recently purchased an oils refining facility in the Netherlands - the company's primary focus will remain in Asia. That ambition was made clear when the company recently purchased another Malaysian palm oil producer Austral Enterprise from sister company Island Peninsular, making it the largest palm oil producer in Malaysia. The deal means that the company's plantation size has increased from 129,000ha to in excess of 200,000ha.
The company says that it also has plans to acquire controlling stakes in Golden Hope Developments and Negara Properties, falling in line with the Malaysian government's aim to merge state-controlled businesses operating in the same line of business.