KUALA LUMPUR: Sime Darby Plantation Bhd (SDP) is looking forward to the lockdown restrictions being lifted in the country to complete its independent evaluation of its labour practices by London-based ethical trade consultancy Impactt Ltd.
At a media briefing yesterday, group managing director Mohamad Helmy Othman said he hoped the independent evaluation, which is currently facing a delay due to movement restrictions, could be completed once travel is allowed, adding that the group would be able to verify the allegations on the ground.
“The Covid-19 movement restrictions involving bans on inter-state travel has halted the progress that we were expecting to do on this assessment by third-party consultants.
“We hope that when travel is allowed, we will be able to fly to Sabah and Sarawak as a lot of verification can only be done on the ground,” he added.
The assessment, which started in April this year, was initially expected to be completed in May.
In December last year, SDP was slapped with a Withhold Release Order by the United States Customs and Border Protection due to allegations on forced labour in its production processes.
Despite the allegations, Mohamad Helmy said almost all of the group’s customers have continued to do business with the plantation group.
“We pride ourselves as a leader in the industry and we know that in terms of sustainability, we have practised going beyond what is actually expected of a plantation company.
“We know that the goalpost keeps moving and standards keep changing. Sometimes, we have to play catch-up with these standards, but we will do that,” he opined.
Currently, the group’s board Sustainability Committee is overseeing the entire exercise of the assessment.
Meanwhile, in a filing with Bursa Malaysia, SDP said it had recorded stronger earnings with a 63% jump in net profit to RM617mil in the second quarter ended June 30 (Q2), from RM378mil a year ago thanks to elevated crude palm oil (CPO) and palm kernel prices and a rise in fresh fruit bunch (FFB) production.
Its revenue rose 37% to RM4.41bil in the quarter from RM3.21bil a year ago.
The group has declared an interim dividend of 7.9 sen per share for Q2 from 4.02 sen per share a year ago.
Nonetheless, Mohamad Helmy confided that the group would likely register a “deficit” in its FFB production in Malaysia this year due to a severe labour shortage.
For the financial year ending Dec 31 (FY21), Mohamad Helmy foresees the total FFB production of the group to remain flat at around 9.3 million tonnes, similar to last year mainly due to the estimated lower production in Malaysia.
“Our FFB production from Indonesia and Papua New Guinea (PNG) would cushion the impact of low production in Malaysia. Fortunately, SDP has its advantage because half of our production comes from other countries such as Indonesia and PNG.
“Our production in Malaysia will not improve until the labour shortage issue is resolved” he explained.
Malaysia constitutes about 50% of SDP’s planted hectarage, with the remainder from Indonesia and PNG’s Solomon Islands.
Despite the grave labour shortage faced by the plantation sector in the country, Mohamad Helmy is enthused to not waste any opportunity in the Covid-19 crisis by automating the group’s plantations to mitigate the impact of the labour shortage.
“The shortage of labour will be here for some time and in any crisis there is an opportunity and a silver lining.
“Everybody is pushed to a corner and is facing a brick wall right now. We have always been at the forefront to mechanise (our operations),” he said.
As such, the group is looking to reduce its labour in its plantation by about 50% to 15,000 workers from 30,000 workers currently in the next three years, as it ramps up automation and mechanisation efforts.
“We are going to end up with one worker covering 20ha, which means it will double the efficiency compared to pre-pandemic levels. Currently, we are employing one worker for 15ha.
“We will roll out some initiatives for automatisation in harvesting which is still at the initial stages. The capital expenditure on the automation would be significant for the group,” he noted.
Besides that, Sime Darby Oils managing director Mohd Haris Mohd Arshad expects CPO prices to hover between RM4,000 and RM4,700 per tonne in the next six months, as demand is expected to continue outstripping supply.
He said the support for the commodity has come from speculators who view it as an investible asset class.
“We are quite worried, to be honest because prices keep inching up and this is not necessarily a good thing because we actually saw a decline in sales, customers are actually holding back, they are sitting on their hands,” he added.
In the long run, Mohd Haris believes that CPO prices would be at a more reasonable price range level of between RM3,000 and RM3,500 per tonne.
“In the longer term, as we get into 2022, hopefully with better crops coming up from the northern and southern hemispheres next year, we ought to see a more reasonable price range,” he added.