Integrated Report 2023 Boustead Plantations Berhad
GROWING GREENER An evocative cover that captures the Company’s sustainable vision and aspirations through a full image-based rendition. A magazine effect is conveyed with the creative positioning of the theme within the image of lush trees. The sunrise reflects a new phase of growth in the Company as it focuses on new horizons of achievement.
Inside This Report 004 OVERVIEW 024 KEY MESSAGES 034 VALUE CREATION 044 MANAGEMENT DISCUSSION AND ANALYSIS 072 LEADERSHIP 096 GOVERNANCE 132 SUSTAINABILITY STATEMENT 181 FINANCIAL STATEMENTS
Our Capitals Material Matters NAVIGATION ICONS ABOUT THIS REPORT INTEGRATED REPORTING APPROACH This Integrated Report is intended to provide stakeholders of Boustead Plantations Berhad (BPlant or the Company and its subsidiaries collectively referred to as the Group) with a greater depth of understanding of our performance, direction as well as material assessment and risks for the financial year under review ended 31 December 2023. It is important for stakeholders to be aware that, at the point of preparing this Integrated Report, BPlant was delisted from the Main Market of Bursa Malaysia Securities Berhad (Bursa Malaysia) on 23 January 2024. First introduced in 2021, the Integrated Report continues to holistically showcase our transformation efforts, while reflecting the International Integrated Reporting Council’s guidelines. Our objective remains unchanged: to communicate effectively and transparently with our stakeholders about the ways in which our strategies, values, and governance have contributed to the short, medium, and long-term value of the Group. Our commitment to prioritising information accessibility remains a key focus in our reporting. In line with this, we have incorporated the use of various icons and links to provide stakeholders and readers with greater convenience and ease when navigating the report. SCOPE AND BOUNDARY In tandem with the reporting frameworks outlined on page 3, the Integrated Report herein provides information on both financial and non-financial performances, as well as key activities and events involving BPlant and subsidiaries in which we have a majority shareholding and exert significant influence. The reporting period spans from 1 January to 31 December 2023. MATERIALITY In assessing matters deemed material to BPlant, the Directors and Management carefully review stakeholders’ expectations, needs and concerns, taking into consideration BPlant’s key strategies as well as internal and external factors. This report contains the identified material issues, which are crucial to our value creation and ability to fulfil our core purpose. Financial Capital Intellectual Capital Social and Relationship Capital Air, Water, Waste and Effluent Management Manufactured Capital Traceability and Supply Chain Human Capital Natural Capital Data Privacy and Security High Conservation Value Areas and Biodiversity Energy Efficiency and Climate Resilience Occupational Safety and Health Labour Practices and Standards Social Welfare and Community Investment Diversity and Inclusion Corporate Governance and Anti-Corruption Business Continuity Research and Development and Yield Improvement Creating Business Opportunities Boustead Plantations Berhad 002
Stakeholders Risks Sustainable Development Goals FORWARD-LOOKING STATEMENTS This Integrated Report may include forward-looking statements which express the Group’s expectations of its performance in the future. These statements however are based on current conditions, which may be impacted by numerous factors and differ substantially from the outcomes articulated herewith. AUDITED FINANCIAL STATEMENT Audited Financial Statement of BPlant for the financial year ended 31 December 2023 together with the Directors’ Report and accompanying statements were issued on 5 April 2024 and approved during Annual General Meeting on 7 June 2024. DIRECTORS’ RESPONSIBILITY STATEMENT This Integrated Report provides a fair representation of the Group’s performance over the fiscal year 2023 and crucial material matters related to our value creation processes. In line with the Board of Directors’ responsibility to uphold the integrity of the BPlant Integrated Report 2023, this report was approved by the Board on 12 July 2024. REPORTING FRAMEWORKS This report has been guided by the principles and standards outlined in the following: • International Integrated Reporting Framework by the International Integrated Reporting Council • Main Market Listing Requirements of Bursa Malaysia • Malaysian Code on Corporate Governance 2021 issued by the Securities Commission Malaysia • Companies Act 2016 • Malaysian Financial Reporting Standards • International Financial Reporting Standards The Sustainability Statement has been guided by the: • Main Market Listing Requirements of Bursa Malaysia • Bursa Malaysia Sustainability Reporting Guide • Global Reporting Initiative Standards Human Capital Risk Financial Risk Industry Bodies/ Associations Legal and Compliance Risk Employees Operational Productivity Risk Strategic Risk Government and Regulatory Bodies Local Communities and Smallholders CROSS REFERENCES You can find this report and other relevant information about BPlant at our corporate website: https://www.bousteadplantations.com.my/ Financial Community Customers Civil Society Organisations Business Partners Integrated Report 2023 003
OVERVIEW SECTION 1 Vision | Mission | Values 006 Who We Are 007 Key Highlights 008 Our Achievements 010 What We Do 012 Group Structure 014 Where We Operate 016 Indices Representation | Our Certifications | Our Collaborations 018 Our Competitive Advantage 019 Integrated Value Chain 020 Corporate Milestones 022 Aerial view of Telok Sengat Estate, Johor
Towards increased mechanisation in our operations
MISSION To remain committed in our focus on research and development and implement breakthroughs at all levels and processes to maintain our technological edge. To achieve greater economies of scale by seizing opportunities to expand our landbank in Malaysia and the region. To enhance our efficiency and productivity via effective cost management and excellent managerial and agronomic practices to maximise productivity per unit area. To provide optimal coaching and training to all levels of employees, the primary engine that drives our business. To explore new business opportunities that will yield the highest returns. VALUES We are committed towards environmental protection and conservation of biodiversity. We will conduct ourselves with the highest standards of integrity and honesty. We strive to be open-minded and receptive to new and diverse ideas, driven by information technology and innovation. We are committed to being a preferred provider by meeting, if not surpassing the quality and standards set by our customers. We are dedicated to the mutually beneficial relationship with our suppliers and contractors, who are our partners. We acknowledge and respect local cultures and values surrounding our operations. We are committed to ensuring sustainable long-term growth and the highest returns for our shareholders by steadfastly being productive and competitive. VISION Boustead Plantations Berhad (BPlant or the Company and its subsidiaries collectively referred to as the Group) adopted a strategy to steer the Group not only towards optimising efficiency, productivity and profitability but also commitment towards environmental protection and conservation of biodiversity. OVERVIEW OF BOUSTEAD PLANTATIONS BERHAD Boustead Plantations Berhad 006
TOTAL ASSETS RM4.0 billion (2022: RM4.2 billion) PROFIT FOR THE YEAR RM36 million (2022: RM589 million) EBITDA RM231 million (2022: RM425 million) CAPITAL EXPENDITURE RM153 million (2022: RM86 million) WHO WE ARE With over a 100 years of plantations expertise, BPlant has developed into one of Malaysia’s most reputable upstream oil palm plantation companies, employing 6,568 individuals nationwide. Following its relisting on the Main Market of Bursa Malaysia Securities Berhad (Bursa Malaysia) on 26 June 2014, BPlant’s market capitalisation stood at RM3.5 billion as of 31 December 2023. On 15 November 2023, the immediate holding company of BPlant changed from Boustead Holdings Berhad (BHB) to Lembaga Tabung Angkatan Tentera (LTAT). Subsequently, BPlant was delisted on 23 January 2024, following the acquisition by LTAT. PRESENCE Peninsular Malaysia, Sabah and Sarawak REVENUE RM852 million (2022: RM1.2 billion) PROFIT BEFORE TAXATION AND ZAKAT RM71 million (2022: RM729 million) A worker collecting loose fruits at Bebar Estate, Pahang Integrated Report 2023 007
FINANCIAL HIGHLIGHTS SUSTAINABILITY HIGHLIGHTS 38,640 hectares (ha) ROUNDTABLE ON SUSTAINABLE PALM OIL (RSPO) CERTIFIED AREA (2022: 38,640 ha) 140,815 metric tonne (MT) TOTAL CERTIFIED SUSTAINABLE PALM OIL (CSPO) RSPO PRODUCED (2022: 126,723 MT) a. 152 kilo tCO2e (GHG Protocol*) b. 1,299 kilo tCO2e (RSPO PalmGHG Calculator) TOTAL GREENHOUSE GAS EMISSIONS (2022: 1,364 kilo tCO2e) Note: *Effective from 2023, we quantified and categorised GHG emissions into Scope 1, 2 and 3 in line with the GHG Protocol 1,424,220 MT BIOMASS PRODUCED (2022: 1,350,796 MT) 19,810 MWh RENEWABLE ENERGY GENERATED (2022: 22,877 MWh) 0 OCCUPATIONAL FATALITY (2022: 0) 11.76 LOST TIME INJURY FREQUENCY RATE (2022: 6.73) 24,871 MT TOTAL CERTIFIED SUSTAINABLE PALM KERNEL (CSPK) RSPO PRODUCED (2022: 21,301 MT) KEY HIGHLIGHTS 10 palm oil mills, 42 estates MALAYSIAN SUSTAINABLE PALM OIL (MSPO) CERTIFIED AREA (2022: 10 palm oil mills, 42 estates) NET ASSETS PER SHARE 130 sen (2022: 133 sen) EARNINGS PER SHARE 1.9 sen (2022: 26.6 sen) RETURN ON EQUITY 1.4% (2022: 20.9%) GEARING RATIO 0.3 times (2022: 0.3 times) BORROWINGS RM774 million (2022: RM857 million) DIVIDEND RM22.4 million (2022: RM324 million) Boustead Plantations Berhad 008
BUSINESS HIGHLIGHTS Average Yield 13.9 MT per ha (2022: 13.0 MT per ha) All palm oil mills are ISO 9001:2015 certified Drive digital transformation and explore new technologies Obtained ISO 37001:2016 Anti Bribery Management Systems (ABMS) Certification BPlant SPOTT rating has elevated to 65.6%, marking an improvement from 61.2% in 2022 Oil Extraction Rate (OER) improved to 20.8% (2022: 20.6%) FTSE4Good Score improved from 3.1 in 2022 to 3.4 in 2023 Highest Returns to Shareholders Over Three Years (The Edge Billion Ringgit Club Awards 2023) 009 Integrated Report 2023
OUR ACHIEVEMENTS 2021 52.9% 0.4% 2022 61.2% 8.3% 2023 65.6% 4.4% BPLANT SPOTT PERFORMANCE AWARDS AND RECOGNITION Highest Returns to Shareholders Over Three Years The Edge Billion Ringgit Club Awards 2023 Boustead Plantations Berhad 010
View of Segaria Estate, Sabah
what we do With 42 operational oil palm plantation estates, comprising 16 in Peninsular Malaysia and 26 in Sabah and Sarawak, BPlant is primarily engaged in the upstream portion of the crude palm oil market. Additionally, 10 palm oil mills are managed by BPlant concurrently throughout Malaysia: three in Peninsular Malaysia, five in Sabah and two in Sarawak. Of our 97,500 ha landbank, 74% or 72,200 ha are used for oil palm agriculture. This is made up of 23,400 ha in Peninsular Malaysia, 38,500 ha in Sabah, and 10,300 ha in Sarawak. Our thriving plantation operations over the years have benefitted from the finest oil palm planting materials and sustainable agricultural practices thanks to our research and development (R&D) arm, Applied Agricultural Resources Sdn Bhd (AAR). Additionally, BPlant through its subsidiary Boustead Life Sciences Research Sdn Bhd (BLSR) is gearing into the commercial production of non-oil palm planting material via Plant Tissue Culture technology. This strategic shift aims to contribute to the broader effort in ensuring a stable and secure food supply. PLANTATION PENINSULAR PLANTATION SABAH PLANTATION SARAWAK RESEARCH AND DEVELOPMENT Boustead Plantations Berhad 012
Our Peninsular Malaysia operations comprise of 20,200 ha (2022: 20,700 ha) of mature oil palm areas. FRESH FRUIT BUNCHES (FFB) PRODUCTION 351,111 MT (2022: 366,724 MT) OER 21.2% (2022: 20.8%) AVERAGE YIELD 17.4 MT per ha (2022: 17.3 MT per ha) Our Sabah operations comprise of 29,300 ha (2022: 34,600 ha) of mature oil palm areas. FFB PRODUCTION 420,684 MT (2022: 432,404 MT) OER 20.9% (2022: 21.0%) AVERAGE YIELD 14.0 MT per ha (2022: 12.2 MT per ha) Our Sarawak operations comprise of 10,300 ha (2022: 10,300 ha) of mature oil palm areas. FFB PRODUCTION 60,021 MT (2022: 72,159 MT) OER 17.8% (2022: 18.1%) AVERAGE YIELD 6.1 MT per ha (2022: 7.0 MT per ha) In order to maximise the yield, extraction rate and profitability of our estates, we continuously strive to plant only the best planting materials and implement the most sustainable planting practices. This objective is realised by capitalising on the vast knowledge and experience accumulated over 35 years by our R&D arm, AAR. We also rely on scientific research and expert advice from agronomists, pathologists, entomologists, microbiologists, specialists in remote sensing and geographic information systems, data analysts, information technology and other university professionals to further support our sustainable practices. In response to the rising global concerns about food insecurity, our subsidiary, BLSR is venturing into the commercialisation of planting materials crops propagated such as banana, MD2 pineapple and ginger via Plant Tissue Culture technology, a move that will also bolster the Group’s resilience and sustainability. Integrated Report 2023 013
group structure BOUNTY CROP SDN BHD 100% BOUSTEAD RIMBA NILAI SDN BHD 100% BOUSTEAD AGRO PLANTATIONS SDN BHD 100% BOUSTEAD GRADIENT SDN BHD 100% BOUSTEAD AGENCY AND CONSULTANCY SERVICES SDN BHD 100% BOUSTEAD PELITA KANOWIT OIL MILL SDN BHD 60% BOUSTEAD TRUNKLINE SDN BHD 100% BOUSTEAD SOLANDRA SDN BHD 100% BOUSTEAD PLANTATIONS BERHAD Wholly-owned subsidiary Non wholly-owned subsidiary Associate Boustead Plantations Berhad 014
BOUSTEAD TELOK SENGAT SDN BHD 100% APPLIED AGRICULTURAL RESOURCES SDN BHD 50% ADVANCED AGRIECOLOGICAL RESEARCH SDN BHD 100% BOUSTEAD ESTATES AGENCY SDN BHD 100% BOUSTEAD EMASTULIN SDN BHD 100% BOUSTEAD ELDRED SDN BHD 100% BOUSTEAD LIFE SCIENCES RESEARCH SDN BHD 100% BOUSTEAD PELITA TINJAR SDN BHD 60% BOUSTEAD PELITA KANOWIT SDN BHD 60% Integrated Report 2023 015
NO. OF PALM OIL MILLS 10 NO. OF OPERATING ESTATES 42 Planted Areas 72,200 ha Matured Areas 59,800 ha Total Landbank 97,500 ha where we operate Boustead Plantations Berhad 016
PENINSULAR MALAYSIA 1. Batu Pekaka 2. Kuala Muda 3. Stothard 4. Kedah Oil Palms 5. Bukit Mertajam 6. Taiping Rubber Plantation 7. Malaya 8. Lepan Kabu 9. Solandra 10. LTT-Terengganu 11. Sungai Jernih 12. Bebar 13. Balau (Not in operation) 14. Bekoh 15. Eldred 16. Chamek 17. Telok Sengat LEGEND Estate Estate with Palm Oil Mill Tissue culture laboratory SABAH AND SARAWAK 18. Sungai Sungai 1 19. Sungai Sungai 2 20. Sungai Sungai 3 21. Kawananan 22. Lembah Paitan 23. Nak 24. Resort 25. Sutera 26. LTT-Sabah 27. Segaria 28. Sungai Segamaha 29. Bukit Segamaha 30. G&G 31. Boustead Pertama 32. Boustead Ruku Ruku 33. Boustead Sapa Payau 34. Boustead Sungai Lokan 35. Boustead Lokan Baru 36. Boustead Tawai 1 37. Boustead Tawai 2 38. Loagan Bunut 39. Jih 40. Pedai 41. Kelimut 42. Bawan 43. Mapai Integrated Report 2023 017
INDICES REPRESENTATION RSPO Certification MSPO Certification OUR CERTIFICATIONS ISO 9001:2015 Certification ISO 37001:2016 Certification OUR COLLABORATIONS Smallholders Vendors Bursa Malaysia Outgrowers Local Major Crude Palm Oil (CPO) Refineries and Palm Kernel (PK) Crusher Boustead Plantations Berhad 018
OUR COMPETITIVE ADVANTAGE 1 2 3 4 5 Over 100 Years of Plantations Industry Experience Efficiency in Financial Management Unlocking Value by tapping digitalisation and advanced technologies Strong Sustainability and Social Responsibility Practices Cultivating a High-Performance Talent Pool Integrated Report 2023 019
INTEGRATED VALUE CHAIN FFB HARVESTING 01 All available FFB are harvested at optimum ripeness standards. 02 Harvesting activities are conducted at appropriate intervals to ensure consistently high yields of FFB MT per ha. 03 All relevant staff and machinery are fully utilised for fieldwork. 04 FFB are realigned for evacuation. 01 FFB and loose fruits are mechanically transferred with the Badang or Mini Tractor Grabber or manually moved using wheelbarrows to roadside FFB collection platforms or into bins or trailers. 02 FFB and loose fruits are realigned for evacuation. FFB EVACUATION Boustead Plantations Berhad 020
01 Streamlined and coordinated internal and external transportation systems enable ideal efficiency and productivity to be achieved. 02 Prompt delivery of FFB to palm oil mills ensures optimal extraction and minimises free fatty acid formation, preventing significant loss of yield. 01 CPO and PK products are derived by carefully processing FFB and loose fruits with highest OER at the palm oil mill. 01 RSPO and MSPO certifications and other pertinent standards are stringently upheld to ensure our CPO and PK products meet consumer demand and expectations. FFB TRANSPORTATION FFB PROCESSING ON-PAR CPO AND PK PRODUCTS Integrated Report 2023 021
CORPORATE MILESTONES 1910 The Barlow family was involved in large scale agriculture, primarily rubber and palm oil, in Malaya 1900s 1960 Boustead & Company was split into Boustead Plc in London and Boustead Holdings Berhad (BHB), which held the assets in Singapore and Malaysia 1960s 1946 Incorporated as a public limited company under the name of The Kuala Sidim Rubber Company Limited (KSRCL) 1940s to 1950s 1828 Boustead & Company was established in Singapore 1800s 1970 KSRCB began acquiring landbank in Sabah 1970s 1973 KSRCB was listed on Bursa Malaysia and Singapore Stock Exchange 1973 KSRCB established Highland Research Unit Sdn Bhd (HRU), a joint venture agricultural research entity 1973 BHB was split into BHB, which held the Malaysia assets and Taiping Singapore Pte Ltd, which held the Singapore, Hong Kong and Brunei assets 1990 Delisted from the Singapore Stock Exchange 1993 Became the principal listed vehicle for BHB Group’s plantation interests 1990s 2003 Delisted from Bursa Malaysia following takeover offer by BHB 2004 Changed name to Boustead Plantations Berhad (BPlant) 2000s 2007 Al-Hadharah Boustead REIT listed on the Main Market of Bursa Malaysia 1994 Changed name to Kuala Sidim Berhad 1994 Began expanding oil palm business in Sarawak 1994 Expanded directly-owned plantation interests 27 January Completed disposal of Kulai Young land 1 March Initiated move towards certification of ISO 37001:2016 Anti-Bribery Management Systems for oil palm estate and palm oil mill operations, as well as corporate services 2022 29 March Signing of Document of Understanding with Cargill Palm Products Sdn Bhd for the long-term supply of high-quality and sustainable crude palm oil 20 December Completion of the condition precedent for the partial disposal of land in Bukit Mertajam Estate 13 December Listed on FTSE4Good Bursa Malaysia Index and FTSE4Good Bursa Malaysia Shariah Index 25 August Boustead Tawai Palm Oil Mill awarded with ISO 9001:2015, completing the certification for all 10 palm oil mills 7 June Entered into a RM45 million green financing agreement with China Construction Bank (Malaysia) Berhad for replanting programme Boustead Plantations Berhad 022
1966 Changed name to The Kuala Sidim Rubber Company Berhad (KSRCB) 1969 BBEA became a substantial shareholder of KSRCB and assumed role of managing agent 1966 Barlow Boustead Estates Agency Limited (BBEA) was established through a merger between BHB and Barlow & Company 1976 BHB became a whollyowned Malaysian entity with Lembaga Tabung Angkatan Tentera (LTAT) as its shareholder 1982 BHB acquired all interest in BBEA. Renamed it to Boustead Estates Agency Sdn Bhd (BEA) 1980s 1977 Nationalisation of BBEA with shares purchased by BHB, FELDA, Lembaga Tabung Haji and LTAT 1986 Co-founded Applied Agricultural Resources Sdn Bhd, an agricultural research and advisory services unit 1987 Disposed entire interest in HRU 31 December Registered a record-high revenue of RM1.2 billion in financial year 2022, highest since relisting on Bursa Malaysia in 2014 24 August LTAT, BHB and Kuala Lumpur Kepong Berhad signed a tripartite Strategic Collaboration Agreement (SCA) to initiate a mandatory takeover offer for BPlant 2023 25 August Signed Memorandum of Agreement between Boustead Life Sciences Research Sdn Bhd and Malaysian Agricultural Research and Development Institute on tissue culture research 4 October Mutually terminated tripartite SCA for the mandatory takeover offer for BPlant 23 October Recognised by The Edge Billion Ringgit Club Awards 2023 for ‘Highest Returns to Shareholders Over Three Years’ 10 November LTAT initiated unconditional takeover offer on BPlant 18 December FTSE4Good score improved from 3.1 in 2022 to 3.4 in 2023 22 December ESG-based SPOTT rating for 2023 assessment improved to 65.6% 1960 KSRCL began converting rubber crops to oil palm 2013 Acquired BEA from BHB 2014 Relisting of BPlant on Bursa Malaysia 2017 Disposal of 678 ha Malakoff Estate, Penang 2013 Acquired 2,400 ha of oil palm plantations land in Lahad Datu, Sabah 2013 Privatisation of Al-Hadharah Boustead REIT 2010s to 2021s 2018 Acquired 11,579 ha of oil palm plantation land in Labuk and Sugut, Sabah 2019 Disposal of 139 ha Malakoff Estate, Penang 2019 Acquired 4,415 ha of palm plantation land and palm oil mill in Beluran, Kinabatangan and Labuk and Sugut, Sabah 2021 Reinventing Boustead Strategy was introduced 2021 BPlant achieved a record-high revenue of above RM1.0 billion, the first since relisting on Bursa Malaysia in 2014 Integrated Report 2023 023
KEY MESSAGES SECTION 2 Chairman’s Statement 026 Chief Executive Officer’s Statement 028 Chief Financial Officer’s Statement 032 View of biogas plant at Telok Sengat Palm Oil Mill, Johor
Towards replanting for greater productivity
CHAIRMAN’S STATEMENT Dear Shareholder, In 2023, Boustead Plantations Berhad (BPlant or the Company and its subsidiaries collectively referred to as the Group), navigated a series of challenges within the oil palm industry. These included lower demand from certain markets, uncertainties of vegetable oil prices further impacted by geopolitical disruptions, unfavourable global weather patterns, and supply disruptions due to labour shortage. Despite these obstacles, the Group managed to deliver moderate earnings, supported by favourable oil extraction rates and yields. Consistent with our strategic response to these challenges, we recognised the urgent need to bolster operational resilience and seize opportunities that enhance our long-term position as a prominent producer of palm oil. Consequently, a pivotal decision was made to privatise BPlant, leading to its delisting from Bursa Malaysia Securities Berhad on 23 January 2024. BPlant is currently a subsidiary of Lembaga Tabung Angkatan Tentera. Stepping into the role of Chairman at BPlant is a great honour and a deep responsibility to undertake. On this note, I am pleased to pen my inaugural statement and present the Group’s Integrated Report for the financial year ended 31 December 2023. The content of the Integrated Report reflects advancements in global reporting standards and the Integrated Reporting Framework. OUR OPERATING LANDSCAPE In the aftermath of robust economic recovery in 2022, the global gross domestic growth (GDP) is expected to shift from 3.5% to 3.0% in 2023 according to the International Monetary Fund. Malaysia’s economy remained resilient with a GDP of 3.7% last year, slightly lower than the projected 4.0%. An integral pillar of the country’s economic development, palm oil’s supply and demand dynamics continued to seek balance after the record-breaking prices of 2022. The financial year 2023 witnessed a normalisation of crude palm oil (CPO) prices, with a notable decline throughout the year. The industry also contended with a reduction in planted area, partly due to ongoing replanting activities, while persistent labour shortages continued to pose challenges. Ongoing Government initiatives, however, resulted in some improvement in labour supply during the year, which was a contributing factor to the national production of CPO rising marginally to 18.6 million metric tonne (MT) from 18.5 million MT in 2022. Additionally, there was an upward trend in the national yield of fresh fruit bunches (FFB) and the national oil extraction rate (OER), increasing to 15.8 MT per hectare (ha) and 19.9% compared with 15.5 MT per ha and 19.7% in 2022, respectively. On the downside, palm oil export was affected by lower demand from major markets, dipping to 15.1 million MT last year from 15.7 million MT in 2022. India maintained its lead as Malaysia’s largest export market, followed by China, the European Union and four other key markets that comprised 54% of the country’s total palm oil exports in 2023. Lieutenant General Datuk Ahmad Norihan Jalal (R) Chairman Boustead Plantations Berhad 026
CPO prices experienced some volatility during the year due to higher palm oil stockpiles, negative growth in planted areas, lower-priced sunflower oil as the impact of the Ukraine-Russia conflict lessened, coupled with Indonesia’s temporary lifting of its export ban along with increased domestic use of biodiesel. Consequently, the Malaysian Palm Oil Board’s average price in 2023 fell to RM3,810 per MT compared with 2022’s RM5,088 per MT. FINANCIAL PERFORMANCE The Group recorded a revenue of RM852 million, a 28% decrease from RM1.2 billion in the previous year. With profit before taxation and zakat of RM71 million in 2023, it was a 90% reduction from the previous corresponding period’s RM729 million. The Group’s results were hampered by the decline in palm product prices. However, this effect was partially alleviated by lower operating costs. Total dividend payout was 1.0 sen per share for the year ended 31 December 2023. SUSTAINING ESG With global environmental concerns on the rise, sustainability is critical for the long-term success of the sector. BPlant remains committed to delivering improved operational efficiencies and profit by upholding our Environmental, Social and Governance (ESG) Strategy Framework. Tackling critical environmental challenges such as deforestation, biodiversity loss, and greenhouse gas emissions is fundamental to how we operate. We prioritise BPlant’s sustainability values across our entire supply chain, aligning our efforts with national goals to transition towards net zero emissions. This holistic approach ensures that our sustainability practices are not only maintained but are continually advanced in line with global standards and expectations. Internally, heightening integrity and corporate governance through responsible anti-corruption and bribery initiatives remained crucial to our sustainability goals. Robust internal controls, in addition to awareness and training programmes, were utilised to maintain a culture that understands and complies with the Group’s policies, procedures, and regulatory standards. During the fiscal year, BPlant successfully obtained the ISO 37001:2016 Anti-Bribery Management Systems Certification, underscoring the efficiency of our governance practices. To further enhance our operations, the Group continued to elevate standards in labour relations with ongoing internal measures and upskilling activities implemented to empower our workforce. We place a strong emphasis on safety and wellbeing, ensuring that these priorities are integrated throughout our operations. Our active participation in Government initiatives contributed towards improving BPlant’s foreign worker supply in an industry that currently still relies on skilled foreign workers, even as we strive to make inroads in plantation mechanisation and automation, aligning with modern technological advancements to future-proof our business. With transparency and integrity in mind, we used the Global Reporting Initiative standards as a guide for the preparation of the Integrated Report 2023. To ensure our global ranking and management of ESG risks remain on track, we utilised the internationally-recognised Sustainability Policy Transparency Toolkit and the Roundtable on Sustainable Palm Oil PalmGHG calculator and GHG Protocol, among other assessment tools. OUTLOOK BPlant’s commitment to transforming into a resilient, technology-centric operation is unwavering as we enter the new financial year. Our emphasis will be centred on enhancing yield rates and maintaining the momentum of our replanting efforts through our 25-Year Replanting Programme, alongside boosting operational efficiencies with the support of the ongoing Plantations Performance Improvement Programme 2.0 aimed at refining business processes Group-wide. The new year will not be without its challenges, including temperamental weather, more stringent ESG policies and rising business cost. However, we are cautiously optimistic on delivering stronger growth. This confidence is bolstered by anticipated increases in both national CPO production and demand from key export markets, alongside improvements in labour supply thanks to supportive Government initiatives. With a proactive approach and an emphasis on sustainability and technological integration, we are focused on making steady progress as we move forward in 2024 and beyond. ACKNOWLEDGEMENT On behalf of the Board, I would like to convey our deep appreciation for the tireless contributions and guidance of the late Maj. Gen. Dato’ Seri Haji Khairuddin Haji Abu Bakar (R) J.P. during his tenure as a Director of the Company from 10 April 2014 to 7 February 2024. I am pleased to welcome to the Board, Mohammad Ashraf Md. Radzi as a Non-Independent Non-Executive Director and Jasmaliha Jaafar as an Alternate Director to Mohammad Ashraf Md. Radzi. A warm welcome as well to our new Chief Executive Officer (CEO), Datuk Zulkarnain Md Eusope. I would also like to thank Fahmy Ismail for his contributions during his tenure as Director and Acting CEO. In addition, I would also like to take this opportunity to express our humble gratitude to our valued shareholders who have been loyal supporters of BPlant. Thank you for the trust and faith you have placed in us. Furthermore, the dedication and commitment of our employees and senior management have been instrumental to the ongoing transformation of the Group. Our sincere appreciation is extended to our external stakeholders, including our financiers, business associates and partners, as well as the regulatory authorities for their support. Integrated Report 2023 027
Datuk Zulkarnain Md Eusope Chief Executive Officer TOTAL LIABILITIES RM1.2 billion (2022: RM1.4 billion) Total Assets RM4.0 billion (2022: RM4.2 billion) TOTAL EQUITY RM2.8 billion (2022: RM2.9 billion) CHIEF EXECUTIVE OFFICER’S STATEMENT Dear Shareholder, Faced with disruptive global market conditions and fluctuating crude palm oil (CPO) prices, Boustead Plantations Berhad (BPlant) concluded the 2023 financial year on a more modest note in comparison with the previous year. Boustead Plantations Berhad 028
Towards resilient and sustainable growth The Group’s performance was impacted by normalising CPO prices after their historic highs in the previous year, coupled with sluggish global demand, with the average price shrinking to RM3,874 per metric tonne (MT) in 2023 compared with 2022’s RM5,066 per MT. The Group’s average palm kernel prices reduced significantly by RM1,053 per MT to RM2,103 per MT from RM3,156 per MT in 2022. The downward trend in palm product prices led to the Group’s revenue moving downward by 28% or RM325 million to RM852 million, while profit before taxation and zakat stood at RM71 million. The Group’s agile and stringent management of operational costs slightly offset the effect of the unfavourable pricing. We were able to maintain our gearing ratio at 0.3 times and our earnings per share stood at 1.9 sen, while our market capitalisation increased to RM3.5 billion as at 31 December 2023. On 23 January 2024, BPlant was delisted from Bursa Malaysia Securities Berhad following the privatisation by Lembaga Tabung Angkatan Tentera. OPERATIONAL LANDSCAPE The Group continued to pursue efforts to maximise productivity at our 42 plantation estates across Peninsular Malaysia, Sabah and Sarawak, comprising a planted landbank of 72,200 hectares (ha). In 2023, we focused on palm age profile management and boosting yield and oil extraction rate (OER), in tandem with our long-term plan to efficiently mitigate the impact of maturing palms. Our adherence to good agricultural practices coupled with the successful implementation of our Group-wide Plantations Performance Improvement Programme (PPIP 2.0) as well as strategic replanting efforts, have allowed us to bolster our productivity, driving our OER above the national average. The PPIP 2.0 has been pivotal in refining our operations and leveraging technology to progressively shore up the overall yield profile of our estates. This was further complemented by alleviated labour woes. These efforts enabled us to successfully reduced the underperforming fields from 185 to 129 fields. Yield disparities in Peninsular Malaysia improved from 37% to 50%, while the Sabah region showed a slight decline in performance, from 62% to 55%. During the year under review, we observed an uplift in yield from 13.0 MT per ha to 13.9 MT per ha, primarily due to heightened replanting in Sabah, which also nudged our OER from 20.6% to 20.8%. Preserved pocket jungle in the vicinity of Telok Sengat Estate, Johor Integrated Report 2023 029
CHIEF EXECUTIVE OFFICER’S STATEMENT We made further strides in our 25-Year Replanting Programme (RP25), designed to manage the age profile of our estates and enhance field infrastructure. Through RP25 we have replanted 5,400 ha of our estates to-date, with 21,200 ha of our oil palm trees at the prime age of 10 to 20 years old in 2023. We maintained the utilisation of Zip Zap battery-operated cutters for the harvesting of fresh fruit bunches, while closely monitoring the Mechanical Assisted Infield Collection for crop evacuation. Ongoing soil fertility enhancements also saw the utilisation of 187,912 MT of empty fruit bunches for mulching. Data-driven insights are integral to our plantation management. Led by Applied Agricultural Resources Sdn Bhd (AAR), our research and development initiatives continue to leverage advanced tissue culture methods to optimise our resources and minimise environmental impact. The resulting higher oil-yielding palms from cultivation and deployment of high-quality DxP seeds have seen oil production increase by up to 20%, compared with more traditional planting materials. In addition, we have identified four potential endophytic nitrogen-fixing (NF) bacteria capable of colonising oil palm tissues, which offer a higher nitrogen fixation rate compared to soil-borne NF bacteria. Results from nursery trials demonstrated a significant 25% reduction in the usage of inorganic fertilisers. Alongside this, our subsidiary, Boustead Life Sciences Research Sdn Bhd (BLSR), is venturing into commercialisation of planting materials via tissue culture technology of other crops such as banana, MD2 pineapple and ginger. During the year, BLSR also entered into an agreement with the Malaysian Agricultural Research and Development Institute on tissue culture research. We expect the efforts of AAR and BLSR to potentially enable new engines of growth for the long-term sustainability of the Group. Embracing the Fourth Industrial Revolution, we have harnessed artificial intelligence and advanced technologies to spur gains in yield and crop resilience. Drone technology has been instrumental in terrain and crop mapping, and we have adopted proactive measures against extreme weather, such as rainwater harvesting and efficient irrigation, fortifying us against unpredictable weather patterns. Although advancements in mechanisation and automation in harvesting will eventually allow us to reduce the involvement of foreign labour, the current reality is that sufficient labour supply is fundamental to the progress of the oil palm industry. To this end, the Group was able to increase our foreign labour force to 3,798 in 2023 from 2,777 in 2022, primarily due to Government initiatives and BPlant’s human resource programmes. We are pleased to report that our Malaysian workforce has expanded to 2,770 from 2,377 in 2022. BPlant steadfastly upholds stringent Environmental, Social and Governance (ESG) standards. Our commitment spans from reducing our carbon footprint and conserving biodiversity to nurturing the well-being of our workforce and their families, thereby contributing positively to the socio-economic fabric of our communities. Through rigorous adherence to international sustainability standards and proactive stakeholder engagements, we are not only enhancing our conservation efforts but also future-proofing our operations. Aerial view of Sungai Jernih Palm Oil Mill, Pahang Boustead Plantations Berhad 030
OUTLOOK As BPlant enters the 2024 fiscal year as a delisted entity, we adopt a cautiously optimistic outlook. Our focus will be on tightening cost efficiencies and implementing strategic operational decisions to unlock emerging prospects that enable us to strengthen as a resilient palm oil producer. In sync with global demands for robust ESG practices, operating responsibly will continue to drive the Group and our entire supply chain as we move forward. We anticipate continued industry challenges, including volatile CPO prices, the management of ageing palms and its accompanying issues of rising cost of fertiliser, labour, and diesel, and the surge in soybean oil supply. Additionally, unpredictable weather patterns, such as monsoons, and geopolitical tensions could pose further complications, alongside uncertainties of global demand. Nevertheless, conditions in our favour include stable palm oil production, narrowing of the labour supply shortage as foreign workers return to Malaysia largely thanks to ongoing Government initiatives, and the rising domestic reliance on B35 biodiesel in Indonesia which could curb their exports. In addition, we are optimistic that demand from India and China, our primary trade partners, will continue to grow. BPlant’s ongoing transformation will be buoyed by strategic measures that include making substantial headway in our yield and oil extraction in prime planted areas and reducing operational costs. Replanting under RP25 will progress with the use of higher-yielding semi-clonal and bi-clonal planting materials and choice superior palms for cloning. This will be amid the ongoing implementation of mechanisation and digitalisation, including the utilisation of drone technology for precise mapping of terrain and elevation, to further boost our operations. As we forge ahead in 2024, we remain committed to harnessing our strategic roadmap and positive market factors to continue our transformation as a leading participant in an industry that is a key driver in our nation’s economic and sustainability development. ACKNOWLEDGEMENT In closing, I extend my deepest gratitude to our members of the Board, senior management and dedicated employees, whose resilience and commitment have been pivotal in our journey in 2023. Our sincere appreciation is also extended to the late Maj. Gen. Dato’ Seri Haji Khairuddin Haji Abu Bakar (R) J.P. for his distinguished service and guidance as Director of the Company from 10 April 2014 to 7 February 2024. I would also like to express appreciation to my predecessor, Fahmy Ismail, for his stewardship in managing the Group as well as former Chief Financial Officer, Mohamad Mahazir Mustaffa, for his long-term dedication and contributions to BPlant. To our valued shareholders, we deeply appreciate the steadfast support and trust you have placed in BPlant over the years. Although we have transitioned to a delisted entity, your contributions have been fundamental to our growth. We are grateful for the role you have played in our journey. Lines of oil palm trees at Bebar Estate, Pahang Integrated Report 2023 031
CHIEF Financial OFFICER’S STATEMENT Dear Shareholder, Boustead Plantations Berhad experienced a challenging year in 2023, navigating a landscape marked by fluctuating market conditions and operational hurdles. Despite these challenges, we were able to close the year profitably, with a profit before taxation and zakat of RM71 million. The reduction compared with 2022 was largely due to a decrease in revenue. Notably, the gains on disposal of plantation assets, which in 2022 totalled RM459 million, were not repeated in 2023. Mohamad Mahazir Mustaffa Chief Financial Officer General view of BPlant’s plantation Boustead Plantations Berhad 032
BALANCE SHEET MANAGEMENT Our balance sheet reflects prudent financial management amidst challenging times. We ended the year with lower borrowings of RM774 million compared with RM857 million last year, demonstrating our ongoing commitment to reducing financial leverage and enhancing financial stability. REVIEW OF INCOME STATEMENTS Revenue In 2023 our revenue reduced to RM852 million, attributed primarily to lower palm product prices and reduced sales volumes. Operating Costs The operating costs, while lower than the previous year at RM750 million, reflecting our stringent cost control measures and efficiency improvements across our operations, still placed considerable pressure on our profit margins. Finance Costs Finance costs were higher at RM40 million during the year, compared with RM34 million in the previous financial year despite a reduction in total borrowings. This was primarily due to the increase in Malaysia’s Overnight Policy Rate (OPR) by Bank Negara Malaysia, with OPR averaging at 2.75% to 3.00% in 2023 compared with 1.75% in 2022. Nonetheless, we continue to uphold our commitment to optimising capital management and enhancing our debt profile. Taxation and Zakat Taxation and zakat for the year amounted to RM35 million, consisting of RM31 million in taxation and RM4 million in zakat payment. The Group’s effective tax rate for the year however is higher than the statutory tax rate mainly due to the unabsorbed tax losses and certain expenses which were non-deductible for tax purposes. This figure underscores our commitment to compliance and fiscal responsibility. REVIEW OF STATEMENTS OF FINANCIAL POSITION Total Assets Our total assets slightly decreased to RM4.0 billion, reflecting the impact of lower current receivables and cash balances. Current receivables reduced to RM43 million mainly due to the settlement of outstanding proceeds from plantation land disposal, while cash balances lessened as a result of declining operational cash inflows. Total Liabilities Total liabilities were carefully managed down to RM1.2 billion from RM1.4 billion in 2022, as part of our efforts to strengthen our financial foundation and reduce our debt burden. This is reflected in lower borrowings of RM774 million in 2023, primarily due to repayment of term loans amounting to RM118 million during the financial year. Total Equity Total equity was stable at RM2.8 billion, reflecting the challenging operational environment but also our resilience in maintaining a solid equity base. REVIEW OF STATEMENTS OF CASH FLOWS In 2023, cash and cash equivalents stood at RM63 million, a reduction from RM166 million in the previous year. Reduced customer collections resulting from weaker palm product prices had an adverse impact on our cash position. Nevertheless, our commitment to improve age profile and better infrastructure remained as planned whereby we spent a total of RM153 million on replanting and capital expenditure as against RM86 million in 2022. FFB evacuation via mechanisation at Telok Sengat Estate, Johor Integrated Report 2023 033
VALUE CREATION SECTION 3 Our Key Capitals 036 Our Value Creating Business Model 038 Stakeholder Engagement 040 Oil palm loose fruits
Towards end-to-end value optimisation
OUR KEY CAPITALS Our ongoing progress as a Group is premised on six vital capitals, namely financial, manufactured, intellectual, human, social and relationship as well as natural. Providing diverse relationships and a network of resources, these interconnected assets ensure our business operations, including estates and palm oil mills, function in a well-maintained, consistent and sustainable manner. FINANCIAL CAPITAL MANUFACTURED CAPITAL INTELLECTUAL CAPITAL The profits from our effective business management, shareholders’ equity and funding from capital providers together comprise the financial capital that ensures our smooth day-to-day operations. With cost and returns optimisation a primary objective, we strive to focus on generating steady stakeholder value and increasing business volume through the expansion of our financial capital. Our manufactured capital are the tangible assets that sustain the Group-wide business operations. Instrumental to our success, the equipment, machinery, and infrastructure situated at our estates and palm oil mills are regularly and diligently maintained. All necessary upgrades are undertaken promptly to ensure these assets remain in optimal condition, which includes adhering to relevant industry standards. Innovation is the driving force of the numerous systems in our business that ensure operational efficiencies. Led by our research and development (R&D) associate, the team continues to make waves with strategic advances, such as the use of drones for enhanced estate management, improvements to the quality of our planting material, and the development of more sustainable biofertilisers. Coupled with continuous digital enhancement of our management, administration and accounting processes, we are able to consistently generate long-term stakeholder value. MARKET CAPITALISATION RM3.5 billion (2022: RM1.5 billion) TOTAL EQUITY RM2.8 billion (2022: RM2.9 billion) TOTAL ASSETS RM4.0 billion (2022: RM4.2 billion) FRESH FRUIT BUNCHES (FFB) PROCESSED 954,944 metric tonne (MT) (2022: 1,050,823 MT) 42 Operating Estates Electrostatic Precipitator 9 units 2 Tilting Sterilisers Wet Scrubber 1 unit 1 Tissue Culture Lab 10 Palm Oil Mills 1 Biogas Plant Particulate Matter Trapping System DIGITAL SOLUTIONS Enhancement of Operations including Drones and Artificial Intelligence R&D Strength and Capabilities ENHANCED PLANTING Materials Technology Boustead Plantations Berhad 036
HUMAN CAPITAL SOCIAL AND RELATIONSHIP CAPITAL NATURAL CAPITAL Our workforce is large-scale, consisting of both local and foreign skilled labour to meet the gruelling demands of plantation work at our estates and palm oil mills. The smooth running of our operations relies heavily on us providing a supportive and conducive work environment, while safeguarding employees’ rights and adhering to all applicable labour regulations. We also invest in developing capabilities through regular training and development programmes. We value the deep relationships we have built with various partners who contribute to our sustainable development and business scalability. Key among these stakeholders are our valued small and medium-sized local vendor partners. As part of our commitment to safeguard their livelihoods, we undertake initiatives such as the Boustead Community Road Maintenance Programme. Concurrently, given the ever-growing importance of environmental, social and governance (ESG) values in our operations, our active membership in the Roundtable on Sustainable Palm Oil (RSPO) ensures we stay informed about and adhere to current industry best practices. INVESTMENT IN EMPLOYEE TRAINING AND DEVELOPMENT AND STAFF WELFARE RM6.0 million (2022: RM4.6 million) ELECTRICITY CONSUMPTION 31,358 MWh (2022: 36,841 MWh) WATER CONSUMPTION 4,770,739 m3 (palm oil mill and domestic processing) (*2022: 3,645,790 m3) EMPTY FRUIT BUNCH (EFB) PRODUCTION 214,340 MT (2022: 241,907 MT) EFB APPLICATION TO FIELD 187,912 MT (2022: 209,358 MT) * We have restated the figure for 2022 to reflect the validated amount. TOTAL NUMBER OF ACTIVE SUPPLIERS 1,045 (2022: 717) LOCAL PROCUREMENT AT BOUSTEAD ESTATES AGENCY SDN BHD 100% (2022: 100%) ACTIVE FFB SUPPLIERS 55 (2022: 66) As an established plantation company, we are well-aware of the impact of our operations on the natural environment and the responsibility we have towards maintaining ecological balance. Our sustainability-driven mindset sees us actively collaborating with the Department of Wildlife and National Parks of Peninsular Malaysia, Sabah Forestry Department, Sabah Wildlife Department, Environmental Protection Department of Sabah and the Natural Resources and Environment Board Sarawak to protect biodiversity in areas with high conservation value. Additionally, our commitment to high environmental standards has resulted in rigorous policies and procedures in place for waste management, which is further supported by our Zero Waste Strategy. Integrated Report 2023 037
FINANCIAL CAPITAL • Shareholders’ fund: RM2.9 billion • Shareholders’ equity: RM2.9 billion • Cash generated from operations: RM174 million • Equity capital: RM1.4 billion MANUFACTURED CAPITAL • No. of operating estates: 42 • Planted area: 72,200 hectares (ha) • Mechanised area: 46,200 ha • Bin system across 8 estates covering 15,800 ha • Unmanned Aerial Vehicle Phantom IV Pro Drone to efficiently manage estate operations INTELLECTUAL CAPITAL • Licensed technology and processes • Best agronomy practices and management practices HUMAN CAPITAL • Total employees: 6,568 • Male: 4,862 • Female: 1,706 • Local: 2,770 • Foreign: 3,798 SOCIAL AND RELATIONSHIP CAPITAL • Total number of suppliers: 1,045 • Embracing sustainable development as well as responsible ESG practices • Continuous engagement with local communities where we operate • Active FFB Suppliers: 55 NATURAL CAPITAL • Electric consumption: 31,358 MWh • Water consumption: 4,770,739 m3 (palm oil mill and domestic processing) • Preserving the environment through conservation • EFB Application to Field: 187,912 MT • Fibres: 124,143 MT • Shells: 47,747 MT • Palm Oil Mill Effluent (POME) for methane capture: 48,464 m3 OUR VALUE CREATING BUSINESS MODEL The value we generate for our stakeholders is supported by a dynamic business model which ensures effective management of relationships and resources for optimal outcomes of the Group. Always striving for excellence in our core plantation business with clear strategic direction, our strong governance facilitates efficient handling of material matters. As a result, we are able to unlock opportunities and manage risks efficiently. OUR CAPITALS ENABLE VALUE-ADDING ACTIVITIES THAT CREATE inputs 01 Plantation Management • Operational Yield • Effective Cost and Efficiency • Best Practices/Certification 02 Growth • Estate and Palm Oil Mill Integration i) Environmental ii) Certification 03 Digitalisation and Technology • Digitalisation • Mechanisation • Technology • Innovation, R&D 04 Capital/Asset Management • Refinancing • Reinvestment/Fundraising • Dividend • Interest Cost For more information, see page 60 STRATEGIC PILLARS Energy Efficiency and Climate Resilience Air, Water, Waste and Effluent Management Occupational Safety and Health Labour Practices and Standards Diversity and Inclusion Social Welfare and Community Investment MATERIAL MATTERS For more information, see pages 49 to 56 Estates Palm Oil Mills R&D BOUSTEAD PLANTATIONS BERHAD Stable demand from key market Uncertainty of vegetable oil prices Uncertainty related to global weather patterns Environmental concerns and increasing demand for sustainable agricultural practices Pursuing technological advancement Supply disruptions due to labour shortage 01 02 03 04 05 06 MARKET TRENDS Business Continuity Creating Business Opportunities Research and Development and Yield Improvement Corporate Governance and Anti-Corruption Traceability and Supply Chain Data Privacy and Security High Conservation Value Areas and Biodiversity Boustead Plantations Berhad 038
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