KUALA LUMPUR: Diversified conglomerate PPB Group Bhd, which slipped into the red in the latest financial quarter — no thanks to the RM170 million net loss contributed by 18.6%-owned Wilmar International Ltd to its bottom line — is confident of better days ahead.
“The loss suffered by Wilmar is only a one-off setback. It has an integrated, diversified and well-established operation internationally. We are not deterred by the short-term setback of Wilmar’s operations,” said PPB managing director Lim Soon Huat.
“Our investment in Wilmar is for the longer term. By having a substantial stake in Wilmar, we are able to tap into a wider portfolio of businesses,” he told reporters during an analyst and media briefing on PPB’s first-half results on Tuesday.
“In fact, [except for Wilmar] the performance of all our business segments are still relatively steady,” said Lim, who expects these segments to continue to perform well in the remaining quarters of the year.
Nevertheless, he noted that the group’s consolidated financial results would still be contingent upon Wilmar’s business performance, given its significant contribution to the group.
And Wilmar itself is expecting to achieve a satisfactory performance for the rest of the financial year, barring unforeseen circumstances, said Lim.
Wilmar, founded in 1991 and headquartered in Singapore, is Asia’s leading agribusiness group, controlled by Malaysian tycoon Robert Kuok Hock Nien.
The agribusiness group recorded its first-ever quarterly loss of US$220 million (RM895.4 million) in the second quarter ended June 30, 2016 (2QFY16), from a net profit of US$193 million a year ago amid difficult operating conditions.
Consequently, PPB was dragged into the red with a net loss of RM78.72 million in its 2QFY16, versus a net profit of RM182.64 million in the same period last year — when it booked a profit of RM135 million from Wilmar. PPB’s revenue for the quarter, however, climbed 7.15% to RM1.06 billion from RM986.02 million.
Lim said PPB is allocating RM440 million as capital expenditure (capex) over the next two to three years to expand its businesses, which include flour milling, cinema operations and property development.
He said RM175 million has been set aside to grow the grains and agribusiness operations, primarily for its investments in Malaysia, China and Vietnam.
PPB is planning to invest RM187 million in its cinema operations, which is undertaken via 100%-owned Golden Screen Cinemas Sdn Bhd.
“We will be opening eight cinemas in five locations [in Malaysia], with 89 new screens in the next three years,” Lim said. Five will be opened next year, followed by one in 2018 and two more in 2019.
“There will be no new openings [in Malaysia] this year. But we are adding four screens to our flagship cinema at Mid Valley Megamall,” he said.
PPB now operates 446 screens in 33 locations across the country, said Lim.
He said PPB intends to open three new cinemas in Vietnam this year with its joint venture
Vietnamese partner, Galaxy Studio Joint Stock Co. “We will also open our first cinema in Cambodia with our partner there next year.”
On PPB’s property segment, Lim said the group would spend RM20 million to refurbish the Cheras Leisure Mall, including the construction of a bridge linking the mall to the proposed mass rapid transit station.
“Currently, the mall has a 90% occupancy rate. We hope to register positive rental reversions following the completion of the refurbishment,” he said. The mall has a net lettable area of 300,000 sq ft.
Lim also said the group’s development of Phase 1 of the Southern Marina Residences in Puteri Harbour, Johor — which comprises condominium units with a gross development value (GDV) of RM172 million — has registered a 40% take-up rate.
“We are still selling the remaining units, though at a slower pace,” said Lim, adding that the group received a lot of enquiries from foreigners regarding the project. “If everything goes well, we may consider launching Phase 2 of the development.”
Going forward, Lim said the group will embark on a mixed development comprising houses, a hotel and a street mall in Penang, but declined to give the project’s GDV at this juncture as the authorities have yet to give the green light for it.
Shares in PPB closed 10 sen or 0.63% higher at RM16.08 on Tuesday, with a market capitalisation of RM19.06 billion.