IOI Corp, Malaysia’s second largest palm oil producer, will invest RM450 million (US$128 million) this fiscal year to expand its specialty fats business to take advantage of higher profit margins.

About RM250 million will be spent on an existing refinery in Rotterdam to raise annual output of palm oil products including specialty fats by 35 per cent to 1.15 million metric tons at the facility this year. Another RM200 million will be invested in a Johor, Malaysia factory, which will supply ingredients to facilities in Europe and the US, said executive director Lee Yeow Chor.

The profit margins for specialty fats, substitutes used in food, are “a few times better” than producing palm oil, Lee said in an interview in Kuala Lumpur on June 30, without providing details. “We are growing this business.”

In the five fiscal years to 2008, IOI’s sales of specialty fats doubled to 521,719 tons, according to its financial report ended June 2008. IOI will seek ventures in South America and Russia to tap new markets for specialty fats, Lee said.
IOI shares advanced 33 per cent to RM4.72 this year, outperforming a 23 per cent gain in the benchmark Kuala Lumpur Composite Index.

The capital expenditure on specialty fats exceeds an estimated RM200 million to be spent its oil palm plantations in Indonesia and Malaysia, mostly for building better housing for workers, roads for operations and on replanting, Lee said.

On May 15, the company said its full-year profit would fall from last year’s record after reporting net income fell 94 per cent to RM37.4 million in the quarter ended March 31, partly on lower prices of palm oil.

Specialty fats are used in margarine and as a fat replacement for cocoa butter in confectionary and bakeries. — Bloomberg Source : Business Times

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