Chairman's Statement

Extracted from Annual Report 2018

Dear Shareholder,

It has certainly been a difficult period for the plantation industry and Boustead Plantations Berhad bore the brunt of this with the substantial reduction in crude palm oil prices coupled with new accounting requirements under the Malaysian Financial Reporting Standards (MFRS) framework, the Group's performance was adversely impacted in 2018. Despite the tough environment, we are resolute in our aim to enhance prospects for the Group moving forward, pursuing our strategic plans for sustainable growth.

Economic Landscape

The global economy experienced slower expansion during the year under review, with moderate growth in both advanced and emerging markets. Against these global headwinds, the Malaysian economy saw positive growth on the back of domestic demand and private sector expenditure.

However, commodity markets were plagued by challenging conditions in 2018. The trade dispute between China and the US, which intensified in July 2018 with China imposing a tax on US exports, including soybeans, contributed to the volatility of commodity prices and heavily influenced the direction of soybean and crude palm oil (CPO) prices during the year.

Higher import duties levied by the Indian government in March 2018 greatly impacted palm oil exports to the country. Depreciating currencies of key importing countries such as India and China further limited their purchasing power.

Palm oil stockpiles increased in the second half of the year as a result of weaker demand and stronger CPO production in Indonesia. Coupled with rising palm oil import volumes from Indonesia, this saw Malaysian palm oil stocks hit a record high by the end of 2018.

Financial Performance

The Group posted a deficit of RM51 million for the year under review. This was primarily as a result of significantly lower palm product prices which impacted our bottom line. High start-up expenses for the acquisition of 11,579 hectares of land in Sabah and the rehabilitation and improvements for these estates also contributed to the deficit.

Revenue for the year was RM584 million. Market capitalisation stood at RM1.7 billion as at 31 December 2018 and net assets per share came in at RM1.21.

Dividend

Whatever challenges come our way, enhancing value for our shareholders is always a top priority for the Group.

Testament to this, dividend paid for the year was 7 sen per share, reflecting a 9.3% yield based on the closing stock price for the financial year ended 31 December 2018.

Sustainability

Sustainability continues to be a driving force for the Group, underpinning our business strategy and operations. As a leader in Malaysia's plantation sector, we are committed to leading by example, strengthening our sustainability commitments under our economic, environmental and social pillars.

This is reflected in the many programmes and measures we have in place to instil sustainable practices across the Group. A key indicator of this is our ongoing efforts to attain Roundtable on Sustainable Palm Oil and Malaysian Sustainable Palm Oil certification for all our operating units, which we continue to make positive headway on.

Reaffirming our commitment to sustainability, we are pleased to present our first dedicated Sustainability Report accompanying this Annual Report. Our progress and achievements for the year are encompassed in this separate report, demonstrating our dedication to responsible, conscientious growth.

HUMAN CAPITAL

In this competitive operating environment, the need for skilled, capable talent is greater than ever. Our talent pool is a mainstay of our success, allowing us to realise our goals and objectives.

To this end, our comprehensive talent development programmes along with employee engagement initiatives enable us to cultivate a driven and highly competent workforce. This in turn contributes to our performance and supports the Group's long-term aspirations.

OUTLOOK

Going into 2019, we expect to see pick up in demand for palm oil in the first half of the year on the back of seasonal factors such as the Chinese New Year and Aidilfitri celebrations. However, additional palm oil demand is needed to absorb the current high palm oil inventories and support global CPO prices. Malaysia and Indonesia's biodiesel mandate could encourage global demand for palm oil over the long term, although without sufficient support or subsidies, biodiesel production volume could be lower than expected.

Much of the CPO market outlook hinges upon the US-China trade talks. Should tensions ease, there may still be a longterm impact on the US soybean market, with some potential exports permanently lost to Brazil, where farmers have boosted production to take advantage of the trade rift.

Nevertheless, as long as the 25% import tariff on US soybeans remains in place, China is unlikely to return as a significant buyer and this will considerably reduce soybean crushing activities and soybean oil supply in China. This could also have repercussions on other agricultural markets, as US farmers could make a significant switch from soybeans to corn for 2019/20 plantings, unless the US government aid package for farmers continues. If this materialises, this would certainly be supportive towards the CPO market.

In a positive development, India has cut import duties on crude and refined palm oil from Malaysia and Indonesia to comply with preferential trade agreements with Southeast Asian nations, which took effect 1 January 2019. This could increase demand for palm oil in India and help shore up palm product prices.

In terms of weather patterns, there are conflicting predictions regarding potential El Nino conditions. Certain weather agencies have forecasted a strong likelihood of the El Nino phenomenon persisting until the spring of 2019, while others have predicted neutral conditions which could possibly see El Nino resurfacing in the later part of 2019. It remains to be seen how this will manifest, however, a strong El Nino effect will result in a severe dry spell to Southeast Asian countries, which could cause supply shocks on palm oil production in Indonesia and Malaysia.

While there are certainly challenges ahead, we are confident that we will be able to overcome these given our proven track record. Building on our strengths, we are optimistic that the Group's long-term prospects remain positive.

ACKNOWLEDGEMENT

My sincere appreciation to our Board members for guiding the Group through this turbulent year. Our gratitude as well to our capable management team and employees for their continued dedication to the success of the Group.

We would also like to express our deepest appreciation to our former Board member and Vice Chairman, YBhg. Tan Sri Dato' Seri Lodin Wok Kamaruddin. His vision, years of dedication and deep commitment were integral to the growth of the Group. We wish him all the best moving forward.

Our sincere thanks to our valued shareholders, financiers, business associates, consultants and the regulatory authorities, for their ongoing support.

GEN. TAN SRI DATO' MOHD GHAZALI HJ. CHE MAT (R)
Chairman
11 March 2019

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