Aug. 28 (Bloomberg) -- Sime Darby Bhd., the world’s biggest publicly traded oil palm planter, will spend 3 billion ringgit ($851 million) over four to five years on refineries in China to meet rising demand for cooking oil.

“China’s potential is huge,” Chairman Musa Hitam said in an interview in Kuala Lumpur last night. Food such as instant noodles, cookies and ice cream all use palm oil and “that’s the biggest potential in the long run.”

China is the world’s biggest vegetable oil buyer. Sime’s investment may boost its palm oil sales to the nation, which expects imports of the commodity to reach a record 5.3 million tons in 2009. Profit at Sime, which also sells Caterpillar Inc. earthmovers, may rise next year as output expands and prices stabilize at 2,000 to 2,200 ringgit a metric ton, Musa said.

“We expect stronger earnings ahead as global and regional economies have bottomed,” Ong Chee Ting, a plantation analyst at Maybank Investment Bank Bhd., wrote in a report today. “Crude palm oil prices have held up well,” said Ong, who rates the stock a “hold.”

Sime Darby shares, which have climbed 58 percent this year versus the benchmark index’s 34 percent gain, fell 0.1 percent to 8.23 ringgit at the 12:30 p.m. break on the stock exchange in Kuala Lumpur.

Joint Venture

Sime Darby, which controls 524,626 hectares of oil palm plantations in Malaysia and Indonesia, yesterday reported full- year earnings of 2.28 billion ringgit, down 35 percent from the previous year.

The company has set up a joint venture in China with Dongguan Sinograin Oils & Grains Co. which will focus on the refining, storage and sale of palm oils and fats, it said in November.

Palm oil has tumbled more than 45 percent since a record of 4,486 ringgit in March last year as demand for food declined amid the worldwide slowdown. Sime Darby sold less palm oil at an average price of 2,177 ringgit a ton in the financial year ended in June, compared with 2,885 ringgit a year earlier, it said yesterday.

The company is looking to raise 4.5 billion ringgit this financial year, most likely via Islamic bonds, to fund capital spending of as much as 7 billion ringgit, Chief Executive Officer Ahmad Zubir Murshid said at a briefing on the financial results yesterday. The plantation sector will probably get most of the proceeds, he said.

To contact the reporters on this story: Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.net; Liza Lin in Kuala Lumpur at llin15@bloomberg.netRanjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net;

Last Updated: August 28, 2009 01:10 EDT