Chairman's Statement

Extracted from Annual Report 2017

Dear Shareholder,

This has been an outstanding year for Boustead Plantations Berhad. A solid growth strategy complemented by an able leadership team allowed us to continue delivering results, despite weakening crude palm oil prices, adverse weather conditions and market headwinds. In line with this, I am pleased to note that Boustead Plantations successfully achieved record earnings of RM733 million in 2017.

Economic Landscape

From a global perspective, economic growth has begun to stabilise, albeit at a moderate rate. In tandem, Malaysia's economy has also continued to strengthen, bolstered by a gradual improvement in the commodities sector.

Nonetheless, the palm oil sector faced a number of challenges throughout the year. The resolution passed by the European Union (EU) in April 2017, which aims to phase out the use of palm oil in EU biofuel programmes by 2020, undoubtedly had a strong negative impact on market sentiment.

Malaysian crude palm oil (CPO) production surged in the first half of the year, putting pressure on CPO prices. This was compounded by significant soybean production in South America as well as the United States.

In the second half of 2017, CPO prices rebounded briefly in September due to lower than anticipated CPO production. However, a sharp increase in import duties on edible oils announced by the Government of India coupled with unexpectedly strong CPO output in the last quarter of 2017 and high palm oil inventories put downward pressure on CPO prices at year-end.

Financial Performance

For the year under review, the Group recorded an impressive profit of RM733 million, an increase from the previous year's profit of RM276 million. This marked a substantial leap of 165%, mainly driven by gains on the disposal of lands as well as improved operational profit.

We remain focused on expanding our plantation land alongside optimising the effective usage of our land bank. Following the disposal of 678 hectares (ha) of land with high development potential combined with the proposed disposal of a further 139 ha of prime land, the Group intends to reinvest in a substantial acquisition of 11,600 ha of plantation land. This strategy to expand our land bank is expected to be completed by the second quarter of 2018. We are confident this will contribute to our earnings growth in the long run.

As a reflection of the Group's sterling performance, investors have clearly found value in Boustead Plantations. To attest to this, our market capitalisation stood at RM2.6 billion as at 31 December 2017. Earnings per share improved to 41.6 sen and net assets per share also saw a significant jump to RM1.59.

Dividend

The Group is highly committed towards fulfilling our mandate in delivering shareholder value.

Dividend for the year stood at 19.5 sen per share, amounting to a 11.8% yield based on the closing stock price for the financial year ended 31 December 2017. To date, dividends of 15.5 sen per share inclusive of a special dividend of 7 sen per share have been paid out to shareholders. The remaining 4 sen will be paid on 27 March 2018 to shareholders on the register as at 14 March 2018.

We are also pleased to reward our valued shareholders further with two bonus shares out of every five held, amounting to a total of 640 million new bonus shares to be credited as fully paid up, subject to shareholders' approval.

Sustainability

We have strengthened our resolve in terms of sustainability for the year 2017. Our philosophy to operate in a responsible manner from an economic, environmental and social standpoint has become all the more evident in the programmes and efforts that we undertake.

Towards this end, we have implemented a variety of initiatives to integrate sustainability across the value chain of our operations. These initiatives are presented in detail within our Sustainability Report, with a further review of the measures and activities undertaken during the year.

Mindful of our objective to be a conscientious Group in the plantations sector, we successfully enhanced our Sustainability Handbook, which provides an in-depth view regarding our principles, policies and plans as a sustainable organisation. As a leading oil palm plantations company in Malaysia, we hope to set new standards for the sector and our nation to create a truly sustainable palm oil industry

HUMAN CAPITAL

The Group is cognisant of the fact that our success in delivering results and achieving our targets is closely linked to the depth of our talent pool. A driven, committed and skilled workforce is essential for any entity to thrive. On our part, the Group looks to develop and strengthen our human capital through a series of talent development programmes, equipping them with the necessary resources for career advancement.

In a similar vein, the Group has also undertaken multiple ongoing employee engagement initiatives throughout the year, in order to foster a conducive and positive work environment. We are conscious that the fight for talent will become ever more evident and as such we have increased our efforts in terms of engagement and alignment with our talent pool.

OUTLOOK

While the Malaysian economy is forecast to grow in the coming year, the strengthening value of the Ringgit is likely to have an impact on exports. With rising palm oil production outpacing projected consumption globally, pressure on CPO prices is also expected to build-up.

In addition, the expansion of soybean acreage across North and South America represents a notable challenge to the palm oil sector. Demand for soybean continues to accelerate, particularly in China, which may potentially limit market penetration for palm oil exports to the region.

On the upside, the Malaysian Government's decision to suspend export taxes on CPO for the first three months of 2018 has certainly had a positive impact, as export demand has increased. We applaud the Government's proactive efforts to boost our nation’s competitiveness in the sector across the region.

The Group is equally heartened by the joint efforts of the Governments of Malaysia and Indonesia against the EU resolution to curb palm oil imports. It is our hope that their actions will allow for a positive solution to address the issue at hand. In the meantime, we remain conscious of subdued sentiments prevailing in the sector. Global trade policies will certainly continue to influence price volatility and commodity trade flows.

The La Nina phenomenon, associated with flooding to oil palm plantations alongside extreme heat and dryness to grain areas in South America, may lend a boost to CPO prices. However, this is predicted to have a shorter and weaker pattern compared to past occurrences. In addition, any new changes in biofuel policy and significant offtake of biodiesel, particularly in Indonesia, could potentially boost CPO prices.

Without a doubt, the year ahead offers its share of obstacles for the sector, domestically as well as abroad. Regardless, we are confident that our strong fundamentals and emphasis on delivering results will enable the Group to remain resilient and weather such challenges.

ACKNOWLEDGEMENT

This has indeed been a fruitful year, in no small part due to our Board members as well as the management team, who have been steadfast in their dedication towards leading the Group onward. The loyalty and drive of our employees have also been crucial towards the Group's ability to continuously deliver results.

On behalf of Boustead Plantations Berhad, I would also like to convey our gratitude and appreciation to our valued shareholders, financiers, business associates, consultants and regulatory bodies for your confidence and support.

GEN. TAN SRI DATO' MOHD GHAZALI HJ. CHE MAT (R)
Chairman
1 March 2018

Boustead Plantations Berhad
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