Kwantas Corporation Berhad’s (KCB) rating has been reaffirmed at A+ID reflecting the integrated nature of the Group’s palm oil operations; its expanding activities namely, the establishments of operations in China (Guangzhou and Zhangjiagang); the commercialization of renewable bio-mass energy; and the Group’s strengthening financial profile.

KCB Group’s credit strength is drawn from the integrated nature of its operations, which ranges from palm oil plantation, milling, kernel crushing, palm oil refinery, bulking installation and bio-mass energy. Sales of refinery products together with milling made up over 90% of its total revenue. Revenue had surpassed the RM1 billion ringgit mark for the second consecutive year owing partly to sustained high crude palm oil prices as a result of increased demand for edible oils vis-a-vis lower output of soyabean oil.

Within the Lahad Datu area, KCB’s refinery plant possesses the highest installed capacity of 2400 metric tonne (MT) per day. The average FFB output of the Group’s 8,478 hectares of palm oil plantations in Lahad Datu has generally outperformed the industry, reflecting the high proportion of matured/prime age trees in its estates. KCB has two palm oil mills located in Lahad Datu, Sabah with a total processing capacity of 180 MT per hour. The mills’ average extraction rate of 20.3% (FY2003: 21.3%) was higher than that of the industry’s average.

In addition to the main palm-oil based activities, the Group has its own bulking installation facility for storage, handling and transportation/exporting refined products to overseas destinations. The electricity produced by the Group’s 9.8 mega watt bio-mass power plant is utilized internally with a view to sell part of the surplus bio-mass energy to external parties at an appropriate time in the future. For its overseas operations, the on-going expansion in China would be independently funded by the respective operating subsidiaries. This would eventually witness substantial contribution to the Group’s bottomline, moving forward. KCB’s shortening plant and refinery soap noodle plant in China have commenced operations and will contribute to the Group’s earnings in fiscal year 2005.

KCB’s profitability measures in FY2004 continued to improve, aided by the higher average palm product prices coupled with improvement in FFB yield. Operating margin exhibited an upward trend since FY2002 and the Group is projecting the trend to continue in the near to medium term. Debt service capacity remained strong while its debt leverage is manageable, averaging at 0.7 times over the past four fiscal years.