CEO's Review

Extracted from Annual Report 2020

Dear Shareholders,

The year 2020 was significantly impacted by the global COVID-19 crisis, bringing about complex challenges that affected the plantation sector. This included various pressures affecting palm oil demand, as well as operational disruptions caused by movement restrictions and measures implemented to contain the spread of the virus.

Despite these unprecedented circumstances, crude palm oil (CPO) prices rallied in the second half of the year as palm oil demand improved in key markets, with lockdowns easing and economies beginning to see a gradual recovery. In addition to our steadfast focus on continuous enhancement, this enabled the Group to navigate through this tough environment to strengthen efficiencies across our operations and drive earnings growth.

Enhancement Measures

In an unprecedented year, our ongoing enhancement measures to improve the Group's operational and financial efficiencies made good progress. This included organisational restructuring, prudent cost management and rationalising of under-performing assets.

The Group stayed its course in navigating through the ripple effects caused by COVID-19 by demonstrating unwavering commitment and focus in our push for long-term sustainable growth that will result in significant socio-economic benefits. Following were the highlights of the year.

Operational efficiency & productivity enhancements:

  • The consolidation of 45 estates and 10 palm oil mills into 10 Strategic Business Units (SBU) to operate as profit centres. Each SBU has a clear channel of command, responsibility and accountability, with a designated Head.
  • With the support of centralised specialist services, all units can now formulate smart, workable and pragmatic action plans with timeline and avenues for revision and yield improving initiatives.
  • Landbank rebalancing which comprised the excising of non-performing and poor performing land plots in the estates to deploy available resources to more productive areas in the estates.
  • Soil fertility enhancement and water conservation techniques including proper frond stacking, rain harvesting and establishment of nephrolepis biserrata as ground cover for overall yield improvement.
  • Mill efficiency enhancement to ensure machinery and tools are compatible to allow interoperability at all our mills nationwide.
  • Disruption to labour supply due to COVID-19 related movement restrictions significantly impacted the sector and the Group, raising the importance of mechanised operations. We continued to introduce new mechanisation initiatives as well as streamline and refine existing initiatives at selected operations including in-field crop evacuation, external crop transporting, in-field infrastructure, mature weeding, manuring, pest management and effluent treatment plant.
  • Accelerated replanting programme to manage imbalance in the age profile distribution of palms.

Financial efficiency enhancements:

  • Centralisation of procurement and vendor management that have resulted in better control of our procurement processes.
  • Increasing transparency of the Group’s tender process with the support of a tender committee set up to oversee and review all major purchases.

Reinventing Boustead Plantations

The Group's enhancement measures clearly resulted in tangible improvements across the business. Buoyed by the success we have achieved thus far and fully prepared for more changes in 2021 in keeping with the recently introduced Reinventing Boustead strategy, we will continue to persevere with confidence and enthusiasm as we future-proof our palm oil business.

As part of this strategy, we have put in place a Plantation Performance Improvement Program. A key feature of this comprises utilising artificial intelligence and big data for precision farming to subsequently improve yield. Along with this, we aim to unlock further value by tapping on digitalisation and advanced technologies, re-assessing our business models, cultivating a high-performance talent pool and rationalising non-core assets. These measures will allow us to strengthen earnings potential and drive sustainable growth moving forward.

Financial Performance

Against a difficult backdrop, Boustead Plantations Berhad delivered an improved performance for the year ended 31 December 2020, registering a profit before taxation and zakat of RM83 million, compared with a deficit in the previous financial year owing to a one-off impairment. Revenue grew by 32% to RM763 million, while profit from operations increased to RM139 million. Underpinning these solid results was the increase in palm product prices, on the back of tight palm oil inventories.

The Group's borrowings for the year reduced to RM1.3 billion, while our gearing ratio remained manageable at 0.5 times.

Even in a turbulent year, we stayed true to our commitment to enhance value for our shareholders. In line with this, we declared total dividends of 1.0 sen per share for the financial year, representing a cumulative payout of RM22 million.

Earnings per share closed at 1.9 sen, while net assets per share stood at RM1.15. Market capitalisation came in at RM1.4 billion as at 31 December 2020.


The pandemic caused significant economic upheaval across the world, resulting in one of the most volatile years for commodity prices in recent history. While vegetable oil prices started the year on an encouraging note, this deteriorated as the COVID-19 outbreak reached global proportions, with prices dropping to a low in May 2020.

Nevertheless, as pandemic containment measures bore results, prices persevered and recovered on a pick-up in demand in several key markets, further supported by lower-than-expected production of many commodities. Prices for most vegetable oils saw an uptick from August 2020 onwards, due to adverse weather conditions, the shortfall in production and higher than anticipated consumption of vegetable oils in various industries, including food, oleo chemicals and energy.

The rebound was particularly evident in the final quarter of 2020, as CPO prices peaked to their highest in eight years, following an increase in crop concerns in South America, a sharp decline in palm oil inventories primarily in Malaysia, as well as labour strikes in Argentina. This was compounded by existing factors, such as record-high soybean imports from China and an acute supply shortage of sunflower seed products. Production and consumption of biodiesel also exceeded expectations, with a comparatively high intake of oils and fats adding to the significant global production deficit.

As a result, the Group recorded a higher average CPO price of RM2,811 per metric tonne (MT) in 2020, up by 32% from the previous financial year. Average palm kernel price was similarly higher by 31% at RM1,628 per MT.


The Group's combined landbank stood at 98,200 hectares (ha) in 2020, with a total of 45 estates. This consisted of 19 estates in Peninsular Malaysia, 20 estates in Sabah and six estates in Sarawak, as well as 10 palm oil mills. Total area under cultivation was 73,500 ha, with mature and immature oil palm areas comprising 66,800 ha and 6,700 ha respectively.

During the year, we invested a total of RM46 million in capital expenditure. With a view towards rebalancing the age distribution of our oil palms, we embarked on our 25-Year Replanting Programme (RP25) setting forth a blueprint with clearly defined short and long-term targets. This saw a total of RM6 million utilised for the replanting of 2,000 ha in 2020, comprising 3% of our total planted area.

Moving forward, to further optimise our oil palm age profile, we are working towards our target of replanting a maximum of 7% of the Group's total planted area on an annual basis. This will also allow us to undertake corrective action for improvement of in-field infrastructure for mechanisation, as well as enabling more efficient management for the overall replanting process. We have new replanting specifications in place to ensure optimum conditions to best facilitate our operations. This includes terrace design, a road grid system, mechanically assisted in-field collection paths and planting platforms to suit different terrains.

Apart from this, in line with our commitment to minimising our environmental footprint and in compliance with the Environment Quality (Clean Air) Regulation 2014 by the Department of Environment (DOE), we successfully completed the installation of a wet scrubber system and four units of a dust particulate trapping system, known as the electrostatic precipitator (ESP) system in our palm oil mills.

Total fresh fruit bunches (FFB) production for the year increased by 2% to 1,001,557 MT. Average yield was higher at 15.0 MT per ha, primarily owing to better production of our estates in Peninsular Malaysia. This was further supported by increased availability of crop as a result of successful rehabilitation activities undertaken at the Tawai Business Unit. The establishment of Business Unit Heads also allowed for better focus on smaller units and helped to expedite the decision-making process. Besides this, we recorded improved operational efficiency and implemented a more flexible minimum ripeness standard to reduce wastage.

Our palm oil mills maintained a total processing capacity of 450 MT of FFB per hour. This enabled us to process 1,152,763 MT FFB during the year, up by 8% from the previous year, largely attributable to additional crop from the Boustead Tawai estates acquired in 2019, as well as higher yields from mature areas. Approximately 83% of total FFB processed was from our own estates.

CPO production rose by 5% to 243,080 MT while palm kernel production also increased by 4% to 49,211 MT, on the back of higher FFB processed. Average oil extraction rate (OER) saw a slight decline to 21.1%, mainly due to unfavourable weather conditions towards the fourth quarter of 2020, coupled with low volume of FFB for Sarawak mills. Nevertheless, OER was still higher than the MPOB's national average of 19.9%. Average kernel extraction rate (KER) was lower at 4.3% against last year's average of 4.4%.

Estate operation costs stood at RM298 per MT while milling costs averaged at RM80 per MT FFB, lower compared to last year due to higher FFB processed and enhanced operational efficiencies. However, cost of CPO production increased to RM1,649 per MT, arising from the full-year effect of depreciation particularly for the newly acquired Tawai Business Unit, low mill utilisation for the Trong, Loagan Bunut, Nak and Kanowit mills, as well as the lower OER and KER.

Harnessing greater efficiencies and reducing manpower needs via mechanisation remains a key priority for the Group. This became all the more pressing during the pandemic, as movement restrictions and tightened border controls caused labour supply disruptions.

In line with our ongoing enhancement measures, we focused on streamlining, realigning and refining our existing mechanisation system, honing in on harvesting operations, in-field crop evacuation and external crop transport. To this end, we introduced the strategic D-9 harvesting system to assist our operating units as a centralised harvesting process to accommodate mechanisation implementation. With the D-9 harvesting system, we are able to increase efficiencies for FFB harvesting and evacuation processes.

We carried out various mechanised activities across our operations during the year. This included our palm circle cleaning programme utilising the Zenoah Air Blower which keeps palm circles free of debris, helping to minimise in-field loose fruit losses. To date, we have deployed a total of 122 units, undertaking palm base sanitisation activities every quarter at 36 estates.

To facilitate FFB collection, we utilise the bin system across eight estates, comprising 15,800 ha. The system has improved overall FFB quality and crop freshness, as well as minimising crop bruising. In addition, via our mechanical platform collection, 126 mini tractor grabbers are utilised across 33,200 ha and mini tractors for in-field FFB collection for over 4,300 ha.

Plans are in place to introduce our bin system across 4,800 ha at our Sungai Jernih Business Unit, in line with our zero-dumping policy. To improve in-field FFB collection, we are expanding the use of mini tractor grabbers to enhance the ratio of machinery utilisation. To reach an optimum ratio, we are currently establishing the necessary infrastructure for machine accessibility for 1,200 ha, including path maintenance and creating connecting terraces.

We further expanded our mechanisation efforts by installing four units of new semi-mechanised FM3 machinery at our Sungai Jernih Business Unit. This allows us to apply fertiliser in both mature and immature areas, as the FM3 machinery is capable of traversing different types of terrain.

In addition, we carried out digital mapping via Unmanned Aerial Vehicles, namely Phantom IV Pro drones. This enables us to efficiently manage estate operations and harvesting areas, in addition to facilitating planning for our replanting programme.

As a responsible plantation company committed to sustainable palm oil production, we are focused on attaining Roundtable on Sustainable Palm Oil (RSPO) and Malaysian Sustainable Palm Oil (MSPO) certifications. Demonstrating our progress on this front, as at 31 December 2020, six of our 10 palm oil mills are RSPO-certified, while all 10 of our palm oil mills and supply estates are MSPO-certified. Our Tawai Business Unit in Telupid, Sabah was the latest to receive MSPO certification in the fourth quarter of 2020, in spite of challenges during the MCO.

In addition, we have undergone re-certification and upgrading audits for ISO 9001:2015 certification by SIRIM QAS International at nine of our mills, with our tenth mill, Boustead Tawai Palm Oil Mill, on track for certification in 2021.

Peninsular Malaysia

Our Peninsular Malaysia operations span a total area of 24,100 ha, comprising 21,000 ha mature oil palm areas. In 2020, FFB production increased to 390,775 MT, due to improvement in upkeep of estates, particularly pruning and circle sanitation activities which resulted in better crop recovery.

Average yield per ha was also higher at 18.6 tonnes FFB. This was attributable to improved production at the Telok Sengat Business Unit in the Southern region and Sungai Jernih Business Unit in the East Coast region, with an average yield of 21.2 MT per ha and 19.1 MT per ha respectively. The Trong Business Unit in the Northern region recorded an average yield of 15.0 MT per ha. Leading in terms of performance were the Bebar and Telok Sengat estates, which attained average yields of 27.1 MT per ha and 24.1 MT per ha respectively.

We recorded a slightly lower average OER of 21.4%, compared with last year's average of 21.8%. Nonetheless, we surpassed MPOB's Peninsular Malaysia average of 19.7%. Our Sungai Jernih Palm Oil Mill recorded the highest OER within the Group at 22.7%.


With 35,500 ha of mature oil palm areas out of a total 39,100 ha, the Group's estates in Sabah recorded an FFB output of 506,254 MT for the year, up from the previous year. This was primarily due to additional FFB contribution from the Boustead Tawai estates.

The region registered a better average FFB yield of 14.2 MT as compared to 13.9 MT per ha in 2019. The higher crop yield was mainly due to positive progress achieved through rehabilitation efforts undertaken at the Boustead Pertama and Tawai estates to enhance accessibility, in tandem with continuous efforts to improve crop recovery at all estates. The Aerial view of Ladang Tabung Tentera Sabah Estate, Lahad Datu, Sabah. Group also embarked on our RP25 land rebalancing exercise in early 2020 to excise areas which have restricted accessibility due to challenging conditions such as very steep terrain and broken terraces.

Our Ladang Tabung Tentera Sabah Estate achieved a yield of 21.7 MT per ha, marking the highest yield for the region. The young mature areas also performed well, particularly the Sungai Segamaha, Sutera and Resort estates.

In terms of our mills, Sabah registered an average OER of 21.3%, compared with 21.9% last year. However, our Sabah mills outperformed the MPOB average OER of 20.7%. Once again, our Segaria Palm Oil Mill recorded the highest OER for the region at 22.4%.


Our operations in Sarawak comprise a total area of 10,300 ha, of which all are mature areas. FFB output for our Sarawak estates was 104,528 MT, a decline from the previous year. The lower yield was primarily due to an acute shortage of skilled harvesters for tall palms and excessive palm heights which were a deterrent for potential harvesters, as well as challenging terrain, poor field infrastructure and cessation of fertiliser application. Inclement weather, which at times hampered crop evacuation, also impacted our results in Sarawak.

Meanwhile, average FFB yield increased to 10.2 MT per ha, driven by better stability of labour, especially harvesters at the Kanowit-Tinjar Business Unit, which led to improved productivity. This was supported by an aerial mapping census conducted for all estates in the Kanowit-Tinjar Business Unit, utilising a drone to demarcate challenging terrain and areas unsafe for harvesting and upkeep operations. As a result of this census, a total of 2,470 ha was excised from the cultivation area across several estates. Our highest yield for Sarawak was recorded by Bawan Estate at 13.6 MT per ha.

Our Sarawak mills recorded an average OER of 19.1%, down from the previous year's 20.2% and lower than the Sarawak MPOB average OER of 19.6%. This was mainly attributable to the significantly low FFB processed by our Loagan Bunut Palm Oil Mill, arising from aged palms.


Leveraging on over 30 years of expertise via our research and development (R&D) arm, Applied Agricultural Resources Sdn Bhd, we are single-minded in our ongoing drive to utilise only the best planting materials and continue incorporating sustainable practices across our operations to drive yields and productivity.

We remain focused on seeking out technological improvements and digital solutions in agriculture to help address industry challenges. This includes scarcity of plantation workers, rising costs of production, environmental concerns and pressures from yield-reducing factors, including pests and disease infestation as well as potential crop losses.

With this in view, in collaboration with a local company and with the support of the Malaysia Digital Economy Corporation under the Ministry of Communications and Multimedia, we developed Oryctes, a cutting-edge agricultural spot-spraying drone which sprays insecticides autonomously onto targeted oil palm spears. Combining precision spot-spraying technology and an advanced aerial mapping system powered by artificial intelligence, undertaking spraying activities with the autonomous drone is an ideal and effective pest control solution, with a 96% accuracy rate. Apart from reducing manual labour, this technology allows us to minimise pesticide exposure to our employees, along with providing opportunities for a skilled local workforce to operate the drone.

As we progress towards Agriculture 4.0, we are exploring innovative technologies that are more labour-friendly, with higher productivity and lower operational costs. To this end, we jointly developed the Verion Smart Fertiliser Spreader (VSFS). The VSFS is equipped with a self-generating ‘as-applied' map to ensure that each palm receives precisely the right amount of fertiliser. This results in higher fertiliser use efficiency, improved palm nutritional status, lower runoff and reduced leaching losses, helping to mitigate environmental impact.

The jointly developed VSFS has been further improved with customisable options for the machine and the fertiliser delivery system. With this, labour productivity can increase by as much as 17 times compared to manual fertiliser application.

Apart from this, to support labour productivity, we are making good progress in breeding planting materials with desirable secondary traits. The latest AA Hybrida LS (long stalk), has a long bunch-stalk (peduncle) to facilitate harvesting with motorised cutters in addition to having better fruit set. As a result of our dedicated drive, we successfully increased the yield of AA Hybrida LS to a level comparable with our current AA Hybrida 1 and AA Hybrida 1S (semi-clonal) planting materials. In addition, utilising stateof- the-art biotechnology techniques, we identified 1,973 oil palm loci anchored by 800 single nucleotide polymorphism markers, that can be applied to detect long stalk traits in our collection of breeding materials for propagation.

Through our core nutrition R&D programme, our ongoing efforts to produce superior beneficial microbes for commercialisation are gaining momentum. Once completed, this will provide additional nutritional benefits for oil palms, stimulate plant growth, protect plants from diseases and restore soil health, subsequently allowing our plantations to produce higher sustainable yields with less agrochemical usage.


Responsible, sustainable growth remains at the core of the Group, clearly reflected by our economic, environmental and social commitments. In tandem with this, we ensure that our sustainability objectives are strongly aligned with the interests of our diverse stakeholders.

In our third dedicated Sustainability Report, we showcase our focused efforts across the Group's operations, tracking our progress as we pursue our vision to achieve a more sustainable future for the plantation sector.


As we embark on a new year, the volatile environment brought about by COVID-19 is expected to persist. While there have been positive developments with the commencement of vaccination programmes, COVID-19 cases have seen spikes in several countries leading to lockdowns being enforced once again, which have caused further economic uncertainties.

Despite these disruptions, CPO prices have remained on an uptrend, picking up in early-2021 to cross the RM4,000 per MT threshold, their highest level since March 2008, indicative of the less than expected production and dwindling stocks. Poor weather conditions in Southeast Asia from late-2020 into the early part of 2021 significantly impacted production, leading to the low supply.

Although CPO prices are being shored up by tight palm oil inventories currently, palm oil production is expected to see a recovery by 4.4 million tonnes in the year ahead. This will have a moderating effect on prices should this materialise. We are also mindful of India's price sensitivities and growing oilseed crops, and China's increasing soybean imports which may hamper demand for palm oil.

Nonetheless, challenges such as labour shortages due to border closures continue to weigh down production. Indonesia also sharply raised its taxes and export levies for palm oil in November 2020 to meet its ambitious biodiesel programme, which could subsequently prompt key importing countries to turn to Malaysia for their palm oil supply.

To strengthen our long-term prospects, we remain focused on continuous enhancement. Following the successful completion of the initial phases of our turnaround plan which entailed creating a more robust organisational structure and streamlining our business units, we are moving ahead with our sustainable replanting programme, RP25.

For the year ahead, we have allocated a capital and replanting expenditure of RM115 million. This will go towards replanting approximately 2,600 ha of land and for the upkeep of immature areas, as well as for the installation of four additional units of the dust particulate trapping system, ESP, in our palm oil mills. This is being carried out progressively and is on track to be completed by end-2021, in line with the DOE's Environment Quality (Clean Air) Regulation 2014.

Without a doubt, the year ahead will bring its share of challenges. What is important is that we stand firm and sustain the momentum we have built to propel the Group towards realising our aspirations for sustainable long-term growth, in strong alignment with the Reinventing Boustead strategy.

Chief Executive Officer
4 May 2021

Boustead Plantations Berhad
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