IOI Corp to focus on improving yields

PUTRAJAYA: IOI Corp Bhd is exploring plans to turn portions of its aged plantation land into large-scale solar farms, as the palm oil producer looks to diversify its earnings base and boost its renewable energy portfolio.

The company has identified several estates with “reasonably high” irradiance levels that are located near Tenaga Nasional Bhd’s power exchange stations, according to managing director and chief executive officer Datuk Lee Yeow Chor.

“Being a relatively large land owner, the solar plant that we are looking to establish has to be of a certain size, at least more than 300 megawatts,” Lee told reporters after the group’s AGM on Monday.

“We have the advantage of having the land needed to undertake a big scale project.”

He added, however, that the company is “still exploring opportunities for solar projects and there is nothing concrete yet,” and has yet to determine how much land it intends to allocate.

In November 2024, IOI Corp said it had allocated part of its aged plantation landbank in Johor to build a solar power plant, though details such as land size were not disclosed as the project was still in its early stages.

At that time, the group said the solar power project will be developed through a consortium comprising three or four partners and it hopes to secure regulatory approvals for the project by the first quarter of 2025.

While the move by planters’ to turn less productive and older aged tree areas into solar project sites is seen as a way to diversify earnings and improve the companies’ environmental, social and governance credentials, critics have raised concerns that converting fertile land, which could otherwise be used for other purposes like food production, is an inefficient use of resources.

Another notable plantation player that is making a push into renewable energy is SD Guthrie Bhd (SDG), formerly known as Sime Darby Plantation Bhd.

It has announced major plans to participate in solar farming initiatives in the country.

Since 2018, SDG has leased a significant portion of its land for solar farms under the government’s large-scale solar schemes. SDG has set a renewable energy capacity target of one-gigawatt.

For IOI Corp, Lee said renewables like solar and pulp-based biomass utilisation is one of the areas of emphasis under the group’s five-year strategic roadmap (2025 to 2029) which was unveiled in January this year.

“Going forward, we will continue to focus on improving yields and reducing labour dependency under the five-year plan. The newer ones that we are working very hard on are the renewables.

“Apart from solar, we have also embarked on palm biomass processing like converting palm trunks into wood blocks. The plant has been operational since early last year.

“We also have a joint venture to convert empty fruit bunches into pulp and this has the potential to scale further as the global demand for pulp is huge,” he said.

On top of that, Lee noted the group is also involved in crop diversification, particularly its fully integrated coconut business.

To date, IOI Corp has planted 3,600 ha of coconuts in Johor, with a target to expand this to 5,000 ha by financial year 2027 (FY27).

This move is expected to broaden the group’s income stream, looking at the attractive prices of coconuts.

“The price of coconuts have gone up a lot to around US$2,000 per tonne. In comparison, palm oil is only about US$1,000 per tonne,” Lee said.

He added the construction of a coconut processing mill is expected to commence in the first quarter of 2026.

The facility, which will process coconuts into both coconut oil and coconut water, is expected to be operational within 18 months.

These initiatives are part of the group’s resource based manufacturing (RBM) segment which consists of oleochemicals and specialty food ingredients.

The RBM segment has been seeing margin compressions in the last few years amid stiff competition from Indonesian players as well as concerns over global economic uncertainties.

“Margins for this segment have not been good for some time, maybe three years, and it is still continuing in this manner.

“We are unable to give a definite time frame on when it will improve,” Lee said.

He explained that margins for the specialty food ingredients space under the RBM segment “has been very good.

The group’s presence in this operation is through its associate company, Bunge Loders Croklaan.

However, as for the oleochemicals segment – which entails pharmaceutical ingredients, as well as personal care and cosmetic products – Lee said “it is very much dependent on the global economic environment”, given that the group’s oleochemical products are traded globally.

He added that currently the global economy “has not been very good, but neither is it bad”.

Further, as part of the group’s five-year plan, IOI Corp is also strengthening its research and development capabilities to drive new product development, mechanisation, and digitalisation across operations.

Lee said the emphasis on mechanisation efforts is not so much cost savings but it is to reduce the reliance on manual labour.

“The other objective is to improve the turnaround time. When it comes to mechanisation, it is not the mechanisation on the harvesting aspect but the evacuation of fresh fruit bunches; the process of collecting and transporting oil palm bunches to the mill.

This improves the turnaround time, which in turn improves the quality of the crop. So far our mechanisation efforts have led to a reduction of about 20% of our manual labour requirement,” Lee said.

IOI Corp has a goal of reaching a worker-to-land hectarage ratio of 1:9.5 by the end of its five-year plan.

“We are almost at 1:9. In Peninsular Malaysia, we can achieve around 1:10.5, while in Sabah it is about 1:9. In Indonesia, it is still slightly more labour-intensive,” Lee said.

CPO prices likely to stay above RM4,000 per tonne

Lee expects crude palm oil (CPO) prices to stay above RM4,000 per tonne over the next three months, supported by tighter supply during the seasonal low production period.

“CPO prices have been having a good run since the end of November last year, well above RM4,000 to about the RM4,500 level. CPO prices came down a bit around May to August to around RM3,800 and below. Two months ago, prices started to come up again and we have been having a good two months where prices are approaching RM4,300 to RM4,500.

“These are good prices, compared with historical levels. However, having said that, prices have come down slightly to below RM4,200 per tonne over the past week partly due to the unexpected high production in Malaysia,” he said.

Lee noted that plantations in East Malaysia are recording double-digit production growth, “in the teens”. This coupled with the recent announcement between the United States and China — where China agreed to resume purchases of soybean oil from the US after being absent from the market this year — has exerted some pressure on CPO prices.

“With China increasing their purchases of soybean oil, the implication is that they may buy less palm oil,” he said.

Lee added while palm oil stocks have risen to around 2.4 million tonnes, this was “expected and healthy”. He said following the production peak in October, the industry is expected to head into the seasonal low period from November through February.

“Weather is always a big factor, and with La Niña expected this year, it will disrupt the production and the harvesting of palm oil, and stock levels will decline accordingly. This will create a friendly environment for palm oil prices to remain healthy and by healthy I mean above RM4,000 per tonne over the next three to four months,” he said.