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Our capital expenditure for FYE2020 totalled RM4.08 million,
with the majority allocated to the construction of the 4 new
tanks referred to earlier while the remainder was spent towards
maintenance and replacement of existing handling equipment,
plant and machinery.
Rollout of the new tank farm inventory management system
across our terminals, which commenced last year is expected
to be completed in this current financial year. The solution
will replace the existing software and will provide a common
platform for all our terminals thereby enhancing internal controls,
improving our global reporting and analysis capabilities leading
to improved productivity and cross-functional efficiencies. In
addition, our customers would be able to access real-time
information on the movement and volumes of their stocks.
Biodiesel
In its first full year of operations, Fima Biodiesel Sdn Bhd
(“FBiodiesel”) recorded revenue of RM24.58 million and
a loss before tax of RM6.47 million. As is
common with any revival of idled facilities,
the plant had been operating below
its optimal utilisation rate due to some
restarting issues. So for this current financial
year, we are stepping up efforts to improve
the plant’s operational efficiencies and
production capacity. Once this is achieved,
we would be in a position to progressively
scale up production and lock in more offtake
contracts. At the moment, production is
adequately backed by supply contracts
and toll processing arrangements with
third parties. There is also a ready market for the glycerin
generated from biodiesel production. On a separate note,
we are happy to report that the plant had obtained the
MSPO Supply Chain Certification Standard. This validates
FBiodiesel’s position as a producer of sustainable biodiesel
and reinforces our commitment to maximise economic
and environmental benefits by adopting sustainable
practices into our operations while simultaneously providing
transparency to our customers.
FBiodiesel’s capital expenditure for FYE2020 totaled
RM3.57 million, which are largely expended on repair
and maintenance of the plant and machinery as well as
upgrading of the water treatment plant.
We expect the biodiesel market to remain stable in this
current financial year as the government’s biodiesel
regulations and mandates are expected to continue
supporting demand. On the other hand, and as the
impact of Covid-19 comes into view, we are seeing some
customers deferring delivery of the contracted volumes
as many are adjusting their strategies on the back of the
supply-demand shock in the oil markets caused by the
sudden massive decline in consumption.
For the longer term, our underlying view on biodiesel
remains positive as we foresee that demand for
sustainable energy will increase. Although currently
only 4% of energy for transport, for example, comes
from renewables, the International Energy Agency
has projected that renewables are expected to grow
significantly over the next five years
1
.
Outlook
As noted earlier, the negative impact of Covid-19 on the
division has been modest in FYE2020 and our operations
have held up well in the face of the slowdown in economic
activities. We are cautiously optimistic on market
improvements in this current financial year, though we note
the potential risk posed by the pandemic outbreak on both
operations and demand for our services. A lot will depend
on the pace, timing and geographical
distribution of the market recoveries.
We are seeing continued strong demand
for storage of UCO and believe that we will
be able to retain some of those volumes
in this current financial year. Based on
current market trends, we also expect
transshipment activities to remain robust. In
contrast, demand for storage of edible oils is
anticipated to slow down on the back of the
forecasted decline in palm oil stock levels
2
.
For this current financial year, our emphasis
will be to drive organic growth through further improvements
in customer offerings and by unlocking synergies within our
existing asset portfolio.
1 Source: International Energy Agency – Renewables 2019 (Market analysis
and forecasts to 2024).
2 Stock levels of oil palm expected to be lower in the range of 1.94 million
to 2.19 million. Source : Dr Sathia Varga, Palm Oil Analytics
Bulking Division : Powering On
kumpulan Fima Berhad
(197201000167)(11817-V)
Annual Report 2020
47