PETALING JAYA: AE Multi Holdings Bhd is confident of returning to profitability in its next financial year ending Dec 31, 2021, driven by its new venture in the palm oil milling business, which it aims to start next year.
On June 10, AE Multi entered into a heads of agreement with Palm Pro Engineering Sdn Bhd to form a joint venture business to carry out milling and processing of oil palm fresh fruit bunches (FFB) and trading of crude palm oil (CPO) and palm kernel, among others.
The group’s financial controller, Michael Chou, remarked that the start of this year was rough due to the Covid-19 pandemic, which has affected the global economy and hampered investment, and prompted the board to look for an alternative income stream and it found an opportunity in the palm oil milling business.
“Palm oil exports from Malaysia, the world’s second-largest palm producer, surged over 50% in early June from the previous month as countries started to relax restrictions,” he said in a press release.
Chou also clarified some misconceptions regarding the new venture.
He pointed out the milling business, which is part of midstream operations, has low risk as there is no need to stock up on inventory. In addition, its revenue and profits from the processing operations are not affected by CPO prices.
“Our business model is to purchase the FFB from upstream players, process them into CPO and sell to the downstream players,” the financial controller explained.
He disclosed that Wilmar International is its largest customer and the whole process will take less than a week.
In regard to the joint venture, AE Multi said Palm Pro has completed the upgrading of its machinery for the milling operations, which has increased efficiency significantly compared with a year ago.
“With its strong earnings visibility and cash generation business model, we strongly believe this new venture will bring the group to the next level, and we are looking to position AE Multi as a dividend-play company in future.”
