ANNUAL REPORT 2012SARAWAK PLANTATION BERHAD0s).#/20/2!4%$).-!,!93)!
ANNUAL REPORT
2 0 1 2
[ 2 ] Vision and Mission [ 3 ] Corporate Values
[ 4 ] 5 Years' Financial Highlights [ 6 ] Corporate Structure [ 7 ] Organisational Structure [ 8 ] Corporate Profile [ 10 ] Corporate Information [ 11 ] Location of Operation Units [ 12 ] Message to Our Shareholders [ 17 ] Review of Operations [ 29 ] Board of Directors [ 33 ] Conflict of Interest
[ 34 ] Key Management Personnel [ 35 ] Audit Committee's Report
[ 39 ] Statement on Corporate Governance [ 49 ] Statement on Risk Management and
Internal Control
[ 51 ] Corporate Social Responsibility [ 53 ] Investor Relations
[ 54 ] Diary of Corporate Events
[ 55 ] Financial Statements and Statement on Directors’ Responsibility
[119] Analysis of Shareholdings [122] Top 10 Properties
[124] Cautionary Statement Regarding Forward-Looking Statements [125] Notice of Annual General Meeting [129] Form of Proxy
Contents
Cover Rationale
Our cover reflects the theme of this annual report - towards organisational enhancement to create and maximise shareholder value. White symbolises both attainment and enlightenment and is used as our cover colour to represent our efforts towards inculcating an environment of continuous learning in the workplace. The photographs show SPB employees performing their widely
Our Mission
To maximize stakeholders’
returns with special emphasis on sustainable development and corporate social responsibilities …
Our Vision
To be one of the largest and highest performing plantation companies in
Sarawak ... SARAWAK PLANTATION BERHAD
451377-P • Incorporated in Malaysia
Corporate Values
INTEGRITY…
Trustworthy and accountable
We stand by high moral values and principles, giving emphasis to being transparent in all our conduct, being faithful and honest, and being accountable and responsible towards our business decisions and results.
EXCELLENCE & RESULT ORIENTED ...
Always be driven to achieve results beyond stakeholders’ expectation We are result oriented, setting high performance standards for ourselves. We focus on outcomes and achievements, delivering superior performance to stakeholders through sustainable development hence building a socially responsible organisation.
PROFESSIONALISM...
Ethical application of knowledge
We stress on ethical conduct in the discharge of our duties, ensuring high quality service both within and outside the organisation.
INNOVATIVE…
Growing through change and moving ahead of the times We encourage creativity in our business to produce significant organisational improvements, welcome new ideas and believe in an attitude of being forward looking in our business.
TEAM SPIRIT ...
Respect and sharing
We respect each other and recognise contributions by each
individual. We encourage effective working relationship through
promoting an environment with mutual support, co-operation
and sharing of knowledge and experience.
5 Years'
Financial Highlights
Year 2012 2011 2010 2009 2008
Revenue
(RM’000)430,172 479,364 340,831 295,524 262,232
Profit Before Tax
(RM’000)66,368 104,175 52,259 51,984 67,684
Profit attributable to Owners
of the Company
(RM’000)46,360 81,599 34,355 39,356 51,818
Total Assets
(RM’000)743,336 763,867 691,719 662,871 602,143
Net Assets
(RM’000)568,571 564,146 509,945 502,416 482,630
Total equity attributable to Owners of the Company
(RM’000)
568,571 564,146 509,945 502,416 482,630
Total number of Shares
(’000)280,000 280,000 280,000 280,000 280,000
Net Assets per Share
(RM)2.03 2.01 1.82 1.80 1.73
Basic Earnings per Share
(sen)17 29 12 14 19
Dividend per Share
(sen)10.0 16.3 7.5 8.5 11.0
Gearing Ratio
(times)0.1 0.1 0.2 0.1 0.1
66,368 104,175 52,259 51,984 67,684
430,172 479,364 340,831 295,524 262,232
46,360 81,599 34,355 39,356 51,818
568,571 564,146 509,945 502,416 482,630 17 29 12 14 19
743,336 763,867 691,719 662,871 602,143
5 Years' Financial Highlights
Revenue
(RM’000)Profit attributable to Owners of the Company
(RM’000)Total equity attributable to Owners of the Company
(RM’000)Profit Before Tax
(RM’000)Total Assets
(RM’000)Basic Earnings Per Share
(sen) 2012 2011 2010 2009 20082012 2011 2010 2009 2008
2012 2011 2010 2009 2008
2012 2011 2010 2009 2008
2012 2011 2010 2009 2008
2012 2011 2010 2009 2008
Corporate Structure
SARAWAK PLANTATION BERHAD
451377-P • Incorporated in Malaysia
SARAWAK PLANTATION AGRICULTURE DEVELOPMENT SDN BHD
Cultivation of oil palm and processing of fresh fruit bunches
SPB PELITA SUAI SDN BHD Cutivation of
oil palm
SARAWAK PLANTATION PROPERTY HOLDING SDN BHD
Property investment
SPB PELITA WAK PAKAN SDN BHD Cutivation of oil palm (Dormant)
SARAWAK PLANTATION PROPERTY DEVELOPMENT SDN BHD
Property development (Dormant)
SPB PELITA MUKAH SDN BHD Cutivation of oil palm (Dormant)
SARAWAK PLANTATION SERVICES SDN BHD Provision of management, agronomic and consultancy services
LIONSUN TIMBER SDN BHD
Dormant
SPS TRADING SDN BHD Marketing agent and dealer for water tanks and farm machineries
CAYAMAS SDN BHD Dormant
WONDERLAND TRANSPORT SERVICES SDN BHD Provision of transportation services (Ceased Operation)
AZARIA SDN BHD Dormant
100% 60%
100% 50%
100% 50%
95% 100%
100% 100%
35% 75%
INVESTMENT HOLDING
Organisational Structure
SARAWAK PLANTATION BERHAD
451377-P • Incorporated in Malaysia
BOARD OF DIRECTORS
GROUP MANAGING DIRECTOR Remuneration and
Nomination Committee
Risk Management Committee
Chief Operating Officer
Plantation Operations
Human Resource
& Administration
Health, Safety
& Environment Finance
Security
Laboratory Information Technology Procurement
Board Audit Committee
Corporate Affairs
Corporate Finance Development
& Strategic Planning
Corporate Legal & Secretarial
Land Administration Marketing
Internal Audit
Estate & Agribusiness
Management Accounting Facilities & Mills
Financial Accounting
Public Relations Investor Relations Communication
Corporate Social Responsibility Sustainability MSOP & RSPO
Corporate Profile
SARAWAK PLANTATION BERHAD
451377-P • Incorporated in Malaysia
Sarawak Plantation Berhad (SPB)
was incorporated in Malaysia on 28 October 1997 as a private limited company under the name of Sarawak Plantation Sdn. Bhd. and commenced business in the same year. SPB was converted into a public company on 1 February 2000 and assumed its present name.SPB was specially incorporated as the vehicle company for the privatisation of Sarawak Land Development Board’s (SLDB) assets.
The privatisation of SLDB’s assets, comprising oil palm plantations, milling facilities and related assets, was effected through the transfer of SLDB’s assets to the SPB Group (comprising SPB and its subsidiaries). With this privatisation, all principal assets of SLDB are now owned and managed by SPB and certain of its subsidiaries.
SPB is one of the pioneer players in the oil palm industry in Sarawak. Currently SPB has a total land bank of 49,893 hectares of which 12,914 hectares is under the Native Customary Rights (NCR) scheme.
• Plantation management services.
• Strategic investment to develop NCR land into oil palm plantations.
• Operation of a seed production unit supplying high yielding seeds and seedlings.
• Providing laboratory and technical services for the oil palm industry.
SPB is the only oil palm seed producer in Sarawak and it owns and operates a seed production unit. It is capable to produce around 2 million seeds currently and it targets to produce 6 million seeds by 2014. These high quality seeds are certified by SIRIM and are licensed for sale by the Malaysian Palm Oil Board (MPOB). They are especially well suited to the peat soil conditions in Sarawak. Apart from providing seeds for internal use, SPB also sells its seeds to other plantations and smallholders.
SPB, through its wholly owned subsidiary, Sarawak Plantation Agriculture Development Sdn Bhd (SPAD), owns sixteen (16) oil palm estates with a total planted area of 28,243 hectares as at 31 December 2012. Further, in response to the State Government’s policy on NCR land development, SPB, through its subsidiary, SPB PELITA Suai Sdn Bhd (SP Suai), has developed and fully planted 1,855 hectares of NCR land in Sarawak with oil palms.
SPAD also owns 2 palm oil mills, with a total designed capacity of 180 MT/hour, located at Niah and Mukah, respectively.
The core business activities of the SPB Group are:
• Development, cultivation and management of oil palm plantations on a large scale.
• Milling of fresh fruit bunches (FFB) into crude palm oil (CPO) and palm kernel (PK).
Corporate Information
CHAIRMAN
Datuk Amar Abdul Hamed Bin Sepawi
GROUP MANAGING DIRECTOR
Datuk Haji Hamden Bin Ahmad
NON INDEPENDENT EXECUTIVE DIRECTOR
Polit Bin Hamzah
NON INDEPENDENT
NON EXECUTIVE DIRECTOR
Hasmawati Binti Sapawi
INDEPENDENT
NON EXECUTIVE DIRECTORS
Umang Nangku Jabu
Datu Haji Chaiti Bin Haji Bolhassan Azizi Bin Morni
Ali Bin Adai
COMPANY SECRETARIES
Trina Tan Yang Li (0666-KT032) Bong Siu Lian (MAICSA 7002221)
REGISTERED OFFICE
8th Floor, Wisma NAIM, 2½ Mile, Rock Road, 93200 Kuching, Sarawak, Malaysia.
Tel: 6 082-233550/233560/233570 Fax: 6 082-256560
Email: info@spbgroup.com.my
BUSINESS OFFICE
Lot 1174, Block 9, MCLD Miri Waterfront, Jalan Permaisuri, 98000 Miri, Sarawak, Malaysia.
Tel: 6 085-413814 (12 lines) Fax: 6 085-416192
E-mail: info@spbgroup.com.my www.spbgroup.com.my
BOARD OF DIRECTORS
SHARE REGISTRAR
TRICOR INVESTOR SERVICES SDN BHD Level 17, The Gardens North Tower MidValley City, Lingkaran Syed Putra, 59200 Kuala Lumpur.
Tel: 6 03-22643883 Fax: 6 03-22821886
AUDITORS
KPMG (AF-0758)
Level 6, Westmoore House, Twin Tower Centre, Rock Road, 93200 Kuching, Sarawak, Malaysia.
Tel: 6 082-422699
PRINCIPAL BANKER
CIMB BANK BERHAD
1st Floor, Lot 2690, Block 10 KLCD, 3rd Mile, Rock Road, 93250 Kuching, Sarawak, Malaysia.
Tel: 6 082 238507/238075
STOCK EXCHANGE LISTING
MAIN MARKET OF
BURSA MALAYSIA SECURITIES BERHAD on 28 August 2007
Sector: Plantation Stock Code: 5135 Stock Name: SWKPLNT
MELUGU(2,245 ha) KM 16, Sri Aman/Serian Road
TULAI (595 ha)
3 KM off KM 20 Sibu/Sarikei Road
MUKAH 1 (3,877 ha) 11KM off KM 85 Sibu/Bintulu Road
MATADENG (1,848 ha) Mukah Land District
BAKAU (4,000 ha) Bawan Land District
BUKUT (1,520 ha) Buloh and Bawan Land District
MUKAH 3 (2,708 ha) 20KM off KM 85 Sibu/Bintulu Road
SRI DUAN (3,023 ha) 27KM off KM 85 Sibu/Bintulu Road
SAWAI (917 ha)
14 KM off KM 106 Miri/Bintulu Road
SUBIS 3 (2,559 ha) 6KM off KM 87 Miri/Bintulu Road
SUBIS 2 (2,736 ha) 1KM off KM 87 Miri/Bintulu Road
LADANG SUREA (2,016 ha) 4KM off KM 55 Miri/Bintulu Road
BUKIT PENINJAU (2,194 ha) 8KM off KM 53 Miri/Bintulu Road
SUNGAI TANGIT (1,627 ha)
Location of
Operation Units
1 2 3 4 5 6 7 8 9 10 11 12 13 14
1 2 3
PLANTATIONS PLANTATIONS
(NCR)THAILAND
SARAWAK
MALAYSIA
VIETNAM
PHILIPPINES BRUNEI
SINGAPORE PENINSULAR MALAYSIA
SABAH LAOS
INDONESIA
Registered Office
SPB PELITA WAK PAKAN (5,340 ha*) Sarikei (unplanted)
SPB PELITA MUKAH (5,446 ha*) Mukah (unplanted)
SPB PELITA SUAI (2,128 ha*) 13 KM off KM 108 Miri/Bintulu Road (planted) Native Customary Rights (NCR) Joint Venture
SEED PRODUCTION
SEED PRODUCTION UNIT
4KM off KM 55 Miri/Bintulu Road
TRAINING CENTRE
LABORATORY
SP Lab (1.12 ha)
Lot 2497, Blk 14, Salak LD, Jalan Sultan Tengah, Petra Jaya, Kuching
1 2
PALM OIL MILLS
MUKAH PALM OIL MILL (MPOM) 13KM off KM 85 Sibu/Bintulu Road
NIAH PALM OIL MILL (NPOM) 2 KM off KM 75 Miri/Bintulu Road
1 2
SPB OFFICES
REGISTERED OFFICE
8th Floor, Wisma NAIM, 2½ Mile, Rock Road, 93200 Kuching, Sarawak
BUSINESS OFFICE
Lot 1174, Block 9, MCLD Miri Waterfront, Jalan Permaisuri 98000 Miri, SarawaK
KUCHING
SAMARAHAN
SARIKEI
KAPIT MUKAH
BINTULU
MIRI
LIMBANG
SIBU
BETONG
SRI AMAN
Kanowit Bintangor
Tanjong Manis
Lundu
South China Sea
SARAWAK
* Gross
1
2
1
2
1 8
14
3 7 4
15 161110
13 2
12
65
1
2
3 9
Message to
Our Shareholders
On behalf of the Board of
Directors, it gives me great
pleasure to present the Annual
Report of the Group for the
year ended 31 December
2012, our fifth full year of
operation since we were listed
on the Main Board of Bursa
Malaysia Securities Berhad on
28 August 2007.
Financial Performance
The Group recorded revenue of RM430.2 million for the financial year ended 31 December 2012 compared with RM479.4 million in the preceding year, a decrease of RM49.2 million or 10.3%. Similarly, the Group’s profit before tax was RM66.4 million compared to RM104.2 million for the year 2011, a decrease of RM37.8 million or 36.3%. Profit attributable to Owners of the Company dropped from RM81.6 million in the year 2011 to RM46.3 million in the year 2012, a decrease of RM35.3 million or 43.3%.
Discussion of Performance
The revenue of the Group was mostly attributable to our oil palm operations business, which contributed 99.7% of the Group’s revenue. Other business segments, namely property holdings and management services which are insignificant to the Group, contributed only 0.3% of the Group’s revenue.
In the year 2012, the Group recorded lower revenue compared to year 2011 principally due to lower realised average selling prices of Crude Palm Oil (CPO) and Palm Kernel (PK), partially offset by higher sales volume of CPO and PK.
Similarly, the profit attributable to Owners of the Company of RM46.3 million was lower compared to the year 2011 of RM81.6 million. This resulted in a decline in earnings per ordinary share (EPS) of 12 sen, from 29 sen in year 2011 to 17 sen in year 2012. The decrease was principally due to lower revenue and an impairment loss of RM16.2 million recognised in year 2012.
The CPO and PK prices decreased by approximately 11.8%
and 30.8% respectively for year 2012, in tandem with global vegetable oil price trends. Sales volumes of CPO and PK were both up by 5.2% and 7.6% respectively, resulting from marginal increase in CPO and PK production as well as sales of CPO and PK stocks.
CPO and PK production volumes increased marginally, as a result of higher purchase of external crops, partially offset by lower own estates’ fresh fruit brunches (FFB) production.
Our own FFB production recorded at 304,118 metric tonnes, a decrease of 3.4% compared to year 2011, primarily due to cyclical downward cropping trends. We purchased 353,033 metric tonnes of FFB from nearby estates and smallholders, an increase of 3.7% compared to year 2011.
We maintained our oil extraction rate (OER) at 21.02% and recorded a slight increase in kernel extraction rate (KER) of 4.55%. Our OER was higher than the Sarawak average of 20.43% for year 2012 (Source: MPOB statistics)
Bearing in mind that the oil palm plantation business is cyclical in nature and our earnings are sensitive to CPO
Message to Our Shareholders
Dividends
On 14 August 2012, the Company declared a first interim, single tier dividend of 5 sen per share, totalling approximately RM14 million, which was paid to shareholders on 26 September 2012. On 27 February 2013 a second interim, single tier dividend of 5 sen per share was declared, totalling approximately RM14 million and was paid to shareholders on 28 March 2013.
This represents a total distribution to Shareholders of RM28 million or 60.3% of the Group’s net profits for the year. The dividend yield is 3.7% based on the year-end share price of RM2.70 and in the Board’s opinion offers excellent short term financial returns for our investors whilst maintaining reasonable cash reserves for future growth, including expansion of land bank, plantation development and other capital expenditure.
Changes in Board Composition
The appointment to the Board of Encik Ali Bin Adai on 27 February 2013 marked an important milestone in our development, as for the first time half our Board comprises independent non executive directors. This is in line with the recommendations of the Malaysian Code of Corporate Governance (MCCG) 2012 and the current international best practices in corporate governance which advocates that the majority of our Board be made up of independant non executive directors as our chairman is not an independent director. In addition to the balance, Encik Ali is expected to bring a wealth of experience in corporate finance, and I look forward to his valuable contributions.
Towards a Fully Sustainable Organisation
During the year we made further advances in transforming the Group into a fully sustainable and self-reliant organisation, including:
• Readiness of training centre as a step forward in the Group's oil palm operations and in line with our focus to develop human capital.
• Continuos emphasis on corporate social responsibility initiatives with the aim to uphold high standards of environmental and social responsibilities.
• Set priority on Health, Safety and Environment activities for environmental protection.
Message to Our Shareholders
Corporate Highlights
After our fifth full year of operation as a listed company, I am delighted to note a number of important highlights that together reflect our increasing maturity, responsibility and accountability as we strive to become a role-model oil palm producer.
Organisational Enhancement
Enhancing the strength and resilience of our organisation is the key to long-term success. During year 2012 we were able to achieve some key milestones.
• We completed the reorganisation of our senior management team following on from the appointment of our Chief Operating Officer, bringing in experienced and highly qualified professionals to take charge of Plantation Operations as well as Human Resources and Administration.
• We carried out further internal reorganisation to improve processes and to increase efficiency, including the implementation of smart partnerships initiative between plantations and mills to enhance cooperation and share risks and profits and the set up of Procurement and Tender Departments to enhance transparency and governance.
• We continued to transform the Group into a continuous learning organisation by implementing our training and succession plan and by completing our SP Training Centre at Lambir, Miri.
• We also conducted a Strategic Planning Programme that was attended by all the key management and managers.
The programme was aimed to draw up a Strategic Plan and Programme for the future, which will maximize returns, increase shareholders’ value, improve internal processes and increase efficiency.
Improved Product Quality
During the year we became a Preferred Supplier of CPO, producing high quality CPO (low Free Fatty Acid). This ensures that our CPO enjoys high demand from customers, with preferential delivery treatment from the refineries.
Expansion of Planted Hectarage
Around 5,800 hectares of land were cleared for planting during the year, of which 513 hectares were already planted by year end.
Laboratory Excellence Award
Our accredited analytical laboratory, SP Lab, was awarded the
“Laboratory Excellence Award” by the Malaysian Institute of Chemistry in November 2012. During the year, the laboratory expanded its customer base with a number of new customers and analysed almost 13,000 samples. This was an increase of 19% over the previous year and enabled SP Lab to record a profit for the first time in the last five years.
Management Information System Enhancement The year 2012 saw the completion and successful testing of the Wide Area Network which links all our estates, mills, other businesses and offices and forms the backbone for the electronic Estate Management System. Implementation of the Estate Management System continued throughout the year and will be completed in 2013.
Strengthening of Corporate Governance
Over the last decade it has become increasingly clear that good corporate governance is not only a moral and regulatory requirement, it can also have a very beneficial effect on a company’s share price and bottom line. With that in mind, we enhanced the independence of our Board (see Changes in Board Composition, above) and reinforced our Conflict of Interest practices relating to tenders and contracts.
To ensure that these efforts go beyond simple rhetoric and achieve concrete results, the Group will continue to seek advice from consultants and monitor their implementation and success.
Rewarding our Shareholders
The aforementioned dividend, comprising 60.3% of net profits, was the second highest (since listing) ever paid by the Company.
Message to Our Shareholders
Challenges and Opportunities
Manpower Challenges
To ensure strong and capable future leadership, a succession plan has been mapped out and candidates for key positions have been identified and are undergoing a series of development programs to prepare and equip them for leadership roles.
Our human capital of over 560 permanent staff is equally important for the Group’s success. Therefore, as part of our vision to create an “environment of continuous learning”, around 500 staff attended various trainings during the year. These were designed to enhance their core skills and competencies and also to develop their soft skills to enable them to thrive in a performance-based organisation. This ongoing process will continue as we develop a workforce of well-rounded individuals with strong personal leadership skills.
The perennial challenge facing our industry is that of frontline manpower. As over 60% of our 2,300 workers are from Indonesia, we have made strenuous efforts to position ourselves as an employer of choice for foreign workers. As wages are similar throughout our industry, we have adopted a strategy of enhancing the overseas work experience for our workers and their families, with high quality accommodation, good health and recreational facilities, etc.
Performance Opportunities
Now that our new senior management team is complete and enhanced estate management strategies are starting to yield results, we have set ourselves the challenge of producing 20 tonnes/hectare of FFB in unencumbered mature planted areas. We are confident of achieving this target in the next three years, except of course in newly planted areas.
We anticipate increasing harvester productivity by over 50%
- from average 1.6 MT/day of FFB to 2.5 MT/day – through increased mechanisation and more efficient allocation of labour. We will also continue to improve product quality, so that the bulk of our CPO delivered (from a current level of 30% to a target of 60% with free fatty acid (FFA) below 3.5%) continues to be eligible for preferred supplier status.
In addition, we will strenuously pursue our efforts to reduce costs while achieving these targets, in line with our goal to become the lowest cost CPO and PK supplier in Sarawak.
Again, our new Procurement Department is expected to achieve considerable savings on materials and services group-wide. Key performance indicators and budgetary controls are effective tools in monitoring the achievement of cost containment strategies.
Expansion Opportunities
We continue to monitor our industry for potential acquisitions and mergers to increase our hectarage, particularly ongoing brownfield operations, which can provide immediate financial returns. However our approach remains highly selective as we are targeting strategically located acquisitions which are either close to our milling facilities or otherwise offer economies of scale. Our medium term goal is to achieve 100,000 planted hectares over the next 6 to 7 years.
Prospects for 2013 And Beyond
Risk Factors
CPO Prices: As a pure plantation concern, our earnings are always highly sensitive to fluctuations in CPO prices.
However the market for edible oils and feedstock is expected to remain buoyant for the foreseeable future.
Cyclical nature of oil palm and weather conditions: Oil palm is subject to physiological stress on a cyclical basis.
Annual FFB yield normally experiences a cyclical pattern, with higher yields at certain intervals. An exceptionally high yielding year may be followed by gradually low yielding years, when the palms produce lower output as a result of a period of production stress. We seek to mitigate this risk by having a balanced maturity profile through new development and replanting activities.
Further, the ever changing and unpredictable weather patterns require us to be meticulous and far sighted in terms of our planning.
Message to Our Shareholders
Prospects for 2013 And Beyond continued ...
Outlook
The risk factors outlined above show an acceptable risk profile with valuable opportunities and thus the outlook for the short and medium term remains positive for a variety of reasons as outlined below.
Young Oil Palm Age Profile: Around 37% of our oil palms are either immature or young mature (less than 10 years).
As these palms attain maturity, our FFB yields are poised to improve compared to those of 2012.
Stabilising CPO Prices: CPO prices appear set to remain comparatively stable over the foreseeable future, with acceptable profit margins. CPO price is now around RM2,200 per tonne. The continuous improvements of our operation will enable us to deliver satisfactory returns to shareholders.
New Areas Coming Into Maturity: We intend to develop at least 5,000 hectares each year, and gradually replace the old mature fields by replanting which will begin to yield FFB from 2016.
Anticipated Results
The Board of Directors is confident of achieving satisfactory results for 2013, subject to a favourable price for CPO and PK.
Acknowledgements
I would like to convey my sincerest thanks to my fellow directors and all the employees of Sarawak Plantation Berhad and its subsidiaries for their hard work and professionalism. We would also like to thank all the State and Federal Government Ministries, Departments, Statutory Bodies and Regulatory Agencies who have offered us such close cooperation and support during the year 2012, along with the relevant Indonesian authorities, in particular the Indonesian Consulate at Kuching. Heartfelt thanks are also due to our joint venture partners, sub-contractors, consultants, professional advisors, service providers and community neighbours, whose goodwill and unstinting efforts have helped our Company to perform so well. We would like to reserve the warmest thanks of all for our fellow shareholders. We are delighted that you have such strong faith in our abilities to achieve our potential.
Thank you,
Datuk Amar Abdul Hamed Bin Sepawi Chairman
Review of Operations
Oil Palm Plantation
Size & Status of Land Bank
Our total land bank as at 31 December 2012 stood at 49,893 hectares (inclusive of 12,914 hectares (gross) under the Native Customary Rights (NCR) joint ventures), of which 30,098 hectares (inclusive of 1,855 hectares under the NCR joint venture) are planted with oil palm.
Out of 30,098 hectares planted with oil palm, 11.5% is immature field, 25.9% is aged 4 to 10 years, 31.8% is aged between 11 to 15 years, 10.3% is aged between 16 to 20 years and 20.5% is more than 20 years old.
As at 31 December 2012 Hectarage (Ha)
Oil Palm 30,098
Others 8,736
Native Customary Rights (NCR) joint ventures project (unplanted)
11,059
Total 49,893
Oil Palm
60%
Unplanted
22%
(NCR projects)
18%
Others5 years hectarage and FFB production and yield by age profile
Unit 2008 2009 2010 2011 2012
FFB PRODUCTION VOLUME
Old Mature MT 26,368 23,994 24,092 50,403 71,093
Prime Mature MT 173,874 176,664 176,607 180,463 138,728
Young Mature MT 130,893 116,649 74,520 83,892 94,297
Underplanting MT 3,503 0 0 0 0
Total MT 334,638 317,307 275,219 314,758 304,118
YIELD
Old Mature MT/Wha 10.55 8.19 7.94 11.76 12.29
Prime Mature MT/Wha 18.54 17.16 14.17 13.82 11.70
Young Mature MT/Wha 11.52 10.32 8.39 12.20 13.19
Average MT/Wha 14.40 12.93 11.29 13.00 12.27
PLANTED HECTARAGE (weighted average) Oil Palm
- Mature Wha 24,799 26,178 26,014 25,893 26,501
- Immature Wha 2,533 1,623 1,548 3,383 3,218
Total planted hectarage Wha 27,332 27,801 27,562 29,276 29,719 Wha - Weighted hectarage (average for the year by reference to maturity) Old Mature - 21 years onwards
Review of Operations
Estate Mechanisation
Labour shortage is still a perennial issue for the industry as a whole and SPB is no exception. The majority of estate activities are carried out manually and the operation is labour intensive. In order to mitigate the labour shortage, SPB estates have over the years made major improvements by upgrading their infrastructure to cater for mechanisation.
The Group’s main focus is on mechanising the following activities:
• Infield FFB Collection • Fertiliser Application
• Mainline Transport • Weedicide Spraying
Oil Palm Plantation continued ...
5 years hectarage and FFB production and yield by age profile continued ...
Unit 2008 2009 2010 2011 2012
MATURE HECTARAGE (weighted average)
- Old Mature Wha 2,667 3,128 3,237 4,573 6,189
- Prime Mature Wha 10,008 10,990 13,297 13,954 12,654
- Young Mature Wha 12,124 12,060 9,480 7,366 7,658
Total Wha 24,799 26,178 26,014 25,893 26,501
Less : Estates Roads Wha 1,554 1,641 1,631 1,672 1,711
Mature Hectarage (Net) Wha 23,245 24,537 24,383 24,221 24,790 Wha - Weighted hectarage (average for the year by reference to maturity) Old Mature - 21 years onwards
Prime Mature - 11 to less than 20 years Young Mature - 3 to less than 10 years
5 Years FFB production and yield by region
Unit 2008 2009 2010 2011 2012
FFB PRODUCTION VOLUME
Northern Region MT 272,057 264,233 231,234 265,000 260,593
Central Region MT 62,581 53,074 43,985 49,758 43,525
Total MT 334,638 317,307 275,219 314,758 304,118
YIELD
Northern Region MT/Wha 16.97 16.31 14.16 16.21 15.91
Central Region MT/Wha 8.67 6.37 5.46 6.32 5.17
Total MT/Wha 14.40 12.93 11.29 13.00 12.27
Increase in Mature Areas
In the year 2012, there was an increase of 608 hectares in mature areas. The increase was mainly due to areas attaining maturity during the year, rising from 25,893 hectares in 2011 to 26,501 hectares in 2012.
FFB Production and Yield
For the year 2012, the Group produced a total of 304,118 MT of fresh fruit bunches (FFB), most of which were processed by our own palm oil mills at Niah and Mukah.
This represented a decrease of 3.4% compared to 2011.
The decrease was due mainly to low cropping year for productive estates in the Northern Region such as Bukit Peninjau and Sungai Tangit, as well as disputes with locals at our Mukah estates.
The Group achieved a yield of 12.27 MT/Ha. Two principal factors caused this low yield. The inability to harvest from 1,855 hectares at SP Suai due to a dispute with Penan participants and dispute with locals at our Mukah estates in Central Region affecting approximately 4,490 hectares.
Dialogues and negotiations with the locals are on going with the ultimate objective of resolving the disputes.
Progress of new developments Matadeng/Bakau/Bukut
Land was acquired in 2009 at Mukah and Bawan Land District, with a total area of 7,368 hectares. As of 31 December 2012, 5,699 hectares have been cleared of which 1,794 hectares have been planted with oil palm. The first harvesting is expected to take place by the end of 2013. A further 5,300 hectares will also be planted with oil palm by the end of 2013.
Tulai and Melugu
The Group has also expanded the new development area to Tulai in Sibu Division and Melugu in Sri Aman Division (around 1,500 hectares and 700 hectares respectively). As of 31 December 2012, clearing works have been completed for both areas. For Tulai, out of the 1,500 hectares that have been cleared, 350 hectares have been planted with oil palm.
The remaining of around 1,150 hectares will be planted in the year 2013.
As for Melugu, 163 hectares have been planted with oil palm and the balance of around 500 hectares will be fully planted in year 2013.
The first harvesting for both areas is expected to take place by the end of the year 2015.
Nurseries have been established to cater for the above developments, with seeds supplied by the Group’s own Seed Production Unit.
Good Agronomic Practices Good Agronomic Practices (GAP) are in place from nursery stage through to field planting and maintenance of oil palm cultivation. The principle focus of GAP is on good nursery techniques and management, Integrated Pest Management
(IPM) for pest and disease control and pruning and harvesting for enhancing FFB production.
To ensure that GAP are adhered to, the workforce needs to be equipped with the right tools and knowledge or skills to make it happen. Therefore on-the-job training for workers has been carried out by the field staff for activities such as harvesting, pruning, weeding, grading of fruit harvested and
Review of Operations
Oil Palm Plantation continued ...
Cattle Integration
The Group’s Cattle Integration project, which involves the rearing of cattle in oil palm plantations, was initiated in 2000 under the “Pawah” scheme through the Department of Agriculture (DOA) Sarawak. The rationale for the project is to promote full utilisation of mature oil palm areas by letting cattle graze on vegetation that is otherwise considered weeds.
Cattle integration benefits the participating estates as part of their integrated weed management programme, which saves the cost of weedicide application, is environment- friendly and contributes towards achieving good agricultural and farm (GAF) practices and standards. Not only is the amount of weedicide reduced, but workers are also freed up from spraying to carry out other functions. The Cattle Integration project can also act as a breeding resource to develop a sizeable stock of high quality cattle in the country, and can reduce the need to open new land for grazing.
Over the years, a total of 1,465 cattle were received and 1,147 were repaid to DOA. In 2012, a total of 78 cattle were repaid to DOA and 218 were sold to external parties.
As at 31 December 2012 the Group had a total of 1,001 cattle.
Performance Benchmarking
In order to achieve targets, estate managers require realistic benchmarks. We are in the process of establishing benchmarks for all of our estates and its sub-divisions. In the interim, we have established a set of benchmarks based on our top performing Ladang Tiga Estate.
Producer-Processor Smart Partnerships
A Smart Partnerships initiative was established between our estates and palm oil mills, whereby each interactively notifies the other about harvesting, delivery, processing capacity, milling yields, etc. Both parties also leverage these data to better manage their respective capacities and workflows in order to share both risks and profits.
Review of Operations
Seed Production Unit
The Group’s Seed Production Unit (SPU), is the only seed producer certified by the Malaysian Palm Oil Board (MPOB) in Sarawak. The SPU is currently capable of producing 2 million germinated DxP seeds per annum and production of seeds is expected to reach 6 million by 2014. The Group is supplying elite germinated DxP seeds under the commercial name “SUREA DxP“ seeds for customers in the state while ensuring sufficient supply to its own estates.
The quality of the Group’s planting material conforms with SIRIM’s Standard (MS: 157:2005) which was awarded on 13 June 2008. On 8 October 2008, the license to sell seeds was given by MPOB.
SUREA DxP seeds are produced from selected dura and pisifera parentage derived from a lineage of superior pedigree. The Deli duras are well known for their high bunch weight and high oil to bunch while the AVROS pisiferas are recognised for their high yield characteristics.
The Group’s meticulous oil palm breeding activities are aimed at producing improved and high standard oil palm planting material which give higher oil yield per hectare. The activities include bagging male and female inflorescence, stringent controlled pollination, seed processing and germination in a controlled environment, scientific experimental design and yield recording. Bunch analysis and vegetative measurements are also carried out to determine oil and kernel contents, palm growth and dry matter production.
Intensive progeny testing is essential before embarking upon any commercial DxP seed production. This is necessary to gauge the performance of our planting material and subsequently to produce the elite DxP seeds. Hence the setting up of a progeny testing area of 24 hectares, planted in 2007 in our estate, Ladang Tiga estate, Miri which has yielded first and second year harvests of 17 metric tonnes per hectare in 2011 and 24 metric tonnes per hectare in 2012 respectively.
The Group has been taking part in the 4th Round Malaysian DxP Comparative Trial initiated by MPOB. The purpose of this trial is to monitor the performance of various DxP seed producers in Malaysia. This can be a benchmark for SUREA DxP for comparing with other seed producers.
The Group continues its promotional efforts to commercialise SUREA DxP seeds to smallholders as well as corporate customers, particularly around Sarawak by participating in exhibitions throughout the state. The Group’s strategy will focus on and take into consideration the four PS - product strategies - pricing strategies, promotional strategies and placement strategies in its effort to market the SUREA DxP seeds. Apart from advertising in local newspapers, posters and pamphlets distribution to oil palm nurseries and strategic places, direct approaches to major oil palm planters in Sarawak will also form part of the marketing strategies.
Review of Operations
Milling Operation
We operate two palm oil mills, Mukah Mill located in Mukah Division and Niah Mill located in Miri Division, which process our own crops as well as third party crops.
Mukah Mill was commissioned in 1981 and has an upgraded designed capacity of 60MT/hour. Niah Mill was commissioned in 1976 and has an upgraded designed capacity of 120MT/hour. The combined designed capacity of both mills is currently 180 MT/hour. Niah Mill has the modern innovations in milling technology and automation in various stages of the process, resulting in minimal handling of FFB, reduced water and energy consumption and enhanced efficiency and safety.
Logistic costs are kept low as our mills are located near to major roads within close proximity to Miri, Mukah and Bintulu. They are also close to key urban locations with strong customer bases, good transhipment facilities and most importantly, major buyers at Bintulu.
Mill Performance 2008 to 2012
The production records of both mills for the year under review and the previous four (4) years are as follows:
2008 2009 2010 2011 2012
FFB Processed (MT)
Niah Mill 356,210 379,204 349,706 420,273 418,205
Mukah Mill 126,068 169,379 158,668 216,107 218,888
Total 482,278 548,583 508,374 636,380 637,093
Output of CPO (MT)
Niah Mill 72,079 79,768 74,284 89,809 89,583
Mukah Mill 24,494 33,295 30,470 44,048 44,322
Total 96,573 113,063 104,754 133,857 133,905
Output of PK (MT)
Niah Mill 16,292 18,310 15,927 19,780 18,979
Mukah Mill 5,549 6,204 6,023 8,955 9,985
Total 21,841 24,514 21,950 28,735 28,964
Average oil extraction rate (“OER”) (%)
Niah Mill 20.24 21.04 21.24 21.37 21.42
Mukah Mill 19.43 19.66 19.21 20.38 20.25
Average 20.02 20.61 20.61 21.03 21.02
Average kernel extraction rate (“KER”) (%)
Niah Mill 4.57 4.83 4.55 4.71 4.54
Mukah Mill 4.40 3.66 3.80 4.14 4.56
Average 4.53 4.47 4.32 4.52 4.55
For 2012, the combined third party crops processed at our two mills were 353,033 MT, which is 55% of the total FFB processed.
Continuous improvements
The Group continues to improve its mills' operations to maximise oil extraction rate and enhance product quality.
Review of Operations
Health, Safety
and Environment (HSE)
It is the Group’s policy to make sure that health, safety and environment (HSE) matters are fully incorporated into its operational activities and business ventures. The Group is committed to ensuring that all business activities are implemented in strict compliance with the appropriate legislative requirements and codes of practices subscribed to by the Group. In compliance with this policy, everyone in the Group is made accountable and responsible for implementing safe and healthy practices in their respective work locations.
In year 2012, all mandatory requirements under Occupational Safety And Health Act (OSHA) 1994 and Factory And Machinery Act (FMA) 1967 were adhered to strictly, and safe and healthy work practices were enforced and implemented at all work locations, in line with the concept of as-low-as-reasonably- practicable (ALARP). Regular monitoring was conducted by HSE personnel and all OSH issues were addressed accordingly with the unit management. The concept of “Observe-and-Intervene”
continues to be implemented at all levels of the Group’s operations. Throughout the year, sustainable operations were achieved group-wide and there were no major interruptions to production lines.
In compliance with legislation, the following actions were carried out in the year under review:
(a) chemical hazard risk assessment for oil palm estates was carried out at Bukit Peninjau, Subis 3, Mukah 1 and the Seed Production Unit;
(b) positive chemical exposure monitoring by external assessor was carried out at all oil palm estates and mills;
(c) health surveillance and examinations were conducted on all pesticide applicators, mechanics and laboratory employees;
(d) pressure vessels and mechanised lifting equipment, including lifts, were serviced and subsequently inspected by the relevant authority.
Quality Assurance
& Product Improvement
The Group places great emphasis on the quality of the oil palm products that it produces. Coordination and co-operation between the estates and the mills is vital for achieving good oil extraction rate (OER). Under the new Smart Partnership initiative (see Plantation section), both mills and estates share common free fatty acid (FFA), OER and KER targets which they achieve through enhanced cooperation, good team work and continuous feedback. For example, FFB grading results are immediately provided to the estates to enable them to control FFB quality in the field.
In the Group's effort to achieve high quality CPO and PK, it has also placed great emphasis on the quality of third party FFB that the mills can accept. The FFB graders are well trained in FFB quality checking and only allow good quality FFB to be purchased.
These efforts are already paying dividends. In the year 2011, 6% of the Group's total CPO delivered to its customers had FFA of 3.5% or below. For the year 2012, the Group achieved 30% of CPO delivered with FFA of 3.5% or below. This achievement has a positive impact on the Group's bottom line, as high quality palm oil is preferred by buyers, who prioritise its purchase.
Review of Operations
Health, Safety and
Environment (HSE) continued ...
Our HSE personnel require our mills and estates contractors to fully comply with HSE rules and regulations in the execution of their works, and monitor them accordingly. The state of compliance has been steadily improving and zero Lost Time Incident (LTI) was achieved for the year under review.
In an effort to improve housekeeping, safety and work productivity, the quality work environment concept of 5S was reemphasised and all unit managers and senior executives received refresher training. With strong commitment and support from the Board and the Management, and as a result of the refresher training, improvements in the areas of housekeeping, safety and work productivity were observed in most work locations.
Competency and skills play important roles in ensuring excellent HSE performance. Therefore, in the year under review, the following training programmes were carried out:
(a) competency training for scaffolding erectors;
(b) two (2) electricians from the palm oil mills were enrolled on the Electrical Chargeman Competency Programme;
(c) 16 technical staff from both palm oil mills were sent for a refresher course in authorised entrance and standby person for confined space works;
(d) first-aider training for 46 staff from various operating units.
HSE will continue to be improved and enhanced in future throughout the Group in order to sustain growth and productivity.
The Group's CPO and PK are sold to four main buyers (which operate palm oil refineries and palm kernel crushing plants), namely Bintulu Edible Oils Sdn. Bhd. (BEO), Kirana Palm Oil Refineries Sdn. Bhd. (KPOR), Sime Darby Austral Sdn. Bhd. (SDA) and SOP Edible Oil Sdn. Bhd. (SOPEO). All of the buyers of our main products are located at Bintulu, Sarawak.
Sales volume
Sales volume performance is fundamentally dependent on the three major factors namely:
(i) amount of FFB processed by the Group's mills (which is dependent on the production from its own estates and the volume of the FFB purchased from external parties) (ii) the effectiveness and efficiency of the mills (i.e. OER and
KER achieved by both mills), and
(iii) the effectiveness and efficiency of the Group's logistics in delivering its products to the main buyers at Bintulu.
Prompt delivery of CPO and PK from mills to buyers is very crucial in this industry to avoid quality deterioration due to long storage periods. In view of the importance of expediting delivery to the buyers, logistics management is a critical success factor. This includes synchronising with three major variables i.e. the mills’ production capacities, transport arrangements and the reception capabilities of the refineries or crushing plants.
Marketing
The Group’s revenue is principally derived from the sales of palm products. The two main products are Crude Palm Oil (CPO) and Palm Kernel (PK). The percentage of the sales of CPO and PK for the year under review are as below:
Palm Kernel (PK) Crude Palm Oil (CPO) PK 10%
CPO 90%
Realised Price
The movement of CPO and PK price is fundamentally dependent on the demand and supply in global oils and fat market. In 2012, the Group faced a major challenge in dealing with a significant drop in price. The drop in selling prices is in tandem with the decline of prices faced by the palm oil industry in Malaysia.
During the year, the prices used in the selling of both products are based on spot negotiation and Malaysian Palm Oil Board (MPOB) monthly average. The Group has support in terms of information from reliable sources which is crucial in conducting technical and fundamental analysis.
Weekly price outlook are available from various analysts of commodity brokerage firms and investment banks and palm oil industry related websites. All the sources of information are sufficient for the Group to be in touch with any price movement of CPO and PK.
The average selling prices realised for the year under review and past four (4) years are as follows:
Review of Operations
Marketing continued ...
Sales volume continued ...
In addition, maintaining good relationships with the transporters, refineries and crushing plants’ personnel (Relationship Marketing) is also important to ensure smooth delivery of CPO and PK especially during the peak crop season.
Our CPO and PK sales volume experienced growth in year 2012 (as compared to 2011) of 5.2% for CPO and 7.6% for PK. The sales volume for the year under review and the past four (4) years are as follows:
--- TOTAL VOLUME (MT) ---
YEAR CPO PK
2008 81,654 21,890
2009 118,557 23,135
2010 110,575 23,624
2011 129,783 27,300
2012 136,524 29,385
0 500 1,000 1,500 2,000 2,500 3,000 3,500 RM/MT
2008 2009 2010 2011 2012 YEAR
CPO PK
2,693 2,200 2,667 3,123 2,756
1,398 986 1,600 2,034 1,407
SP Laboratory
The Group operates its own Analytical Chemistry Laboratory, SP LAB, at Kuching, Sarawak. SP LAB provides a wide range of analytical services to its customers, which include government agencies, private oil palm plantations, fertiliser and agrichemical suppliers and fertiliser mixing factories.
Accreditations & Capabilities
SP LAB is an accredited testing laboratory (Skim Akreditasi Makmal Malaysia No. 214) under MS ISO/IEC: 17025:2005 standard. The Scope of Accreditation includes analysis of leaf samples, fertiliser samples, soil samples and water samples for their chemical and physical analysis.
SP LAB is committed to provide efficient, reliable competitive and professional analytical services to all customers in accordance with International Standard Requirements and Regulations under MS ISO/IEC/17025:2005. All of its technical staff are competent to carry out analytical test in accordance with prescribed and approved test methods.
Laboratory Excellence Award
In November 2012, SP LAB was awarded the ‘IKM Laboratory Excellence Award’ by the Malaysian Institute of Chemistry (IKM). This was in recognition of the lab’s achievement in providing accurate, reliable, high-quality testing services pertaining to local legistration, especially in the field of health, safety and environment. This award serves to underline both the quality of SP LAB’s services and the Group’s commitment to satisfying and even exceeding its customers’ expectations.
Remarkable Year-on-Year Growth
During the year 2012, SP LAB analysed a total of 12,929 samples, comprising fertilisers, foliar, soil and other miscellaneous samples, eg. compost, organic fertilisers, herbicides and bunch ash. This showed a growth rate of 19% compared to the year 2011 and 47% compared to the year 2010.
Expanding and Promoting Services
The Group continues to expand its scope of accreditation and promote its laboratory services. During the year, online and printed brochures were designed and sent out to publicise SP Lab's services to a wider range of potential customers.
Review of Operations
Human Resources
The Group’s Human Resource is undoubtedly its most valuable asset. With over 560 permanent staff and around 2,300 workers, getting the best out of our human resource is a complex and challenging task. Therefore the Group has adopted a tactical re-engineering approach to human resource development, designed to stimulate capacity building with a strong emphasis on personal leadership.
Our ultimate objective is to inculcate an “environment of continuous learning”, a strategic process which will create holistic individuals with a well balanced outlook, who together form a more empowered and enterprising workforce.
Skills and Competency Training
SPB is continuously and aggressively narrowing the competency gap through training and the development of human resource at every level. As we gradually depart from conventional and subjective methods of assessing performance to more structured and objective methods, keen emphasis is placed on the competency of the human resource.
During the year 2012, over 80% of our permanent staff attended technical workshops and soft skills development programmes, conducted through in-house training courses or by participating in programmes organised by external training providers.
Performance Assessment
The Group believes in continuous competency assessment to gauge the progress and effectiveness of the learning process. The assessment is carried out by observing and interviewing the individual staff using Key Result Area and Key Performance Indicator criteria.
2012 was the third year of rolling out the Group Key Result Area (GKRA) and the individual Key Performance Indicator (KPI) targets. We were successful at smoothing out many of the previous teething issues, as staff have become more conscious of their personal and teamwork contributions and how they impact on the Group’s activities and achievements.
Motivating and Rewarding Staff
The Group believes that the success and sustainability of the performance based culture is further enhanced by attracting and retaining talents through an attractive remuneration and benefits package. Therefore a number of revisions in the benefit package were introduced during the year.
Management Succession
A management succession plan has now been fully mapped out. Candidates for key positions have been identified and are undergoing a series of development programs to prepare and equip them for leadership roles.
Future Manpower Development
Our new SP Training Centre at Lambir near Miri is expected to recruit its first intake of students during 2013, ensuring a steady supply of skilled manpower for our future operations.
Review of Operations
Review of Operations
Security
The Security Department has played a significant role in the Group’s operations throughout the year in review. Security personnel are located at all of the Group’s estates and mills, where they monitor and enforce security activities and regulations, with the objective of providing total security throughout SPB.
During the year the Group focused on making this department more formidable and service oriented. To achieve this the Group formed its own Auxiliary Police Unit, with members of our security team undergoing training at the Royal Malaysian Police Training School at Kuching, Sarawak.
The security team now has full legal powers to stop, check and arrest any perpetrator that commits or attempts to commit crimes anywhere in our estates or mills. The training has also strengthened personal ties and formal relations between the security team and local police and other enforcement agencies, improving access to their manpower and resources when required.
As well as setting-up the Auxiliary Police Unit, the Group also focused on continuous training for all its security personnel during the year. This is to improve and enhance its overall security and also to prepare for the Group’s planned expansion. During the year 2013 the Group will continue in-service training and also plans to embark on the formation of a K-9 Dog Unit to reinforce and increase the overall capability of the Security function.
Procurement
The Procurement Department was set up in year 2012 to enhance and improve the process of tendering as well as the direct procurement of goods and services. The Procurement Department's objectives are to provide reliable services to all operating units, centralising the purchasing function for the entire Group to take advantage of competitive prices through quantity discounts, well-planned ordering schedules, better negotiation strategies and earlier and more accurate anticipation of requirements.
It is in line with the cost control efforts of the Group, as well as to provide a more efficient supply chain. More importantly, the tender and procurement processes have been considerably strengthened and are subject to continuous monitoring, in order to enhance transparency and governance with regards to the purchase of goods and services.
Information & Communication Technology
The Information & Communication Technology serves the Group by applying and integrating information resources to provide and enhance a secure IT environment and maintain the Group’s systems. It focuses on the continuous upgrading of hardware and infrastructure with the aim of improving information technology operations and providing quality support to the Group.
Implementation of Wide Area Network
During the year 2012, the Group continued work on the implementation of the Wide Area Network (WAN) that connects the Miri Operating Head Office, Corporate Office Kuching, SP Lab, mills and estates using VSAT and wireless access connections. The WAN is used mainly for system integrating, e-mailing, data sharing and internet access. The installation was fully completed in November 2012.
Estate Management System
The Estate Management System (EMS) is an integrated information system that serves all operating units within the Group, with special emphasis on estate management of the Group's plantations. It provides a wide variety of analytical, information and management tools to optimise the Group's business activities and to strengthen its operational control, efficiency and effectiveness. The implementation of EMS is by stages. In year 2012, trial run was carried out in two estates. The Group targets to fully implement EMS to all operating units by 2013.
Review of Operations
Finance
The Board ensures that our financial reporting is carried out in compliance with Financial Reporting Standards (FRS) and other statutory requirements.
Malaysian Accounting Standards Board (MASB), announced on 19 November 2011 the issuance of Malaysian Financial Reporting Standards (MFRS). The application of MFRS framework shall be effective for annual reporting periods beginning on or after 1 January 2012, with the exception of entities subject to the application of MFRS 141 Agriculture and/or IC Interpretation 15 Agreements for the Construction of Real Estate.
On 30 June 2012, MASB made a further announcement to allow transitioning entities to defer the adoption of the MFRS. MFRS will therefore be mandated for all companies for annual periods beginning on or after 1 January 2014.
In view of the foregoing, as a transitioning entity subject to the application of MFRS 141, the financial statements of SPB will be prepared in compliance with MFRS from the financial year beginning 1 January, 2014.
The Board recognises the importance and priority of getting the Group ready for full convergence. MFRS trainings are one of the keys to ensure the employees are fully aware of the changes and revisions in MFRS. This will enable the Group to evaluate the financial impact and effect on disclosures and measurement consequent on such convergence.
In addition, the Group recognises the fundamental importance of public trust in financial reporting and encourage transparency. We ensure that timely, accurate and reliable financial information is provided to our shareholders and investment community at all times, through announcement of interim results on a quarterly basis.
Budgetary control is one of the key tools for effective operational controls. The Group closely monitors any significant and/or material variances. These variances will be investigated and analysed and appropriate follow up actions are considered and implemented.
Corporate Affairs
The Group recognises the importance of public relations, investor relations, communication and corporate social responsibilities. The Group also acknowledges the need to combine economic dynamism with environmental and social responsibilities.
One of the Group's Corporate Affairs role is to manage corporate communication with the government, regulatory bodies, private and public sectors. Dissemination of information of the Group is restricted to matters that are in the public domain.
In year 2012, the Group's Public Relations and Communication Section continued to highlight the Group's aspiration to incorporate these responsibilities in its business via its comprehensive corporate communication channels which include the annual report, corporate website, positive media engagement, regular brand-building activities, advertisements, corporate networking functions and philanthropic activities.
Further details on Corporate Social Responsibility and Investor Relations are found on pages 51 to 53 of this Annual Report.
Datuk Haji Hamden Bin Ahmad
GROUP MANAGING DIRECTOR
Datuk Haji Hamden, aged 65, was appointed as our Director on 1 May 2007. On 16 June 2010, he was redesignated from Independent Non Executive Director to Executive Director, and further redesignated to the position of Group Managing Director on 29 March 2011. He is a Chartered Accountant, obtained his membership of the Association of Chartered and Certified Accountants (ACCA) from the London School of Accountancy, United Kingdom, and was subsequently appointed a Fellow of the ACCA. He is a member of our Risk Management Committee.
He began his career as a Chief Accountant with Sarawak Land Development Board from 1978 to 1982. He set up his own accounting firm in 1983. He was the former Assistant Minister of Youth Affairs of the Ministry of Social Development and Urbanisation and former Assistant Minister of the Ministry of Urban Development and Tourism. He is a Senior Independent Non-executive Director of Naim Holdings Berhad and a Director of BLD Plantation Berhad, both companies listed on the Main Board of Bursa Malaysia. He also holds directorships in several private limited companies.
Datuk Amar Abdul Hamed Bin Sepawi
CHAIRMAN
Datuk Amar Abdul Hamed, aged 64, was appointed to our Board on 30 August 2005 and redesignated as Non Executive Chairman on 11 March 2011. Educated at Malay College, Kuala Kangsar, he holds a BSc from the University of Malaya, a BSc (Forestry) from the Australian National University, Canberra, and a Master's degree in Forest Products Utilisation from Oregon State University, United States. He is Chairman of the Remuneration and Nomination Committee.
He has more than 23 years of experience in forest and plantation management and the manufacturing of forest products. For the last 16 years, he has been actively involved in various industries such as construction, property development, oil and gas, oil palm plantations and ICT. He was the recipient of the Sarawak State Entrepreneur of the Year Award for 2004 and 2005 and was nominated for the Malaysia Entrepreneur of the Year Award 2005. He was awarded the Panglima Gemilang Bintang Kenyalang in September 1999 and the Datuk Amar Bintang Kenyalang in September 2012.
He is the Executive Chairman of Ta Ann Holdings Berhad, a forestry and plantation company based in Sarawak, and also serves as Chairman of a property and construction company Naim Holdings Berhad, listed on the Main Board of Bursa Malaysia, and as Chairman of logistics technology company Smartag Solution Berhad, listed on the ACE Market of Bursa Malaysia. He is also Chairman of Sarawak Energy Berhad, a power utility company wholly owned by the Sarawak State Government. Datuk Amar Abdul Hamed is also Chairman of the Sarawak Oil Palm Plantation Owners’ Association
Board of
Directors
Polit Bin Hamzah
NON INDEPENDENT EXECUTIVE DIRECTOR
Polit Hamzah, aged 63 was appointed as our Director on 1 May 2007. On 20 December 2012 he was redesignated from Independent Non Executive Director to Non Independent Executive Director. He is the Chairman of our Risk Management Committee.
He graduated with BSc (Hons) in Geology from the University of Malaya in 1975. He worked for twenty years (1975-1996) for an oil and gas exploration and production company Petronas Carigali Sdn Bhd in various technical and management positions, his last position being General Manager in-charge of Sabah Operations. From 1997-2001, he headed the Land Custody and Development Authority (LCDA) Sarawak, a body responsible for planning and development of lands for large scale commercial agriculture (oil palm, sago) plantations and property development throughout the State of Sarawak, through partnerships with listed and private companies. From 2002 to 2003 he was General Manager of the Sarawak Economic Development Corporation. From 2003 to the present, he continues to be involved in the Boards of various government and privately- owned companies in Sarawak and at the federal level. Encik Polit was a
