27th Aug 2013
KUALA LUMPUR (Aug 27): PPB Group Bhd said today it expects to achieve “good” results for its full financial year in 2013, supported by domestic demand and flour milling expansion overseas.
It also expects profit contribution from its 18.33%-associate company, Wilmar International Ltd of Singapore, to continue to account for 65%-70% of PPB’s total profit.
“On the whole, PPB Group’s operations are expected to perform well in 2013; nonetheless the overall financial results would depend substantially on Wilmar’s business performance for the year,” said Leong Choy Ying, chief financial officer of PPB Group, at a briefing for the media and analysts today.
“The domestic demand in Malaysia is expected to be well-supported by resilient consumer and business spending… Regionally, expansion of the group’s flour milling capacity in Indonesia and Vietnam is progressively coming on-stream to supply additional volume in those markets,” she added.
In the first half of this year, PPB Group netted profit of RM439 million, as compared to RM302 million in the first half of 2012. Contribution from Wilmar accounted for RM300 million or 68.3 % in the first half of this year.
The company declared an interim dividend of 8 sen, compared to 7 sen in the first half of 2012.
In response to a question from theedgemalaysia.com on whether a stronger performance expected this year could mean expectation of a higher dividend, PPB Group managing director Lim Soon Huat replied:
“Our strategy is to pay dividend from operating cash flow, and one of the two major sources is from Wilmar… In the first half of this year, we have paid interim dividend one sen higher than last year’s interim, so it will depend on performance of second half this year.”
In the second half of last year, the final dividend paid was 13 sen. For the full year, it was 20 sen net. The highest in recent years was in 2010, when 88 sen in total dividends (including special dividends) was paid.
At the press briefing today, the company also announced that its total capital commitment for the next 2-3 years will be RM528 million.
The bulk of this capital expenditure will go to flour and feed milling and grains trading (RM245 million), while the rest will go to its film sector, property development, bakery, frozen food processing and consumer products.
Lim said about RM40 million of RM60 million allocated for property development in the next 2-3 years will go the development of its new property venture in Puteri Harbour in Iskandar Malaysia, together with Kuok Brothers and Khazanah Nasional.
The 12.5 acre land slated for mixed development with gross development value of RM1.5 billion is expected to be launched in stages from mid-2014 and is expected to start contributing to PPB’s earnings from 2015 onwards, Lim said.
The whole development, comprising apartment and condominium, officer tower and retail mall next to a private marina and overlooking the Straits of Johor, is expected to be completed in 2017.
“We are still at the planning stage. But we expect strong interest from local and foreign buyers due to our location which enjoys close proximity to the customs, Singapore and good infrastructure,” said Lim.
Looking ahead, Lim and his senior managers acknowledge that the current weakness of the ringgit will hit its cost if the local currency continues to slide against the US dollar as PPB’s raw materials are imported.
“What we see now is not a normal market condition. But we had a far worse experience in 1997-1998 Asian financial crisis (where the ringgit/dollar breached 4.00 before being fixed at 3.8)… Hedging is a part of our tools to mitigate the risk. We have this in place for years,” said Lim.
“We have a knowledge bank in trading and hedging of currencies and commodities. We work closely with Wilmar International on this,” he added.
[Source]
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