IJM PLANTATIONS BERHAD 28 th ANNUAL GENERAL MEETING Friday, 23 rd August 2013, Holiday Villa, Subang Jaya

Transcription

1 IJM PLANTATIONS BERHAD 28 th ANNUAL GENERAL MEETING Friday, 23 rd August 2013, Holiday Villa, Subang Jaya

2 1. SNAP-SHOT FY2013 Milestones and WELCOME Performance Review AGM PRESENTATION TODAY 2. MOVING FORWARD Strategies & Outlook 3. Q&A SESSION # From MSWG etc.

3 SNAP-SHOT FY2013 Milestones and Performance Review

4 BIG PICTURE : IJMP STORY ( SINCE 1985 ) 2015/ Desa Talisai South & North Estates 1992 Desa Talisai Palm Oil Mill Primabahagia Permai Sijas Estate 1993 Meliau Estate 1998 SANDAKAN Prima Alumga Minat Teguh Estate Minat Teguh Palm Oil Mill Wisma IJM Plantations 2000 Kernel Crushing Plant INDONESIA MALAYSIA SUGUT Indonesia Plantation Sinergy Sinergi Agro Industri Legend Oil Palms First palm oil mill in Indonesia operational 2004 Estates Berakan Maju Estate 2009 Excellent Challenger I Estate 2007 First planting in Indonesia Palm Oil Mill Sg. Sabang Estate 2010 Sabang Palm Oil Mill- 1 Excellent Challenger II Estate Sabang Palm Oil Mill- 2 Rakanan Jaya North Estate Sabang Jetty & Bulking Facilities Rakanan Jaya South Estate Quality, Training & Research Centre

5 MILESTONES IN FY2013 IJMP MALAYSIAN OPERATIONS Achieved an oil yield productivity of 5.5 mt/ha/yr IJMP INDONESIAN OPERATIONS Planted 6,172 hectares. Total planted area grew todate to 27,492 hectares and maiden mill in Kalimantan was commissioned. IJMP GROUP Total planted area grew 52,863 hectares. ( Above 50,000 hectares )

6 BURSA MALAYSIA PLANTATION COUNTERS Over 40+ stock counters under Plantation Sector Hectarage : <50K PLANTED AREA IN HECTARES K >100K

7 LOCATION OF OPERATIONS & AGE PROFILE FY14 : Another 6,300 hectares in Indonesia will be mature in phases -> total mature 10,000 hectares i.e. 22% additional mature area

8 Oil Palm 101 : Brief Introduction FROM TREE TO OIL OIL PALM ESTATES Oil Palm Tree -> Total FFB production -> FFB yield per hectare Fresh Fruit Bunches (FFB) Fresh fruit bunch (FFB) Fruit PALM OIL MILLS Oil Extraction Rate (OER) Crude Palm Oil (CPO) Palm Kernel (PK) Kernel Extraction Rate (KER)

9 IJMP FFB PRODUCTION IN MALAYSIA (FY13 vs FY12) 80,000 Q1 Q2 Q3 Q4 70,000 60,000 50,000 FY2012 NEGATIVE POSITIVE 40,000 30,000 FY ,000 10,000 0 BIOLOGICAL LAG-EFFECT FROM DRY WEATHER 2 YEARS EARLIER MONSOON SEASON Apr May Jun July Aug Sept Oct Nov Dec Jan Feb Mar FY12 (A) 43,348 59,538 66,893 67,485 61,919 60,264 62,907 55,414 52,102 44,056 34,953 39,974 FY13 (A) 33,979 36,306 36,335 46,171 50,797 65,062 66,094 73,758 67,941 62,641 49,650 47,897

10 IJMP ESTATES CROP PRODUCTION FY12 FY13 Variance Actual Actual FY13 vs FY12 ' M T ' M T % SANDAKAN (11) SUGUT MALAYSIA (2) INDONESIA GROUP FFB : Fresh fruit bunches FY14 : Sustaining crop production level in Malaysia amid replanting of aging palms and scaling up of crop production in Indonesia.

11 FY13 MONSOON SPELL FLOOD IN LOW-LYING AREAS IN IJMP ESTATES Perseverance, working round the clock, effective planning & innovative

12 IJMP PALM PRODUCT EXTRACTIONS PROCESSING FY12 FY13 % Var A ctual A ctual FY13 vs FY12 OER % % % MALAYSIA INDONESIA 22.5 GROUP KER % % % MALAYSIA INDONESIA 3.2 GROUP OER : Oil extraction rate KER : Kernel extraction rate FY14 : Maiden palm oil mill in Kalimantan commissioned in October 2012 and initial works for another palm oil mill is in the pipeline

13 PLANTATION KEY PERFORMANCE INDICATOR (KPI) OIL YIELD = Fresh fruit bunches (FFB) yield / mature area x Oil Extraction Rate (OER) 5.5 mt oil/hectare/year

14 PLANTATION KEY PERFORMANCE INDICATOR OIL YIELD FY12 FY13 % Variance IJMP M'SIA A ct ual A ct ual FY13 vs FY12 MT MT FFB YIELD OER % OIL YIELD : mt oil / hectare Fresh fruit bunches (FFB) x Oil Extraction Rate (OER) OIL YIELD vs Malaysia

15 EDIBLE OIL YIELD COMPARISON Global Vegetable Oil Yields Soybean 0.36 Sunflower 0.42 Competing Edible Oils Rapeseed 0.59 Palm Oil Palm Oil Year 2012 : 3.8 mt/ha FY 2012/13 : 5.5 mt/ha 45% metric of oil per hectare

16 UNFORTUNATELY, CPO PRICES TURN BEARISH FY2012 FY2013 FY2014 >RM3,000 pmt THE GREAT DROP Indonesia s change in palm oil export duty in Sept 2011, Malaysia s slowing export volume and high-crop production in this country caused Malaysian palm oil stocks to surge, reaching a peak of 2.6 mil tons in Dec ~RM2,300 pmt

17 BEARS AND BULLS INFLUENCING CPO PRICES Supply-demand factors Crude oil prices Hedgefunds Climatic- El Nino / La Nina Govt. Policies Biofuel Emerging markets Population Growth Trans-fat Stock levels Differential tax structures Competing oils Commodity producer : Price takers NOT Price makers

18 IJMP FY13 BOTTOM LINES RM (million) FY12 Actual FY13 Actual % RM 'mil RM 'mil Variance Avg Price CPO 3,049 2,620 (14) Avg Price CPKO 4,102 2,762 (33) Revenue (18) Profit Before Tax (27) Profit After Tax (24)

19 MOVING FORWARD Strategies & Outlook

20 MOVING FORWARD AREAS OF FOCUS FOR HIGHER PERFORMANCE 1. Key Enabler MALAYSIAN OPERATIONS 3. Building Blocks OUR PEOPLE 2. Game Changer INDONESIA EXPANSION 4. CSR Footprints NURTURING SUSTAINABILITY

21 KEY ENABLER MALAYSIA Sustaining high oil yields, cost effectiveness and replanting excellence

22 PRODUCTIVITY & INNOVATIONS Target : Sustain High Yields & Cost Effectiveness -> Improved Margins MECHANISATION - Crop Evacuation COST EFFECTIVENESS MPOB CERTIFICATION RESEARCH CARE FOR REPLANT DRIP IRRIGATION MILL INNOVATIONS LOGISTIC ENHANCEMENT

23 IJMP OIL YIELD - LAST 5 YEARS +45% +34% +31% +35% +45% IJMP (M) Oil Yield Malaysian Oil Yield

24 WORLD HIGHEST PALM OIL-YIELDING PLCs Latest : Year 2012/2013 Desktop Review of Annual Reports from PLCs Updated : May 2013 Oil Yield FFB Yield OER (mt/ha) (mt/ha) (%) 1 IJM PLANTATIONS BHD (M) UNITED PLANTATIONS BHD (M) FIRST RESOURCES LTD GOLDEN AGRI-RESOURCES LTD R.E.A HOLDINGS PLC KIMLOONG RESOURCES BHD UNICO-DESA PLT. BHD IOI CORPORATION BHD SIME DARBY BHD HAP SENG PLT. BHD Source : UOB Kay Hian & Internal, 2013

25 COST EFFICIENCY Efficiency Yield and Labour Cost Matric for 2012 ( Rabobank, July 2013 Report )

26 MAIN OPERATIONAL CHALLENGE FOREIGN GUEST-WORKERS Backdrop: Minimum wages and other increases in cost of production

27 SITE-SPECIFIC MECHANISATION CROP EVACUATION The Conventional Way Bison / Semut Harvesting Wheelbarrow/ buffaloes: FFB to platform Bison / Semut Farm Tractor: Pick up FFB from platform Netting & Crane System FFB sent to nearest ramp Farm tractor /lorries transport crops to the mill Harvesting Netting & Crane System

28 GAME-CHANGER INDONESIA Scaling up crop production, operating and construction of new mills

29 IJMP IN INDONESIA 5 Parcels of Land in Kalimantan & Sumatra PARCEL 1 (PBP) Primabahagia Permai PARCEL 2 (PTS) Sinergi Agroindustri 1 st PALM OIL MILL +PARCEL 5 (KBSA) Karya Bakti Sejahtera Agrotama PARCEL 4 (PPA) Prima Alumga, Lampung PARCEL 3 (IPS) Indonesia Plantation Synergy

30 MAIDEN PALM OIL MILL IN KALIMANTAN IPS palm oil mill commissioned in October 2012 IPS Palm Oil Mill, Kalimantan

31 IJMP DIRECTORS VISITED OPERATIONS IN INDONESIA

32 USD LOAN FACILITIES AND CURRENCY TRANSLATION FY2012 FY2013 FY ve +ve June 2012 USD15M

33 USD LOAN FACILITIES AND CURRENCY TRANSLATION FY2012 FY2013 FY2014 8,886 -ve +ve 9,738 -ve +ve Oct 2011 USD70M Jan 2013 USD80M

34 BUILDING BLOCKS PEOPLE ASSET Talent management, training Imperatives and succession planning

35 BUILDING BLOCKS OUR PEOPLE ASSET Sustained employees engagement and nurturing employees development

36 IJMP PEOPLE Talent Management : Empowering and Mentorship TOTAL PEOPLE ASSET ( 31 March 13 ) : 8,997 No of Employees GEN -Y IJMP GROUP AGE GEN -X Age BABY BOOMERS

37 EMPOWERING GEN-Y (BELOW 34 YRS OLD) MANAGING INTER-GENERATIONAL SHIFT En. Jefflis Bin Janis Age: 34 Mr. Lee Wei Ming Age: 33 Mr. Gaius Solibun Age: 30 Mr. Eric Cheong Age: 34 En. Ardyaffendy Age: 30 Ms. Seng Sheau Yng Age: 29 Cik Siti Mashilah Age: 27 IJMP SCHOLARS : Chong (28), Fadzlan (26), Alex (25), Chia (25)

38 CORPORATE RESPONSIBILITY NURTURING SUSTAINABILITY

39 IJMP CORPORATE RESPONSIBILITY (CSR/CR) NURTURING SUSTAINABILITY - CREATING SHARE VALUE PROFIT Returning to Community Productivity & Innovations Care for Environment PEOPLE Investor in People PLANET

40 CARE FOR ENVIRONMENT Hundred Acre Wood : Conservation, Education and Training Medicinal Plant Garden & Mini Arboretum IJMP Club House & Chalets Dormitory IJMP HUNDRED ACRE WOOD Natural Tropical Rainforest Plot Tropical Fruit Orchard

41 CARE FOR ENVIRONMENT FLORA : Biodiversity Enhancement - Tree Planting with Tropical Species

42 FAUNA : FOCUS ON BIRDS BIODIVERSITY Birds Inventory List Borneo Bird Festival Birds Conservation Awareness in School Birds Survey in Estate

43 INVESTOR IN PEOPLE Focus : Promoting Education, Sports and Cultural Heritage

44 RETURNING TO COMMUNITY Focus : Nurturing Youth Sports Development through Rugby

45 RETURNING TO COMMUNITY Focus : Grass-Root Breast Health Awareness

46 ON-GOING RURAL OUTREACH PROJECT IN SUGUT-PAITAN REGION, SABAH DEWORMING RURAL OUTREACH HEALTH AWARENESS SUPPLEMENTS SCHOOLS CONSERVATION TALKS GRASSROOT BREAST HEALTH

47 SUMMARY : IJMP CSR FOOTPRINTS To enhance shareholders value while balancing operational agenda with shared value of socio-environmental stewardship ENVIRONMENTAL ASPECTS SOCIAL ASPECTS FLORA & FAUNA Hundred Acre Wood OUR PEOPLE Education, Sports, Cultural Heritage FLORA Focus : Biodiversity- Planting Tree COMMUNITY : SPORTS Focus : Youth Sports Development FAUNA Focus :Biodiversity in Birds COMMUNITY : OUTREACH Focus : Breast Health Awareness, Rural Outreach & Volunteerism

48 OUTLOOK FOR PALM OIL Short & Long Term

49 CPO PRICE MOVEMENT ( ) 1980 to to to : Subprime Crisis - Recession 2010: World >2010 Population 7 Billion 1987: Stock Market Crash 1987: World Population 5 Bil 1997: Asian Economic Crisis 1999: World Population 6 Billion 3,000 2,000 1,

50 GROWING DEMAND FOR PALM OIL Future for palm oil consumption to be driven by demand from population and global economic growth 7 BILLION to 9 BILLION

51 PRESENT AND NEW USES OF PALM OIL PRODUCTS Food, non-food, biofuel and other biomass utilisation Non dairy ice cream Vegetable Ghee (Vanaspati) Non dairy chocolate Palm kernel oil Industrial frying Palm oil Red palm oil Non dairy creamer Cooking oil Margarine

52 LONG-TERM BUSINESS SUSTAINABILITY : PRODUCTIVITY Palm oil vis-à-vis Other Edible Oils OIL YIELD = OIL / HECTARE / YEAR Above 5 mt/ha mt/ha mt/ha mt/ha mt/ha

53 OUTLOOK FOR FY2014 PALM PRODUCT PRICES Palm product prices has been on downward trend since end of 2012, amid high stocks & lower global demand CROP PRODUCTION (MALAYSIA) Notwithstanding replanting, crop production in Malaysia is expected to sustain the level of FY13 USD EXCHANGE The strengthening of US Dollar will impact on unrealised FOREX translation of borrowings CROP PRODUCTION (INDONESIA) Crop production growth from young planting and more areas coming into maturity

54 IJMP BLUE-PRINT FOR HIGHER PERFORMANCE STAY STEADFAST AND FOCUSED Key Enabler: Malaysian High Yield Target Game-Changer : Expansion in Indonesian Building Blocks: Nurturing People Asset CSR Footprint : Nurturing Sustainability

55 IJM PLANTATIONS BERHAD 28 th ANNUAL GENERAL MEETING Friday,23 rd August 2013, Holiday Villa, Subang Jaya

56 IJM PLANTATIONS BERHAD 28 th ANNUAL GENERAL MEETING 23 rd August 2013, Holiday Villa, Subang Jaya QUESTIONS & ANSWERS SESSION

57 QUESTIONS FROM MSWG Q1. How many hectares of immature land in Indonesia that will mature in FY2014 and what is the expected amount of FFB production? A1. The total mature area as of 31 March 2013 was 3,761 hectares. Another 6,300 hectares is expected to mature in phases from April 2013 to March We expect to harvest over 100,000 metric tonnes of FFB in FY2014 from these mature plantings.

58 QUESTIONS FROM MSWG Q2. What will be the target new planting programme (in terms of hectares and estimated cost) in Indonesia in FY2014? What will be the capital expenditure of the second mill and its capacity in Indonesia? A2. The target for FY2014 is 3,000 hectares with a cost to maturity ranging from RM18,000 per hectare. The second mill with the capacity 90 mt per hour is expected to cost approximately RM100 million.

59 QUESTIONS FROM MSWG Q3. Given that USD has been strengthening against Ringgit and Indonesia Rupiah, and is expected to continue, why did the Board choose to increase its borrowings denominated in USD during the year and moreover the Group continues to hold high balance in cash? It is noted that RM296 million of USD denominated term loans were drawn down during the financial year. A3. In 2006/07, the Group embarked on an expansion programme in Indonesia with a target to double the size of operations. This undertaking is for the long term and our capital requirements would certainly be impacted by short-term currency fluctuations. The Group took the borrowings in USD as the revenues from the palm produce provide a natural hedge given that they are intrinsically referenced to USD as a commodity. In addition, Bank Negara Malaysia restricts Ringgit borrowings for use in foreign territories, whilst borrowings in Rupiahs attract disproportionately high interest rates.

60 QUESTIONS FROM MSWG A3 Continued The Group s Financial Risk Management and Policies which include foreign currency exchange risk are stipulated in page 124 of the Annual Report. The RM296 million USD denominated term loans were drawn down in accordance with the schedule of borrowings. The cash in hand at the close of the financial year, which includes funds generated from the operations, is meant for the planned FY2014 capital expenditure of RM250 million, in addition to the normal working capital requirements and dividend payment. It is prudent to have the funds needed for the expansion project in Indonesia ahead of spend so as not to disrupt the progress of our expansion plans.

61 QUESTIONS FROM MSWG Q4. Inventories increased 50% from the previous year s RM66.70 to RM million. What were the tonnages increases from the previous year in terms of CPO and PK? How long could the CPO inventory be kept without affecting its quality and subsequently the selling price of CPO? A4. At the close of FY2013, the inventories consist of 20,337 mt, 1,500 mt and 5,787 mt of CPO, PK and PKO respectively. (Note: At the close of FY2012, they were 7,000 mt of CPO, 1,332 mt of PK and 90 mt of PKO). Without heating and under controlled conditions, CPO can be kept for 12 months without affecting their quality significantly. If the quality specifications are maintained and met, the subsequent selling price of the CPO will be determined at their market price.

62 IJM PLANTATIONS BERHAD 28 th ANNUAL GENERAL MEETING 23 rd August 2013, Holiday Villa, Subang Jaya