KUALA LUMPUR (Oct 2): Given the softening of crude palm oil prices in recent years, Matang Bhd is planning to diversify its business to include durian plantation and related activities, which it believes may contribute 25% or more to the group’s net profits, moving forward.

Matang, which currently derives all its revenue from the sale of fresh fruit bunches (FFB) from its oil palm plantation activities, said the diversification is to mitigate its reliance on palm oil, diversify and expand its earnings base, going forward.

“The increasing demand for durians from overseas countries and the limited supply of durians from Malaysia is believed to have resulted in rising average export prices of durians from Malaysia over the recent years.

“The group views the proposed diversification as a viable means to provide an opportunity for diversification in [the] plantation sector, with additional streams of revenue and income with no significant risk to the group financially or otherwise,” it said in an exchange filing today.

So far, Matang has identified a 46.6 ha land within its existing oil palm estate of 1,094.15 ha in Johor for the plantation of durian. The identified area, which is currently planted with oil palm trees above 20 years, had been identified for replanting.

According to Matang, the durian business will entail amongst others, the plantation, processing, marketing, sales and distribution of the durian fruits, as well as other related downstream business activities associated with durian.

The group intends to engage third party contractors to commence earthwork and infrastructure work for the durian plantation on the identified land in the first quarter of next year.

This will be followed by planting, nursery preparation and bud grafting of the durian seedlings from the second half of 2020.

“At this juncture, the group intends to fund the aforementioned initial works through internally-generated funds, the amount of which can only be ascertained at a later stage.

“Durian trees are expected to mature and start fruiting in the fifth- to sixth year and barring unforeseen circumstances, the durian business may contribute to the future earnings of the group in 2025-2026,” it said.

Matang said it may in future, embark on additional viable ventures into the durian business organically, or through joint ventures and mergers and acquisitions, amongst other approaches.

“Notwithstanding the proposed diversification, the board will continue with the existing principal activities of [the] Matang Group in the same manner.

“Premised on the above, the board anticipates that, barring any unforeseen circumstances, the durian business may contribute 25% or more of the net profits or net assets of Matang Group, moving forward.”

Shares of Matang were unchanged at 6.5 sen today, giving it a market capitalisation of RM117.65 million.