Johor Plantations Group Bhd managing director Mohd Faris Adli Shukery (left) and chairman Tan Sri Dr Ismail Bakar (Photo by Patrick Goh/The Edge)

KUALA LUMPUR (June 12): Johor Plantations Group Bhd (KL:JPG), bound for Main Market listing on July 9, is projecting that its new venture into the downstream plantation business will contribute about 10%-20% of its total revenue by 2027.

Its managing director Mohd Faris Adli Shukery said the business venture into the downstream segment is part of the group's aspirations of becoming a fully integrated palm oil producer.

"We intend to diversify to meet our future growth aspirations by becoming a fully integrated palm oil producer through our venture into the downstream segment. As our first step to realise this vision, we have embarked on a venture with Fuji Oil Asia to develop a palm oil refinery to produce specialty oils and fats," he said at the group's prospectus launch here on Wednesday.

Mohd Faris was referring to JPG's joint venture agreement with Fuji Oil Asia Pte Ltd, a subsidiary of Japan's Fuji Oil Group, signed in January, to develop a specialty oils and fats refinery operating on renewable energy.

The palm oil refinery will be constructed as part of an integrated sustainable palm oil complex which will include a palm oil mill, a kernel crushing plant, and an animal feedmill plant. The integrated complex will be powered by renewable energy from biomass and biogas.

"What we expect is half of the feedstock that we produce will be moving into the proposed refinery," Mohd Faris said.

JPG will fund 51% of the estimated cost for the downstream refinery amounting to RM91.9 million, while the remaining RM88.3 million will be funded by Fuji Oil Asia, according to the prospectus.

The total cost for setting up the integrated sustainable palm oil complex to be born by JPG is approximately RM358.4 million, of which RM171.6 million will be funded via proceeds raised from the public issue portion of its upcoming initial public offering (IPO).

Meanwhile, the remaining RM186.8 million will be funded through internally generated funds and/or external financing.

The construction works for the complex is expected to be completed by the second quarter of 2024.

For FY2023, JPG recorded a net profit of RM167.31 million, down 66.2% from the previous year's net profit of RM495.59 million, mainly attributable to lower delivery volume as a result of lower oil extraction rate primarily due to adverse weather conditions and flooding at its plantation estates in March 2023, as well lower average selling prices of crude palm oil (CPO) and palm kernels during the year. Revenue was also down by 28.4% to RM1.25 billion in FY2023.

Established in 1978, JPG is an upstream oil palm plantation company operating predominantly in Johor. As it stands, the group is principally involved in the production of CPO and palm kernels.

Besides the venture into the downstream segment, Mohd Faris also shared several other initiatives in the pipeline, designed to increase the group's competitiveness by focusing on increasing CPO production.

He said JPG is developing plans and strategies to improve operational efficiency, expanding its land bank in Johor, and increasing supply of crops from third-party suppliers, especially from certified smallholders.

JPG currently operates 23 plantation estates, of which 22 are in Johor and one is in Pahang, with a total land bank of 59,781 hectares and a total oil palm planted area of 55,904 hectares, representing approximately 93.5% of the total land area of its plantation estates. The group also operates five palm oil mills.

"Notwithstanding this, our R&D team is continuously developing high-yielding planting materials in collaboration with industry agencies.

"At the same time, mechanisation and digitalisation initiatives are key towards future-proofing JPG’s continued efforts and presence in producing sustainable and high-quality palm oil," Mohd Faris added.

JPG's IPO on the Main Market of Bursa Malaysia is expected to raise a total of RM735 million, of which approximately RM345.2 million will accrue entirely to its sole shareholder Kulim (Malaysia) Bhd through an issue for sale of 411 million existing shares. Kulim is a wholly owned subsidiary of state-owned Johor Corporation (JCorp).

Approximately RM389.8 million will be raised via a public issue of 464 million new ordinary shares in JPG. The public issue portion of the IPO has been opened for public application on Wednesday and will be closed on June 24.