Chairman's Statement

Extracted from Annual Report 2020

Dear Shareholders,

Despite immense challenges during the year as a result of COVID-19, for Boustead Plantations Berhad, the unprecedented crisis put into greater perspective the importance of staying true to our core purpose of delivering value to our shareholders. Moreover, by virtue of our majority shareholders Boustead Holdings Berhad and Lembaga Tabung Angkatan Tentera, we indirectly contribute to the wellbeing of members of the Armed Forces, as well as their families.

With this purpose-driven objective, we strived to adapt, change and find ways to mitigate the impact of the pandemic on the Group. Although we faced disruptions such as foreign workers' restrictions, which led to harvesting and production hurdles and contributed to tight supply, being resilient and sustainable have always been part and parcel of our business operations.

Testament to this, even prior to the health crisis, the Group undertook a series of enhancement measures that were pivotal in steering us forward and setting the stage to embark on our reinvention plan. This, coupled with stronger demand as economies reopened, Malaysian Government mandated tax exemptions and improved crude palm oil (CPO) prices in the second half of the year led the Group back to a profitable footing at year-end.

On this note, I am pleased to pen my inaugural statement as Chairman and present Boustead Plantations Berhad's Annual Report for the financial year ended 31 December 2020.

Reinventing Boustead Plantations

With a view towards accelerating the trajectory of Boustead Plantations, we will be guided by the Boustead Group's Reinventing Boustead strategy. This will put us on a stronger and firmer footing, preparing the Group to take on new opportunities and challenges in the coming years.

To this end, we have already begun adopting the Reinventing Boustead strategy, with key senior management personnel of Boustead Holdings Berhad appointed to our Board to provide expertise and drive execution of digitalisation and technology initiatives. Focusing on new value creation within existing core businesses, reviewing business models for enhanced revenue streams, deepening talent development and rationalising non-strategic assets, we strive to future-proof the business as we evolve from being a brick-andmortar company towards more robust, digitised and sustainable operations.

Economic Landscape

With much of the world in lockdown for months in 2020, there was dampened economic activity on the back of a dramatic fall in demand and supply and a steep drop in international trade and investment, causing global gross domestic product (GDP) to contract by 3.5%.

In Malaysia, where GDP contracted by 5.6% in 2020, we faced our sharpest recession in two decades, challenged by a decline in consumer spending, fluctuations in gross exports and imports, and labour market woes. Government stimulus packages and intermittent easing of movement restrictions proved to be a muchneeded boost to help counter the far-reaching consequences of the coronavirus.

In tandem, global demand for palm oil saw a contraction of 4%, mainly due to the health crisis which generally impacted much of import and consumption of edible oils last year.

Domestic palm oil production was also adversely affected, leading to export supply issues not just as a result of labour shortage but also seasonal weather conditions, and dipped to 19.1 million tonnes in 2020 from the initial forecast of 19.4 million tonnes.

While CPO prices were erratic during the year, they rallied to a record high in December 2020, last seen eight years ago, as a result of higher exports and lower stockpiles.

The year initially also saw weaker demand from key buyers, namely India and China. While India imposed a boycott in early-2020, trade relations between India and Malaysia improved significantly in the latter months. India's purchase resumption was also the result of our discounted CPO price and Indonesia's export tax. There was also a rebound in demand from China when it resumed economic activities after the country made headway in controlling the pandemic.

In spite of challenges, the Malaysian palm oil industry generated RM72.8 billion in palm oil and palm product exports in 2020, comparatively higher than RM63.7 billion recorded in 2019.

Financial Performance

Positive impact from the Group's ongoing enhancement measures notwithstanding, the year ended with more favourable trade conditions and CPO price corrections.

Boustead Plantations' commitment to push through the trials of 2020 paid off, with the Group delivering a profit before taxation and zakat of RM83 million, compared with the previous financial year's deficit. We achieved this on the back of an improved revenue of RM763 million.

Market capitalisation was RM1.4 billion as at 31 December 2020, while net assets per share stood at RM1.15.

Dividend

Enhancing shareholder value remained a priority, even amidst the tough environment. During the year, we declared a dividend of 1 sen per share, amounting to a total pay-out of RM22 million.

Sustainability

Our commitment to producing sustainable palm oil was further intensified in the financial year under review, given the nature of the circumstances that impacted not just Boustead Plantations but the entire industry.

The Group's sustainability drive during the year under review continued to emphasise labour practices, environmental initiatives and business accountability as we took necessary measures to operate ethically and responsibly.

The standalone Sustainability Report 2020 contains an in-depth account of our collective efforts and progress made towards achieving key goals.

Human Capital

Reducing the impact of the pandemic on our workforce was a primary goal for the Group in 2020, in order to accommodate the changing needs efficiently and effectively. With flexible and remote working options to maintain a safe work environment and open communications, our aim was to help our workforce adapt to the unprecedented changes in their lives.

We continued to implement talent development initiatives and training programmes to ensure our human capital was equipped with enhanced capabilities and skill-sets to cope with changes in the work environment.

With human capital being our most vital asset, we had to reinvent how they worked in order to ensure productivity was sustained by rethinking work processes, while demonstrating flexibility and care. It was tremendously gratifying to see how our workforce adapted with agility and resilience, and through this, contributed towards propelling Boustead Plantations ahead in a tumultuous year.

OUTLOOK

We entered 2021 with economies and populations worldwide continuing to valiantly battle the pandemic. Ongoing vaccine roll-out is key to global recovery, as are government stimulus programmes and strengthened economic activity to improve livelihoods as much as the bottom-line. The unforeseen circumstances caused by the virus has rivalled any other in recent time, with a slow-paced recovery expected as we adapt and reinvent ourselves.

Palm oil continued to be the main oil produced globally in 2020, making up 31.4% or 74.1 million tonnes of total oils and fats, despite a dip from 2019's level of 76.7 million tonnes. The eight-year record-high CPO prices on the back of tight supplies in the last quarter of 2020 coupled with strengthened demand from India and China were instrumental in boosting earnings for the sector in Malaysia.

However, the first two months of 2021 witnessed a fall in export demand, primarily due to Malaysia's reinstated export tax of 8% on CPO starting 1 January as well as India's higher import duty. This was compounded by China's growing import of soybean and corn, as well as palm oil stockpiling at the end of 2020. Nevertheless, during the Palm and Lauric Oils Price Outlook Conference & Exhibition organised by Bursa Malaysia Derivatives Berhad in March 2021, industry experts forecasted that CPO prices for the year could trade between RM3,320 to RM4,113 per metric tonne as stocks are still very tight.

In addition, the phasing out of palm biodiesel by the European Union may result in a slight decline in consumption in 2021 but this is not expected to affect other palm oil-buying countries. Our mandate to produce biodiesel with 20% palm oil, or B20, has also been postponed to 2022.

Palm oil production in Malaysia is expected to increase in 2021, with the Malaysian Palm Oil Council projecting this year's output to increase to 19.6 million tonnes from 19.1 million tonnes in 2020. These indications certainly point to the sector continuing to play a significant role in the domestic economy as the fourth largest contributor.

Global consumption of oils and fats will rise as populations increase, with other vegetable oils hard-pressed to meet demand. With palm oil production set to recover in 2021, the Group intends to continue rising to the challenges by focusing on sustainable best practices, effective solutions and innovative technologies.

ACKNOWLEDGEMENT

We are grateful to the Board members for their expertise, as well as dedication and steadfastness to the Group. To the Management Team and employees, particularly our frontliners at the plantations, thank you for remaining committed to the goals of Boustead Plantations. You have demonstrated admirable resolve in the face of unprecedented hurdles, from the movement restrictions to various operational disruptions and challenging conditions that have been a mainstay of this turbulent year. With your support, the Group continued to progress sustainably and responsibly.

The year saw us bidding farewell to our former Chairman, Datuk Syed Tamim Ansari Syed Mohamed. On behalf of the Board, I would like to extend our gratitude for his commendable service to the Group. Our sincere thanks as well to former Board members, Dato' Chan Kong Yew, Dato' Sri Ghazali Mohd Ali and Dato' Haji Ahmad Tajuddin Haji Sulaiman for their significant contributions and we wish them well.

The Board also had the pleasure of welcoming Datuk Hj. Shah Headan Ayoob Hussain Shah, Encik Izaddeen Daud, Encik Fahmy Ismail and Encik Ahmad Shahredzuan Mohd Shariff as Non-Independent Non-Executive Directors, as well as Ir. Abdul Aziz Julkarnain and Dato' Indera Haji Mustaffar Kamal Haji Ab Hamid as Independent Non-Executive Directors.

We would like to record our thanks to our valued shareholders, financiers, business associates, partners, consultants and the regulatory authorities for their continued support and unwavering faith in the Group.

As we reinvent ourselves, we look forward to a stronger year ahead.

DATO' HAJI ISMAIL HAJI LASIM
Chairman
4 May 2021

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