LIAP #13: REPLANTING 10,000 ACRES OF OIL PALM

 



Replanting 10,000 acres of oil palm trees may sound ambitious, but for a plantation company with 25 years of experience, it’s not entirely new terrain. The company has seasoned managers and skilled staff to handle the operational aspects of such a project. What truly concerns the Board of Directors (BOD), however, are the financial implications and the business risks—both during the replanting phase and in the years that follow.

In this case, replanting was not just an operational task, but a full-fledged business project. The first step was to prepare a comprehensive project brief to seek the formal approval of the CEO and the BOD.

A well-prepared project brief answers three critical questions: the why, the how, and the what of the project.

Why replant now?
The trees in question were over 15 years old—well past their peak production years. Ideally, replanting should have been done in phases (e.g., 3,000 to 5,000 acres at a time) to minimize disruptions to cash flow and sales revenue. But due to various operational and strategic factors, the company decided to undertake replanting on a larger scale.

How will the project be executed and financed?
The estimated cost of replanting was RM25 million. We had to evaluate whether the company had sufficient internal funds or whether borrowing would be necessary. This led to further analysis: What was the outlook for crude palm oil (CPO) prices? At the time, CPO was trading at RM1,200 per tonne, with production costs around RM600 per tonne. If financing was required, we had to be certain the company could service the loan, even under less favorable market conditions.

What will be done on the ground?
The scope of work at the estate level included land clearing, seedling preparation, planting, fertilization, and infrastructure upgrades. All of this had to be costed, scheduled, and monitored carefully.

To strengthen the company’s cash position and reduce reliance on borrowing, I proposed exploring a parallel property development project on underutilized land. The idea was to unlock value from non-income-generating assets and boost the group’s cash flow and turnover during the replanting period.

Our project proposal was backed by solid financial projections and risk analysis. The BOD approved it. I was pleased to see the project outperform our expectations—especially when CPO prices rose to nearly RM1,600 per tonne just as the new palms began to bear fruit.

In business, success often comes down to managing risk and timing. No matter how good your plan is, timing is the one variable you can’t control. During the COVID-19 pandemic, many hotels with decades of successful operations had to shut down almost overnight. That’s the reality of business.

The lesson here? Always plan thoroughly, manage risks wisely, and remain adaptable. And most importantly, surround yourself with a good team. You can’t predict the future—but you can prepare for it.

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