Business

KLK quietly snaps up large tracts of Aussie farmland

By Ida Lim
February 19, 2013

KLK intends to ‘derive economies of scale’ with its purchase of Australian farmland. – Reuters picKLK intends to ‘derive economies of scale’ with its purchase of Australian farmland. – Reuters picKUALA LUMPUR, Feb 19 - Malaysia’s palm oil giant Kuala Lumpur Kepong Bhd (KLK) has been steadily purchasing farms in Australia’s largest wheat-producing region, the Wall Street Journal (WSJ) reported today.

The WSJ reported that KLK now owns about 26,000 hectares in Australia, citing company documents and investment agents.

The business paper listed a few land deals that KLK had made last year, with another big one expected in Dandaragan, a town north of Perth, the capital city of the Western Australia state.

Simon Wilding, a real-estate broker, told WSJ that he is looking at inking a deal with KLK Farms Pty Ltd, an Australian subsidiary, over the Dandaragan land in the coming weeks.

“They’re looking at a lot more country in the area,” Wilding, the director of broker firm VNW Independent, told WSJ.

The WSJ also reported that KLK had last August acquired 3,600 hectares of farmland near York, a town east of Perth, citing Geoff Collins, the managing director of Farming Management Services, which manages land for KLK Farms.

KLK’s accounts up until September 30, 2012 showed that it paid RM83.1 million for 13,970 hectares of farmland near Northampton, a town in Western Australia, WSJ said.

Lim Poh Poh, KLK’s head of corporate communications, said the firm intended to “derive economies of scale” with its purchase of Australian farmland, but did not give the total land size that it owns in Australia.

She told WSJ that only 0.3 per cent of the listed company’s profits for the last financial year came from the company’s farms in Australia.

WSJ points out that KLK’s core palm oil business activity is facing pressure from lower palm oil prices and rising wages for labourers in Indonesia, with the firm’s net profit for last year dropping by 23 per cent to RM1.21 billion.

Indonesia, where many Malaysian palm oil firms had ventured into to plant oil palm trees, had last December pushed for an increase of up to 50 per cent in wages for plantation workers.

KLK’s website states that its plantation land bank in Malaysia and Indonesia currently exceeds 250,000 hectares.

The share price for the KLK counter stood at RM21.28 at the close of trading yesterday.

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