Kulim (Malaysia) Berhad (23370-V)
We CARE for Kulim (Malaysia) Berhad (23370-V) Suite 12B, Level 12 Tel Fax Email Website Tomorrow Menara Ansar +607 226 7692 +607 222 3044 [email protected] www.kulim.com.my Annual Report | 2011 65 Jalan Trus +607 226 7476 +607 222 3022 80000 Johor Bahru Johor MALAYSIA We CAR E fo r Tomo rr o w Annual Report 2011 Annual Report CONTENTS SECTION 1: 2011 Synopsis 4 2011 Highlights 5 Simplifi ed Group Statement of Financial Position 6 Statement to Stakeholders 22 Corporate Event Highlights 2011 24 Sustainability Event Highlights 2011 26 Recognitions and Accreditations 29 In the News 30 Financial Calendar
SECTION 2: About Kulim 34 Corporate Profi le 37 Corporate Milestones 40 Group’s Signifi cant Subsidiaries 42 Corporate Information 44 Board of Directors 53 Management Team 55 Organisation Chart
SECTION 3: Performance WE C.A.R.E Highlights and Statistics Kulim (Malaysia) Berhad believes that the spirit of caring is 58 Group 5-Year Financial Statistics integral to the prosperity and survival of our business. 61 Group Quarterly Performance 2011 Our concept of caring integrates and extends beyond our 62 Group Statement of Value Added 5-Year Plantation Statistics: capital providers, to include our employees, our society and 63 • Group our environment. It means building our COMPETITIVE • Malaysia capacity with intense biasness towards ACTION in generating • Papua New Guinea profi table growth whilst being fi rmly guided by our pledge to • Solomon Islands be RESPONSIBLE and ETHICAL. 67 5-Year Foods and Restaurants Statistics 68 Human Capital Statistics We CARE, so we ensure our shareholders are rewarded with 69 Shareholding Statistics superior returns. 71 Warrantholding Statistics 73 Share Price Performance and Volume Traded 2011 We CARE, so we teach and nurture the same spirit among our employees. SECTION 4: Segment Review We CARE, so we contribute and enrich the lives of our 76 Plantation community and society. 100 Foods and Restaurants 108 Intrapreneur Ventures We CARE, so we treat the earth with respect for it has given us our reason for being.
We CARE, so we share… SECTION 5: Sustainability 116 PART I: Kulim’s Sustainability in Context • Policy Framework • Policy, Strategy and Management System • Stakeholders Engagement • Commitments and Targets 122 PART II: Environmental Performance • Protecting and Conserving Biodiversity • Water Conservation • Addressing Climate Change Issues 128 PART III: Social Performance • Labour Standards • Employees Retention • Occupational Health and Safety • Empowering Women • Community and Economic Contributions 136 PART IV: Doing Our Part for the Palm Oil Supply Chain
SECTION 6: Governance Statement 142 Corporate Governance Report 153 Internal Control Statement VISION 160 Audit Committee Report 164 Additional Compliance Information DELIVERING VALUE 165 Additional Disclosure To excel in delivering value to all our stakeholders through high performance teams who are committed to the highest standards of ethics, integrity and SECTION 7: Financial Statements professionalism. 167 Group Financial Statements
SECTION 8: Other Corporate Information 280 Locations of the Group’s Palm Oils Division Operations MISSION 282 Properties of the Group We aim to be the most progressive, effi cient, profi table • Malaysia and respectable corporate organisation. • Papua New Guinea We shall: • Solomon Islands • Enhance and deliver value to the stakeholders 297 Notice of Annual General Meeting • Optimise the use of resources 301 Statement Accompanying Notice of Annual General Meeting Proxy Form • Produce superior quality products • Be a socially and environmentally responsible corporate citizen • Operate with due regard for the welfare, health and safety of employees, the local community and the wider public. SECTION 1: 2011 SYNOPSIS 4 2011 HIGHLIGHTS 5 SIMPLIFIED GROUP STATEMENT OF FINANCIAL POSITION 6 STATEMENT TO STAKEHOLDERS 22 CORPORATE EVENT HIGHLIGHTS 2011 24 SUSTAINABILITY EVENT HIGHLIGHTS 2011 26 RECOGNITIONS AND ACCREDITATIONS 29 IN THE NEWS 30 FINANCIAL CALENDAR C OUR COMPETITIVE SPIRIT WILL CONTINUE TO DRIVE US TO FORGE AHEAD EXPANDING OUR MARKET REACH AND GLOBAL PRESENCE
OUR VISION IS CLEAR AND RESOLUTE – TO DELIVER VALUE TO OUR STAKEHOLDERS. IMPERATIVE TO THE REALISATION OF THE SET VISION AND ULTIMATELY OUR SURVIVAL IS OUR ABILITY TO COMPETE IN THE FAST-CHANGING AND DYNAMIC MARKET PLACE. THE THRUST TO OUR COMPETITIVENESS LIES IN OUR FAR-SIGHTED STRATEGY, BEING DRIVEN BY A CUSTOMER-CENTRIC AND MARKET-ORIENTED ATTITUDE, COMPETENT WORKFORCE, COHESIVE TEAMWORKING AND MORE PROFOUNDLY, A PASSION FOR EXCELLENCE. Kulim (Malaysia) Berhad (23370-V) 4 | annual report 2011 2011 HIGHLIGHTS
Revenue PBT from continuing operations 28.3% 75.4% to RM7,041.77 M to RM1,364.80 M from RM5,488.94 million from RM777.90 million
OPERATIONAL 2011 2010 Yield per hectare (tonnes) – Group 24.36 21.66 – Malaysia 21.89 19.01 – PNG 25.49 23.60 – SI 24.37 21.97
OER (%) – Group 22.07 21.78 – Malaysia 20.20 20.24 – PNG 22.85 22.42 – SI 21.86 21.63
SHAREHOLDERS’ RETURNS 2011 2010 % sen % sen Gross dividends for year ended 31 December: – Interim 20 5.00 15 7.50 – Special – – 85 42.50
Share price (RM) – Lowest 3.10 7.04 – Highest 4.22 14.20 annual report 2011 | 5 Kulim (Malaysia) Berhad (23370-V) SIMPLIFIED GROUP STATEMENT OF FINANCIAL POSITION
TOTAL ASSETS
6% 5% 7% 8%
Property, 7% plant and equipment 8% Intangible assets 2% Investments 6% 2011 Inventories 2010 Receivables 10% Cash 11%
64% 66%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
1% 3% 1% 2% 2% 7% 13% 9% 16% Share capital 9% Other reserves 7% Retained earnings Non-controlling interests 2011 21% 2010 Borrowings 21% Deferred tax liabilities 23% Payables 21% Current tax liabilities Others
23% 21% Kulim (Malaysia) Berhad (23370-V) 6 | annual report 2011 STATEMENT TO STAKEHOLDERS To all our stakeholders,
On behalf of the Board of Kulim (Malaysia) Berhad (“Kulim” or “the Group”) we are pleased to present the Annual Report and Audited Financial Statements of the Group for the fi nancial year ended 31 December 2011.
WE CARE FOR TOMORROW The Group achieved a record breaking year with revenue in excess of RM7 billion while for the fi rst time ever, profi t before tax breached the billion mark, at RM1.36 billion. All 3 divisions: Plantation, Foods and Restaurants and Intrapreneur Ventures, contributed higher revenues and profi ts.
The achievement is a testament to the contributions of our many stakeholders whose engagement helps drive our long-term sustainability and shareholder’s value. Indeed, our stakeholders have contributed immeasurably to the Group’s great success this year with their unstinting support. We thank and congratulate them on the deserved outstanding result achieved.
As the theme for the report this year – ‘We Care for Tomorrow’ suggests, we are setting in place a leaner organisational structure to drive our strategy, drawing together, along with the right systems, skills, people and shared values, all the elements to forge a higher performance company that will deliver sustainable returns for our shareholders in the coming years. All whilst taking cognisance of our role and responsibilities as a sizable player in our industries to help satisfy global needs while ensuring the protection of the environment and care for the well-being of the communities that we operate in.
In the Plantation Division, more milestones have been achieved. Fruit production and profi ts hit record highs of 2.38 million tonnes and RM1.13 billion, a refl ection of both the excellent performance by our operational personnel as well as the strong fundamentals in the oils and fats markets during the year. Similarly important is the fact that these encouraging results had been achieved as a culmination of various key corporate exercises undertaken during the past 2 years. Our London-listed subsidiary New Britain Palm Oil Limited’s (“NBPOL”) palm oil refi nery in Liverpool in the UK continues to capture new markets and we will be commissioning a bakery margarines and fats plant, whose products will be sustainable and fully traceable.
Our Foods and Restaurants business opened more new outlets and continues to invest in expanding the KFC franchise in India. Our Intrapreneur Ventures Division has also shown improved results.
There remains much to be done to further enhance our businesses to best position the Group to capitalise on all potential opportunities and meet the challenges of tomorrow.
We are however quietly confi dent that our objective to promote economically viable, socially equitable and environmentally sustainable production, processing and trade of palm oil can be achieved. annual report 2011 | 7 Kulim (Malaysia) Berhad (23370-V)
“THE GROUP ACHIEVED A RECORD BREAKING YEAR WITH REVENUE IN EXCESS OF RM7 BILLION WHILE FOR THE FIRST TIME EVER, PROFIT BEFORE TAX BREACHED THE BILLION MARK, AT RM1.36 BILLION.“
KULIM AND SUSTAINABILITY CORPORATE DEVELOPMENTS involving Sungai Papan Estate and Siang Estate was completed, injecting some 6,000 We regard the sustainable palm oil In March 2012, we embarked on a capital hectares of productive oil palm estates programme as one of our Corporate restructuring exercise to make our shares into the Group. Stage 2 of the proposed Responsibility fundamentals. Our goal is to more affordable and enable a wider spread acquisition is targeted for completion within integrate business into serving a higher social of investors to participate in Kulim’s growth. the fi rst half of 2012. cause, adding value to creation, embracing The exercise that involved share split, the sustainable use of land and water, issuance of bonus shares and free warrants, For several years, our then listed subsidiary, advocating appropriate treatment of wildlife, has also helped to enhance the liquidity and marketability of Kulim shares on the Sindora Berhad, had failed to meet the and leaving a lasting heritage for our future shareholding spread requirement of a generations. Our active representation in the Main Market of Bursa Securities. Kulim currently has 1.26 billion tradable shares as listed entity. On 16 August 2011, Kulim Roundtable on Sustainable Palm Oil (“RSPO”) announced a voluntary general offer to and the adoption of the RSPO Principles and opposed to 312.35 million shares previously. On top of that, the bonus shares and free acquire the remaining Sindora shares at an Criteria denote our systematic and planned warrants have rewarded Kulim’s existing offer price of RM3 per share. The offer price approach to achieve a balance between shareholders for their continuous support was subsequently revised to RM3.10 per People, Planet and Profi t. Towards this end, and will allow them to further participate share in September 2011. Subsequently on Kulim has established a comprehensive set of in the future growth of the Group when the 25 October 2011, Kulim announced that it policies and adopts an integrated approach warrants are exercised. had acquired greater than nine tenth (9/10) in developing the policy framework for our of the nominal value of Sindora shares sustainable development. Our environmental Kulim at its core is an agriculture company and accordingly invoked the compulsory performances on biodiversity and soil with palm oil as its dominant business. acquisition of outstanding Sindora shares conservation are covered in more detail in Thus we were pleased that after repeated pursuant to Section 222(1) of the Capital this report along with coverage of our social pursuits, our majority shareholder, Johor Market and Services Act 2007. On 30 programmes and involvement with the Corporation (“JCorp”), fi nally agreed to divest November 2011, Sindora was removed communities in which we operate and live. a signifi cant portion of its oil palm estates from the offi cial listing of Bursa Securities. Our sustainability policy framework inter- to us. On 16 August 2011, Kulim announced Completion was on 5 December 2011, upon relates with our Corporate Vision and Mission that its wholly-owned subsidiary, Mahamurni the bulk transfer of Sindora shares to Kulim. and is embraced within our corporate Plantations Sdn Bhd (“MPSB”) had entered Sindora since then has become a wholly- governance processes to ensure it has into conditional Sale and Purchase owned subsidiary of Kulim. direct relevance to the overall set corporate Agreements (“SPA”) with JCorp for the strategy and direction. The policy thus serves proposed acquisition of 6 oil palm estates of On 14 December 2011, Kulim announced as the foundation and overriding philosophy approximately 13,687 hectares, and 2 palm that that the Board of Directors of QSR of the Group’s continuous progress towards oil mills, for a total consideration of RM700 Brands Bhd (“QSR”) and KFC Holdings delivering value to all our stakeholders. million. An Extraordinary General Meeting (Malaysia) Bhd (“KFCH”) had, respectively, (“EGM”) was convened on 22 December 2011 received letters from Massive Equity Sdn Bhd and shareholders’ approval was obtained for (“MESB”) which set out MESB’s conditional the proposed acquisition. As at 31 December offer to acquire nearly all the businesses 2011, Stage 1 of the proposed acquisition and undertakings, including substantially all Kulim (Malaysia) Berhad (23370-V) 8 | annual report 2011
STATEMENT TO STAKEHOLDERS (continued)
of the assets and liabilities, of QSR and KFCH Group stands to record a substantial gain This results in Kulim’s shareholding in NBPOL respectively. Subsequently on 21 December from this exercise. We are proud of our record being reduced from 50.68% to 49.54% and 2011, the Board of Directors of QSR and in growing the business and increasing its renders NBPOL to be an associate company KFCH accepted the respective offers subject value. It has been an exhilarating period of Kulim, instead of a subsidiary. to the execution of the relevant Sale and we are pleased to recognise the many of Business Agreements (“SBA”). Further individuals for their contribution and in The issuance of 3.33 million new shares to IPBC, announcements by QSR and KFCH on 23 particular the role played by Jamaludin Md other than to streamline the shareholding April 2012 indicated that the parties are in Ali, the Managing Director of KFC Holdings structure at KPOL, is also strategically aimed the process of fi nalising the SBA. (Malaysia) Bhd and QSR Brands Bhd. to enhance the existing good cooperation and relationship between NBPOL and the Subject to the completion of the whole An equally significant development is the provincial governments in PNG. A further 1.7 exercise, Kulim will effectively exit the Foods announcement by NBPOL on 25 April 2012 million shares are also planned to be issued and Restaurants business. The impact of this that it had issued 3,333,147 new NBPOL to New Britain Nominees Limited to assist in move to the Group’s fi nancial performance shares to the Independent Public Business potential acquisition of approximately 20,000 and position upon deconsolidation is Corporation of Papua New Guinea (“IPBC”) hectares of new leases in PNG, and to New expected to be significant. Nonetheless, as consideration for the acquisition of 20% Ireland Development Corporation (“NIDC”) should the divestment come to fruition, the interest in Kula Palm Oil Limited (“KPOL”). to streamline shareholdings in KPOL’s subsidiary, Poliamba Limited, representing the continuation of NBPOL’s long term KULIM AND KFCH established process of land acquisition. 2002-2006 2007-2011 Going forward, Kulim will no longer New Stores 60 188 consolidate NBPOL’s accounts and instead their results will be equity-accounted. Market Capitalisation RM1.07 billion RM3.05 billion Nonetheless, we expect that impact to the (31.12.2006) (31.12.2011) Group’s cash fl ow and Group’s bottom-line CAGR* (%) at Profit After Tax and Minority Interests (“PATMI”) level to be minimal. Revenue 5.1% 12.9% The imminent exit from the Foods and Shareholders’ Funds 6.5% 15.2% Restaurant business as well as the change in Share Price 12% 23.3% status of NBPOL from subsidiary to associate company will reduce borrowings at Group FBM KLCI 11.1% 6.9% level, thus further strengthening the Group’s Balance Sheet. * Compound Annual Growth Rate annual report 2011 | 9 Kulim (Malaysia) Berhad (23370-V)
REVIEW OF EXTERNAL BUSINESS coupled with a jump in productivity contributed to the large increase. Despite this massive ENVIRONMENT uplift in production, world demand remained robust. Growth would have been higher but for the consumption slowdown observed in the European Union owing to unstable macro The Arab Spring and the monetary travails of economic conditions. Food demand increased by 4% with much of the growth coming the Eurozone were the defi ning backdrops from China, India and other emerging economies while growth from matured economies for the year 2011. Overall, global growth was almost fl at. eased from 3.8% in 2010 to 3.2% in 2011 even as the global recovery broadened to Palm oil accounts for 21% and 47% of the global oils and fats production and trade encompass more fi rms, more countries and respectively. Both Malaysia and Indonesia together are the world’s largest producers and more components of aggregate demand. exporters of palm oil holding 84% and 90% shares of world palm oil production and There is cautious optimism that improving export, respectively. Palm oil has played an increasingly dominant role in the world oils labour market conditions in high-income and fats supply and demand equation during the past 40 years. The ascent of palm oil as countries and strongly expanding domestic a powerhouse in the global oils and fats market augurs well for palm oil in its role as the demand in developing countries will driving force of the world oils and fats economy and the future prospects on the Group’s continue to spur global economic recovery. core plantation business in Malaysia, Papua New Guinea and the Solomon Islands. The Malaysian economy recorded a steady pace of growth of 5.1% in 2011 (2010: GROUP FINANCIAL RESULTS 7.2%), despite the challenging international economic environment. Growth was lower All 3 core business divisions recorded growth in terms of revenues and operating profi ts. in the first half of the year, particularly in the second quarter, as the economy was REVENUE 2011 EBIT 2011 affected by the overall weakness in the 6% 3% -1% advanced economies and the disruptions in the global manufacturing supply chain 20% arising from the natural disaster in Japan. Although the global economic environment became increasingly more challenging and uncertain in the second half-year, Malaysia’s RM7.04 RM1.44 economic growth improved due to stronger billion 46% billion domestic demand. 48% From a global perspective an unprecedented 78% increase in global palm oil production of 9% to some 50.13 million tonnes was boosted by a very good cropping year in 2011. The expansion in Indonesia and other regions Plantation Foods and Restaurants Intrapreneur Ventures Others Kulim (Malaysia) Berhad (23370-V) 10 | annual report 2011
STATEMENT TO STAKEHOLDERS (continued)
REVENUE The Foods and Restaurants segment PROFITABILITY recorded a solid 10.3% increment adding The Group’s Foods and Restaurants as Earnings before interest and tax (“EBIT”) sales of RM314.08 million to reach RM3.35 well as Plantation Divisions were the billion compared to RM3.04 billion in the increased by a remarkable 68.9% to largest contributors to Group revenue, corresponding period. The growth was RM1.44 billion from RM850.79 million at 48% (2010: 55%) and 46% (2010: 38%) mainly driven by the restaurants business in the prior year. Consequently, the EBIT respectively; the Intrapreneur Ventures with the opening of new KFC and Pizza margin improved to 20.4% from 15.5% in (“IV”) division’s contribution remained fairly Hut restaurants locally and regionally. 16 the previous year. constant with 6% (2010: 5%). new Pizza Hut restaurants, 42 Pizza Hut Delivery (“PHD”) outlets, and 24 new KFC Signifi cantly, pre-tax profi t from continuing Revenue rose by RM1.55 billion to RM7.04 restaurants were added in 2011. This operations had increased by RM586.90 billion in 2011, the highest ever revenue was in addition to the launching of the million or 75.4% to RM1.36 billion in 2011 recorded in Kulim’s history and an increase KFC 500th Restaurant Celebration, the ‘So from RM777.90 million in 2010. Pre-tax of 28.3% over the RM5.49 billion recorded Good’ thematic campaign, and extensive profi t margin from continuing operations in 2010. marketing programmes as well as the improved to 19.4% from 14.2% in 2010. introduction of innovative new products. The significant increase in revenue was mainly due to higher palm product prices As in the previous year, the Plantation The revenue from the IV Division also fetched during the year by the Plantation Division still accounted for the largest recorded commendable growth of Division as compared to 2010. Average share of the Group’s EBIT at 78% (2010: RM103.82 million or 35.5%, from RM292.80 CPO prices per tonne achieved in Malaysia 78%); Foods and Restaurants Division came million to RM396.62 million in 2011 mainly ascended to RM3,193 (2010: RM2,604) and next, albeit lower at 20% (2010: 32%); and driven by shipping business under E.A. in Papua New Guinea (“PNG”) and Solomon IV Division contributed 3% (2010: 2%). Technique (M) Sdn Bhd (“EA Technique”) Islands (“SI”) to USD1,108 (2010: USD850). and its subsidiary, Orkim Sdn Bhd (“Orkim”), This year the Group’s accounts also refl ect The growth in the Group’s profitability with the successful deliveries of 10 newly Kula Palm Oil Limited’s (“KPOL”) full-year was substantially driven by the stellar constructed vessels, all of which had secured revenue versus 8 months results in 2010. long-term contracts with oil majors. performance of the Plantation Division, particularly by the PNG and SI operations whose profits alone almost doubled to RM893.22 million. High prices obtained for other palm products also were a contributing factor, along with increased annual report 2011 | 11 Kulim (Malaysia) Berhad (23370-V)
productivity, as well as better fresh fruit The loss recorded by KFC India was mainly “THE GROWTH IN THE bunch (“FFB”) yields and palm product due to high initial start-up costs as it is GROUP’S PROFITABILITY extraction rates. still in the gestation period. Following the opening of the new KFCH International WAS SUBSTANTIALLY In Malaysia, the increase in estate operating College’s Bandar Dato’ Onn campus in DRIVEN BY THE STELLAR costs, arising mainly from higher labour Johor, the education segment incurred PERFORMANCE OF THE and fertiliser costs, were absorbed by the higher marketing expenses for advertising PLANTATION DIVISION...” higher production of FFB. The unit cost of and promotions in the media. Aggressive production in 2011 was steady at RM1,790 promotion to solicit student intake was per tonne CPO (2010: RM1,775 per tonne undertaken via participation in education CPO), before kernel credits. fairs and career talks, collaboration with REVENUE Government agencies, and by running short In addition, profitability also improved courses and certifi cation programmes. % from the full-year profit before tax (“PBT”) 28.3 contribution from the KPOL estates of USD57.8 Results from the Cambodian operations to RM7.04 B million compared to the 8-month result of were damped by a weak economy although from RM5.49 billion approximately USD29 million in 2010. it is now showing signs of recovery. KFC Cambodia registered encouraging sales but The Foods and Restaurants Division, despite its profi tability was affected by the high cost recording steady growth in revenue, of both local poultry products and imported PBT FROM turned in only a marginally 2.4% higher raw materials. Steps are being taken actively CONTINUING operating profit than last year. While the to source for cheaper alternative suppliers OPERATIONS Pizza Hut and KFC restaurants in Malaysia, and review the marketing programmes Singapore and Brunei were recording good to improve sales throughput at the % levels of profit growth, the overall result restaurants. Impairment on fixed assets 75.4 was tempered by losses incurred by the for 4 non-performing restaurants was also to RM1.36 B operations in Cambodia and India as well prudently taken. from RM777.90 million as costs associated with the start of the new KFCH International College campus in Johor Bahru. Kulim (Malaysia) Berhad (23370-V) 12 | annual report 2011
STATEMENT TO STAKEHOLDERS (continued)
In addition, the integrated poultry segment Finance cost increased by 12.3% to RM91.48 BALANCE SHEET registered a lower profi t as it was signifi cantly million from RM81.44 million in 2010, mainly The Group’s cash position as at the end of affected by the higher cost of feed for its due to a higher interest expense recorded 2011 improved notably to RM645 million broiler farming as well as increased energy, by NBPOL as a result of the refi nancing of from RM452 million last year demonstrating storage and other operating costs. The the 12-month USD200 million loan for the the fi nancial health of the business. segment also incurred a higher cost for acquisition of KPOL with a USD240 million broiler purchases from the open market long-term loan. The Group’s total borrowings stood at RM2.62 to meet the increasing demand by KFC billion, a signifi cant 36% increase from last Malaysia’s operations. Interest cover was more than satisfactory, year’s RM1.93 billion, mainly attributable to increasing to 15.92 times as compared to an additional RM375 million loan acquired to The IV Division recorded a substantial 10.55 times in the previous year due to the part fi nance the acquisition of JCorp estates, improvement in operating profi t of 224.5% higher EBIT recorded this year. a USD240 million term loan secured by or RM29.71 million, from last year’s RM13.23 NBPOL to refi nance the short-term USD200 million, mainly driven by the new tanker Earnings per share (“EPS”) from continuing million loan obtained previously to fund deliveries and the commencement of income activities increased to 45.90 sen for the the acquisition of KPOL, and an increase in generation from these tankers as all are fully current year from 18.73 sen in 2010 (adjusted Sindora’s and QSR’s borrowings of RM163 secured with long-term contract with oil for share split and bonus shares), refl ecting million and RM101 million respectively, majors. The operating profi t margin on the this year’s record highest profi ts attributable mainly for expansion purposes. IV business also improved significantly to to shareholders in the Group’s history. 10.8% from 4.5% in 2010. As a result, gross and net gearing increased to 0.38 times and 0.29 times respectively SHARE PRICE MOVEMENT 2011 (2010: 0.35 times and 0.27 times respectively), 40% KLCI nevertheless staying within prudent Plantation Index parameters. 30% Kulim Group shareholders’ funds recorded a commendable improvement of 20.4% to 20% RM4.29 billion as at December 2011 from RM3.57 billion in December 2010, refl ecting 10% the high PATMI recorded in 2011. Net assets per share also increased to RM3.48 from RM2.80 in 2010 (adjusted for share split and 0% bonus shares).
-10% Kulim : 35.73% FBM KLCI : -0.18% Plantation Index : 0.36% RETURNS TO SHAREHOLDERS -20% SHARE PRICE Jan Feb Mac Apr May Jun Jul Aug Sep Oct Nov Dec From a closing price on 31 December 2010 of RM12.74, Kulim’s share price recorded strong growth during the first 2 months SHARE PRICE MOVEMENT 2011 – LISTED SUBSIDIARIES of 2011, trading at its highest level ever at RM16.00 per share. After the share split (1 40% NBPOL share split into 2 shares) and issuance of QSR 30% bonus shares (1 for 1) was completed on KFCH 24 February 2011, Kulim’s share closed at RM3.63 on even date. 20%
Kulim also issued free warrants (1 free 10% warrant for every 8 shares) as reward to its owners. This exercise was completed by early 0% March 2011.
-10% Kulim’s share price grew by 35.73% in 2011, NBPOL : -19.49% well outperforming the FBM KLCI and the -20% QSR : 30.05% Plantation Index which tracked a gain of KFCH : 1.75% 0.36% and loss of 0.18%, respectively. Kulim’s -30% market capitalisation reached RM5.21 billion Jan Feb Mac Apr May Jun Jul Aug Sep Oct Nov Dec as at 31 December 2011, a 31% improvement from RM3.98 billion as at 31 December 2010. annual report 2011 | 13 Kulim (Malaysia) Berhad (23370-V)
All listed subsidiaries within the Group, corporate exercises undertaken during the have the effect of increasing the value of except NBPOL, also recorded positive year. Nonetheless, for Kulim’s shareholders shares outstanding in the hands of our growth in their share prices, refl ecting the who have owned Kulim shares prior to the shareholders, will continue to remain a improvement in market sentiment during capital restructuring at end of February 2011, practical strategy when the Board believes the year and investors’ confi dence. NBPOL’s this interim dividend theoretically can be the market is under-pricing the shares. share price rallied from the start of the year translated into a net dividend of 20 sen Further exercises will be evaluated at before peaking at the end of the second per ordinary share of RM0.50 each, or 40% opportune times. quarter and ending the year lower. based on Kulim’s previous par value. The interim dividend was paid in December 2011 The share volume traded in 2011 was 4.24 DIVIDENDS amounting to RM61.72 million. billion units (2010:1.20 billion units). Warrant conversion in 2011 amounted to 500 units. The Group declares and pays annual dividend after taking due consideration on SHARE BUY-BACK As part of our effort to promote robust various factors including the level of available The programme was carried out in 2011 and effective investors’ relations, we held cash and cash equivalents, retained earnings with 14.84 million shares bought back at an 6 meetings, 2 conference calls, 5 company and projected levels of capital expenditure average purchase price of RM3.40, signalling visits and participated in 4 roadshows, and other investment plans. During the to the market that the management believes including 2 international roadshows during year, Kulim declared an interim dividend that Kulim’s share price is undervalued. As the year. Foreign shareholding of Kulim stood for the year ending 2011 of 20% or 5 sen at 31 December 2011, total treasury shares steadily at around 16% in 2011, signalling the net per ordinary share of RM0.25 each. The held by Kulim was 27.48 million, averaged confidence long-term investors, including lower dividend is refl ective of several major at RM3.50 per share. Share buy-backs, which those abroad, have in Kulim.
“...THIS INTERIM DIVIDEND THEORETICALLY CAN BE TRANSLATED INTO A NET DIVIDEND OF 20 SEN PER ORDINARY SHARE OF RM0.50 EACH, OR 40% BASED ON KULIM’S PREVIOUS PAR VALUE.” Kulim (Malaysia) Berhad (23370-V) 14 | annual report 2011
STATEMENT TO STAKEHOLDERS (continued)
SEGMENT HIGHLIGHTS Malaysian Plantations PLANTATIONS The Malaysian estates recorded a marked The Group’s plantation operations turned increase in FFB production of 15.6%, mainly GROUP’S FFB in yet another strong performance in 2011 due to better rainfall and the benefi t of a PRODUCTION with a record harvest of 2,375,388 tonnes of relatively more stable workforce compared FFB from the Malaysian, PNG and SI estates. to the labour conditions prevailing in 2010, % This represented a positive growth of 19.6% producing a total of 636,761 tonnes of against a total of 1,985,619 tonnes of Group FFB in 2011. The yield per hectare in 2011 19.6 increased to 21.89 tonnes from 19.01 tonnes FFB produced in 2010, the upswing owing to 2.38 million tonnes to a cyclical biological surge in the crop in the preceding year. from 1.99 million tonnes and good weather. The Malaysian estates produced 27% of total Group FFB (2010: In Malaysia, total CPO production was 28%); PNG estates produced 68% (2010: 185,666 tonnes in 2011 which was higher by 66%), whilst the SI estates’ contribution 13.74%, than the 163,233 tonnes in the prior shrunk slightly to 5% (2010: 6%). The Group’s year. PK production was 53,678 tonnes, an planted area to oil palm increased to 118,655 increase of 12.39% from the 47,758 tonnes in hectares as compared to 112,224 hectares in 2010. The Group’s Malaysian mills’ extraction 2010. rates were affected by wet weather in early 2011 and higher purchases of variable The Group continues to pursue its “30:30” quality third party crop that increased from initiative with the objective of raising fruit 345,281 tonnes in 2010 to 365,151 tonnes in yields to 30 tonnes per hectare and palm 2011. So in terms of oil yield, the Malaysian product extraction rates to 30%. Results this plantations recorded an increase from 5.63 year have been positive and well over the tonnes CPO per hectare in 2010 to 6.38 Malaysian industry standard. Further gains tonnes in 2011. are anticipated by the recent replanting with higher yielding hybrids and the lowering of the average age of the trees. annual report 2011 | 15 Kulim (Malaysia) Berhad (23370-V)
To sustain higher production, the Group is “THE MALAYSIAN ESTATES RECORDED A MARKED INCREASE IN committed to improving the age profi le of its plantations. In Malaysia, 868.29 hectares FFB PRODUCTION OF 15.6%, MAINLY DUE TO BETTER RAINFALL were replanted in 2011. By the end of 2011, AND THE BENEFIT OF A RELATIVELY MORE STABLE WORKFORCE taking into consideration the 6,000 hectares COMPARED TO THE LABOUR CONDITIONS PREVAILING IN 2010...” of oil palm estates acquired from Johor Corporation, the Malaysian estates’ average In PNG and SI, NBPOL continued to expand NBPOL’s fi rst methane capture plants in West palm age decreased slightly to 12.40 years in their palm oil production base with the New Britain is a major step forward for the December 2011, from 12.90 years in 2010. addition of 1,582 hectares of new plantings company as it begins to utilise the potent in West New Britain and Ramu Agri-Industries greenhouse gas as an energy source and PNG and SI Plantations Limited (“Ramu”). Replanting of 1,544 reduce carbon footprint. Commissioning of With weather conditions across PNG and SI hectares was completed across Guadalcanal the plants is expected in the first half of favourable for crop growth during 2011, the Plains Palm Oil Ltd (“GPPOL”), Higaturu, Milne 2012. The power will be utilised to supply overall palm product extraction rate for 2011 Bay and Poliamba. the housing estates and refi nery as well as was 28.21%, an increase from the 2010 result supplying the local grid in support of rural of 27.50%. FFB production from the PNG Supported by the full year’s contribution of electrification through an agreement with and SI estates increased to approximately fruits from the newly acquired KPOL estates PNG Power. 1.74 million tonnes supported by the full at Higaturu, Milne Bay and Poliamba, the PNG production from the newly acquired KPOL and SI mills registered a record year with NBPOL is embarking on the construction of estates at Higaturu, Milne Bay and Poliamba 591,477 tonnes of crude oils (crude palm oil a further 3 CDM projects in West New Britain, in the New Ireland Province, PNG. and palm kernel oil) produced, representing Higaturu and Milne Bay. In West New Britain, a 23.5% increase over 2010. the team is proud to have completed the In PNG and SI, NBPOL has 78,332 hectares second fractionation plant at the Kumbango planted with oil palm of which 68,438 The new mill commissioned at Waraston refi nery, which will supply specialised palm hectares are being harvested with the increases the total processing capacity in West products to Ferrero Rocher. balance being immature oil palms that were New Britain from 260 to 320 tonnes of fruit planted over the last three years. Yield of FFB per hour. In SI, the mill upgrade at Tetere from per hectare over the area under harvest was 25 to 45 tonnes per hour was completed with 25.4 tonnes (2010: 23.7 tonnes per hectare). further work on the kernel mill ongoing. At Ramu, work commenced at the Gusap palm oil mill during the year to increase the capacity from 30 to 45 tonnes per hour. Kulim (Malaysia) Berhad (23370-V) 16 | annual report 2011
STATEMENT TO STAKEHOLDERS (continued)
Palm Oil Refi nery in Liverpool, United Kingdom In Liverpool, New Britain Oils Limited (“NBOL”) refinery operation, as a result of a further multi-million pound investment, is scheduled to produce its fi rst packed products for sale into the UK bakery and foodservice sectors in the first quarter of 2012. This will give NBOL the largest range of fully traceable sustainable products in the market.
Sugar production During the year, the operation harvested some 397,328 tonnes of cane from 7,311 hectares. This was an improvement on 2010 when 375,822 tonnes of cane was for the PNG market, generating revenue of International College expanded further harvested. The sugar factory with a capacity PGK14.9 million. Additional investment in during the year, now spanning 2 campuses, of processing 500,000 tonnes of cane was stock yards and machinery for both silage and is positioned to provide the Foods and therefore under little pressure. Overall sugar production and pasture improvement are all Restaurants business with trained candidates recovery from cane processing improved in contributing to better effi ciencies. for managerial roles. 2011 to 81.4% from 79.3% in 2010. FOODS AND RESTAURANTS In 2011, the total number of outlets operating Beef Production under our Foods and Restaurants brands – All our brands were strengthened in 2011 Pizza Hut, KFC, Kedai Ayamas and RasaMas – NBPOL remains the largest producer of and the recent expansion of KFC into India exceeded the 1,000 mark for the fi rst time by beef in PNG. However, beef production will was consolidated. QSR Brands Bhd (“QSR”) growing to 1,063 units from 978 in 2010. By continue to play only a minor role in the and its subsidiaries continued to add new December 2011, we had 307 Pizza Hut and overall investment strategy. The herd size outlets and executed their programmes 756 KFC/Kedai Ayamas/RasaMas restaurants showed some growth with 20,000 cattle for image enhancement, always reaching and we now operate across 5 countries in managed in 2 separate locations. The herd out to new markets and strengthening Asia, from Brunei to India. produced some 1,284,000 kilograms of beef the loyalty of existing customers. KFCH Revenue at the Foods and Restaurants Division in 2011 rose by 10.3% to RM3.35 billion. However profi t before tax increased only marginally, by 1.2% to RM269.96 million against RM266.86 million in the previous year, as a consequence of start-up costs and rising expenses at the new KFC restaurants in Cambodia and India.
2011 brought QSR widespread recognition. Yum! Brands presented Pizza Hut Malaysia with the Franchisee of the Year Award in the dine-in category, the People’s Choice Best Remodel Award, and the Best Advertising Award. BrandLaureate voted Pizza Hut the Best Brand in the Food & Beverage Pizza category, and Readers’ Digest presented us with their Trusted Brand Gold Award.
At KFC’s 13 outlets in India, in Pune, Mumbai and Aurangabad, sales more than tripled to RM19.8 million. Capitalising on the Indian passion for Cricket, KFC India was an Offi cial Partner in the 2011 ICC World Cup. The staff donned special tournament T-shirts, and customers took advantage of the limited- time offer of meals served in a cricket- themed Fan Bucket. annual report 2011 | 17 Kulim (Malaysia) Berhad (23370-V)
“BY DECEMBER 2011, WE is also continuously seeking better cost Our subsidiaries EA Technique and Orkim effi ciencies and improving productivity at have propelled the Group to becoming an HAD 307 PIZZA HUT AND all its business segments. Culinary skills important player in the maritime sector 756 KFC/KEDAI AYAMAS/ and great service will continue to reinforce and positioned us as the second biggest RASAMAS RESTAURANTS AND customer loyalty, while creative products shipping company in Malaysia in the clean and marketing will entice new customers as petroleum product tanker category. WE NOW OPERATE ACROSS well as long-time customers. 5 COUNTRIES IN ASIA, FROM Both companies operate in niche markets BRUNEI TO INDIA. “ INTRAPRENEUR VENTURES providing long-term charter contracts for the transportation of clean petroleum product, Results at the Intrapreneur Venture (“IV”) and upstream exploration support, for oil Division were encouraging. Revenue in 2011 majors. The substantial improvement in increased by 35.5% to RM396.62 million, from performance in both companies in 2011 was RM292.80 million in the previous financial the result of the successful deliveries of 10 KFCH International Colllege enrollment year. Operating profi t more than doubled to newly constructed tankers for commission currently stands at 700 students on RM42.94 million from RM13.23 million. campuses in Puchong and Johor Bahru. under long-term charter contracts. The higher full year contributions from these On offer are 9 diploma programmes in a The good performance this year was new vessels will be felt in 2012. variety of hospitality-related disciplines, as attributable mainly to the growth of the well as Early Childhood Education, Business shipping segment. The IV portfolio’s other The Group also provides offshore support Administration, Information Technology, and start-ups are in the early stage of investing, vessels and manages third party vessels. Electrical & Electronics. building prototypes and gathering feedback Currently, EA Technique provides 9 vessels and data from their customers to build for offshore support services that includes 2 The food sector is relatively resilient but sustainable businesses. We will continue fast crew boats, 4 mooring boats, 2 harbour it faces inflationary cost pressures. QSR identifying promising start-ups for incubation tugs and a security boat, while Orkim plans to generate earnings by continuing and give them access to the resources needed manages 2 vessels owned by a third party to drive the topline aggressively through to grow, prosper, improve earnings, add value, for an oil major. The construction of the new and repeat customer purchases. QSR and maximise returns to shareholders. Kulim (Malaysia) Berhad (23370-V) 18 | annual report 2011
STATEMENT TO STAKEHOLDERS (continued)
PROSPECTS AND PLANS The global economy is expected to post a more moderate growth in 2012. The IMF has lowered its forecast for 2012 global growth to 4%. The US economy is proving to be resilient and is expected to grow about 2.3%, an improvement from 2011 but well below the rate needed to make much of a dent in the unemployment rate. In the housing market, on a downtrend for 5 years, price expectations have changed from negative to positive. Consumer confi dence is up. Ramped up motor vehicle assemblies are helping revive industrial activity, while oil and gas production has increased sharply, buoyed by higher prices. Consumer spending has benefited from improving employment gains, and cash fl ows are being bolstered by sharply lower borrowing costs that have accelerated refinancing activity. Solid corporate profits are exceeding expectations so far in 2012 and will help boost confidence of business managers, encouraging more hiring and investment. A strong, sustained expansion though remains elusive in an election-year with uncertainty about tax rates and the spending cuts necessary to trim the federal defi cit.
The still unfolding Euro zone debt crisis is hurting the region’s growth outlook and weighing on the exports of the European new tankers, and disposals of ageing vessels, Union’s key trading partners, which includes “THE SUBSTANTIAL have resulted in a much lower average age China. In Europe, rising unemployment will profi le for the fl eet and enabled the Group IMPROVEMENT IN work against any quick recovery in light of to position itself to seize opportunities in the PERFORMANCE IN the unprecedented structural adjustments shipping market ahead of competitors. 2011 WAS THE RESULT related to wages and productivity needed to regain export competitiveness. Household OF THE SUCCESSFUL Our shipbuilding and ship repair facility, deleveraging in the more highly indebted Johor Shipyard and Engineering Sdn DELIVERIES OF 10 developed nations will continue, with most Bhd (“JSE”) has the potential to become NEWLY CONSTRUCTED countries embarking upon a multi-year a major contributor considering that the period of fiscal consolidation. Fortunately, TANKERS FOR high demand for ship repairing facilities is there appears to be greater confi dence that COMMISSION UNDER currently being met by a limited number of the developing economies have engineered a yards around the region. LONG-TERM CHARTER soft rather than a hard landing. Construction and investment activity remains quite fi rm, CONTRACTS. THE JSE has identified a 10-acre site at Hutan helping to keep employment and spending HIGHER FULL YEAR Melintang, Bagan Dato, Perak for its in the relative fast lane of growth. CONTRIBUTIONS FROM permanent base. Currently, JSE is preparing basic facilities for the shipyard that is THESE NEW VESSELS However the rise in the price of crude oil expected to become fully operational by poses a growing threat to many income- WILL BE FELT IN 2012.” the end of 2012. The shipyard will be able to constrained consumers and businesses accommodate vessels of up to 10,000 dead- around the world, and a risk to many emerging weight tonnage (“dwt”) for construction nations battling domestic infl ation. Crude oil or repair. Besides shipbuilding, to diversify prices began to fi rm up in the second half of revenues, the yard will also become involved last year as escalating geopolitical tensions in steel fabrication for the offshore oil and again in the Middle East, this time involving gas industry. potential supply disruptions surrounding Iran and Syria, caused the price of crude oil annual report 2011 | 19 Kulim (Malaysia) Berhad (23370-V)
to jump close to USD110 a barrel, a level previously reached in the fi rst quarter of last year that contributed to the cooling down of US and global growth.
Amid the more challenging external environment, Malaysia’s economy is projected to experience a steady pace of growth of 4% – 5% in 2012. Domestic demand is expected to remain resilient and will continue to be the anchor for growth. Several measures that were announced in the 2012 Budget are expected to provide support to private consumption. These include the upward revision of public sector wages and the one- off fi nancial assistance to low and middle- income groups. Private investment will be supported by domestic-oriented industries and the ongoing implementation of projects under the Economic Transformation Programme (“ETP”). “AVERAGE PALM OIL PRICES ARE LIKELY TO BE SUSTAINED The Malaysian public sector will remain AT AROUND RM3,000 (USD990) PER TONNE LEVEL NEXT supportive of growth in 2012, with higher YEAR ON THE ANTICIPATION OF TIGHT SUPPLIES AFTER capital expenditure by both the Federal Government and the non-financial public SPELLS OF ERRATIC WEATHER AND STABILISING GLOBAL enterprises. The implementation of the ECONOMIC OUTLOOK. ” Special Stimulus Package through Private Financing Initiative that was announced sentiment has improved in recent weeks as Underlining the importance of research in in the 2012 Budget would provide further dominant Southeast Asian producers enter producing high quality planting materials, impetus to real activity during the year. the rainy season and the La Nina weather the Group will construct a new purpose- While the domestic drivers appear positive, pattern is seen to be returning. built dedicated R&D complex in Malaysia, global concerns may weigh down on the scheduled to be ready by 2013 which will near-term outlook of the Malaysian economy Average palm oil prices are likely to be also include the Group’s in-house genome and economic growth will likely get bumpier sustained at around RM3,000 (USD990) per research facility. Along with other major in the months ahead. tonne level next year on the anticipation of players, the goal of the research is to tight supplies after spells of erratic weather develop and utilise biotechnological tools Production in Indonesia, the world’s top and stabilising global economic outlook. to support and complement our crop palm oil producer, is estimated to rise by On the positive side, robust demand from improvement and agronomic research as much as 1.5 million tonnes next year emerging markets is likely to offset the early programme, which encompasses oil palm to 25 million tonnes. The major swings in effects of the Euro zone and its sovereign breeding, tissue culture, pests and diseases palm oil prices would come from Malaysia’s debt crisis that has been weakening demand control and agronomy. production, which will grow at an even for raw materials. An important factor in smaller rate, thanks to limited acreage. Next 2012 could be the intensifying competition NBPOL has commissioned its 12th palm oil year, Malaysia’s output is expected to rise. between Malaysia and Indonesia to capture mill in West New Britain, adding an annual Both countries account for more than 90 market share. Indonesia has the early processing capacity of over 300,000 tonnes percent of global supplies of the edible advantage with the introduction of a new of FFB, giving NBPOL increased capacity and oil, which is used in products such as food, tax structure. fl exibility to mill the rising West New Britain cosmetics and biofuels, which is likely to hit crop. NBPOL also increased its processing 48 million tonnes for 2012. We expect a positive impact next year from capacity in the SI from 30 to 45 tonnes of the acquisition of the plantation assets fruit per hour. With production growth normalised in from JCorp, by way of higher volumes of 2012, demand should grow steadily along FFB, CPO and PK in 2012. So far, we have Our RSPO certification process continues with increasing population and incomes. As completed the acquisition of 2 estates with and in 2011 NBPOL successfully completed supply is not going to be affected, we are the other 4 estates plus 2 palm oil mills the audit at Poliamba. We are targeting to going to see the global economic scenario expected to reach completion by mid-2012. have our remaining sites at Milne Bay and driving the oil market. Southeast Asian palm Including the impact of these acquisitions, Higaturu audited under RSPO as part of our oil prices may come under pressure as crop production from the Group’s Malaysian commitment to have all units and supply looming concerns over the global economy operation is expected to increase in 2012 chains certified as fully sustainable and weigh on Brent crude oil. Palm oil investor going forward. traceable by the end of 2012. Kulim (Malaysia) Berhad (23370-V) 20 | annual report 2011
STATEMENT TO STAKEHOLDERS (continued)
“THE GROUP EXPECTS TO COMMISSION ITS FIRST METHANE CAPTURE PLANT IN MALAYSIA AND 2 IN WEST NEW BRITAIN DURING THIS YEAR WHICH WILL SUBSTANTIALLY REDUCE OUR CARBON FOOTPRINT AS WELL AS DELIVER RENEWABLE ENERGY FOR OUR OPERATIONS AND THE WIDER COMMUNITY.”
The reporting and mitigation of carbon growth since the sixties was achieved through dioxide and other greenhouse gas emissions acquisitions and distinctive plantation can now be quantified and NBPOL has management practices which emphasised released its first Carbon Footprint report. continuous improvements in yields and As palm oil is such a ubiquitous product, cost efficiencies. As a major player in the we feel that this will prove to be another palm oil industry, which is the third biggest persuasive argument for companies to contributor to the Malaysian economy, Kulim switch to sustainable palm from the Group. looks forward to the challenge of ensuring its future will be as illustrious as its past. To tap another stream of income in the coming years, we are embarking upon The Group also looks forward to continuing downstream processing, turning the mills’ to receive tremendous value from its by-products such as biomass, POME and investment in NBPOL and has full confi dence biogas into high value-added end-products in the Board, and experienced management that can generate additional revenue. The team in PNG and SI, to continue delivering Group expects to commission its first outstanding results. methane capture plant in Malaysia and 2 in West New Britain during this year which will With a view to consider the possibility of substantially reduce our carbon footprint restarting Nexsol, our biodiesel plant, the as well as deliver renewable energy for our Group is being prepared for the International operations and the wider community. Sustainability and Carbon Certification (“ISCC”). ISCC recognition would offer With the acquisition of the JCorp estates, the access to the EU market and afford us an Group’s focus henceforth in the Plantation additional competitive edge, and further segment will be primarily on the Malaysian increase customer loyalty and marketability operation. The estate operation’s strong of sustainable palm products. annual report 2011 | 21 Kulim (Malaysia) Berhad (23370-V)
WORDS OF APPRECIATION The status of palm oil as it is today in the world market is without doubt due to the On behalf of the Board, we would like to signifi cant contribution by the Malaysian most sincerely thank all our employees palm oil industry. In fact, the country has for their loyalty, dedication and hard become a role model for many other work in making 2011 the best year in palm oil producing countries in their history for Kulim. We would also like to plans to spur economic development in thank all other stakeholders who have the agricultural sector and to gain foreign contributed, supported and believed exchange through exports of surplus in Kulim: our financiers, our business production. partners, all Government bodies and Regulatory Authorities that we dealt with The Palm Oils business will continue to and last but not least, our most valued form the backbone of our Group and loyal customers. the industry continues to face new challenges in the face of globalisation. We also would like to take this opportunity Rapid responses are needed to meet the to thank our fellow Board members for increasing challenges of the sector as they their valuable insights and thoughtful unfold. We are prepared to do our part. advice in helping us to steer Kulim into its current position. To further strengthen We care for tomorrow and we believe the Board in facing a more challenging that the best has yet to come for Kulim. tomorrow, we would also like to take this We hope all our shareholders will share opportunity to welcome the new directors in the excitement that we feel as we work of the Company - Zulkifl i Ibrahim, Datuk together to create a progressive business Ahmad Zaki Zahid, Wan Mohd Firdaus enterprise that is set to continue growing Wan Mohd Fuaad, Leung Kok Keong and profi tably. For tomorrow, as is today, our Natasha Kamaluddin. vision remains unchanged, to excel in delivering value progressively to all our stakeholders in a sustainable manner.
KAMARUZZAMAN ABU KASSIM AHAMAD MOHAMAD Chairman Managing Director Kulim (Malaysia) Berhad (23370-V) 22 | annual report 2011 CORPORATE EVENT HIGHLIGHTS 2011 annual report 2011 | 23 Kulim (Malaysia) Berhad (23370-V)
10 10 February 2011 5 13 July 2011 15 November 2011 Kulim’s Extraordinary General Kulim was announced as one of Kulim was announced as the winner the winners of The Edge Billion Meeting for the Share Restructuring for Industry Excellence Award (Main Ringgit Club Award 2011 during approval was held at Persada Johor Board) – Plantations and Mining, the Gala Dinner held at Shangri-La International Convention Centre, during NACRA award presentation Hotel, Kuala Lumpur. Johor Bahru. dinner held at Sime Darby Convention Centre, Kuala Lumpur.
6 1 18 – 19 July 2011 14 February 2011 Kulim participated in MPC Mini ICC 11 18 – 20 November 2011 An annual gathering of Group Convention – North Region held at Kulim participated in BN Youth Job employees, Pedoman 2011 with the Meritus Pelangi Beach Resort & SPA, Fair 2011, held at Putra World Trade theme “Membina & Membela”, was Langkawi. held at Persada Johor International Centre. Convention Centre, Johor Bahru.
25 - 26 July 2011 30 November 2011 Kulim participated in MPC Mini Removal of Sindora Berhad from 19 April 2011 ICC Convention – Central Region offi cial listing of Bursa Securities at Kulim participated in MPC Mini organised by MPC, held at Grand the conclusion of the privatisation ICC Convention – South Region Dorsett Hotel, Subang Jaya. exercise by Kulim. organised by Malaysian Productivity Corporation (“MPC”), held at Renaissance Hotel, Melaka. 7 27 – 28 September 2011 Kulim participated as the Silver 7 – 9 December 2011 Sponsor in The CSR Asia Summit Kulim participated in Hari Mekar 22 – 24 April 2011 2011, held at Istana Hotel, Kuala Johor Corporation 2011, an Lumpur. annual event organised by Johor Kulim participated in Karnival Corporation (“JCorp”) to promote Mahabbah IKIMfm, held at Kompleks total quality initiative, held at Mutiara Johor Land, Johor Bahru. Persada Johor International 8 19 – 20 October 2011 Convention Centre, Johor Bahru. Kulim participated in the MPC 2 National Convention 2011, an 18 June 2011 annual event organised by MPC, Gerak Kemas Perdana 2011, an held at Sunway Pyramid Convention 16 – 18 December 2011 annual event initiated by the Centre, Selangor. 5S Committee to promote the Kulim participated in the exhibition adoption of 5S ‘house-keeping’ during MyAgroSis Programme, held philosophy by focusing on effective at University Technology MARA work place organisation. 19 – 23 October 2011 (“UiTM”), Merbok, Kedah. Kulim participated in the exhibition during the Ekspo Beli Barangan Buatan Malaysia held at Persada 12 3 23 June 2011 Johor International Convention 22 December 2011 Kulim’s 36th Annual General Meeting Centre, Johor Bahru. Kulim’s Extraordinary General was held at the Puteri Pacifi c Hotel, Meeting for the acquisition of Johor Bahru. plantation assets from JCorp at total consideration of RM700 million was 9 held at Persada Johor International 28 – 30 October 2011 Convention Centre, Johor Bahru. 4 Kulim participated in the exhibition 23 – 26 June 2011 during the Malaysia International Kulim participated in Karnival Commodity Conference and Kerjaya, Perniagaan & Kemahiran Showcase (“MICCOS”) organised by 2011 (“KEPAK 2011”) held at Persada the Ministry of Plantation Industries Johor International Convention and Commodities at Malaysia Agro- Centre, Johor Bahru. Exposition Park, Serdang. Kulim (Malaysia) Berhad (23370-V) 24 | annual report 2011 SUSTAINABILITY EVENT HIGHLIGHTS 2011 annual report 2011 | 25 Kulim (Malaysia) Berhad (23370-V)
1 6 11 3 January – 25 – 27 April 2011 24 September 2011 12 February 2011 Pre-Retirement Programme, a Syukur Raya 2011, an annual employee KSRT Sports Carnival, an annual sports programme to emphasise personal gathering in conjunction with Aidilfi tri programme organised by Kelab Sukan fi nancial factors affecting employees’ organised by KSRT, was held at Kulim & Rekreasi Tiram (“KSRT”) with the aim retirement planning, was held at Corporate Offi ce, Ulu Tiram, Johor. to promote healthy lifestyle among Pulau Sibu. employees.
12 8 October 2011 7 May 2011 2 22 February 2011 Infaq 1 Warisan, a tree-planting project KWD Programme for Sindora Complex as part of Kulim’s sustainable initiatives, Inter Region Sports Carnival organised was held at Rengam Estate, Kluang. was held at Mungka Estate, Segamat. by KSRT and opened to all operating units within Kulim Group to promote commitment to healthy lifestyle 7 among employees. 12 May 2011 13 16 – 17 October 2011 Jointly organised by Kulim, Wildlife Kulim Family Day with the theme ‘We Conservation Society and several Are One’, was held at A’Famosa Resort 3 government agencies, a press Water World, Melaka. 6 March – 16 April 2011 conference on Tiger Conservation Kulim participated in Johor Corporation by the US Ambassador was held Sports Carnival 2011 and was declared at Persada Johor International as the overall champion. Convention Centre, Johor Bahru. 29 October 2011 Through KSRT, Kulim participated in the Charity Walk ‘World Hunger Relief 4 13 March 2011 8 25 June 2011 2011’ at Putrajaya. Majlis Maulidur Rasul, a religious WOW (Women OnWards) Carnival programme attended by Group was held at KSRT, with the aim to employees and surrounding promote handcrafting and cooking 14 11 – 13 December 2011 community, held at Masjid Jamek Ulu skills among female employees within Break That Pattern! To Maximise Value Tiram Estate. the Group. Creation – Senior management retreat held at Selesa Beach Resort, Port Dickson. 5 2 & 9 April 2011 9 25 June 2011 Kulim Wildlife Defenders (“KWD”) With the theme ‘Glitz Glamorous’, Programme, a programme opened to KSRT Dinner 2011 was successfully 15 17 December 2011 students from surrounding estates, held at Persada Johor International Karnival Sukan Rakyat & Senandung was successfully held at Sekolah Convention Centre, Johor Bahru. Irama KSRT was held to commemorate Kebangsaan Nam Heng, Basir Ismail traditional games. Estate. 2 July 2011 A religious talk by Dr. Fatma Az-Zahra 16 21 December 2011 14 – 24 April 2011 was held at KSRT, attended by the Program Seminar Keluarga Bahagia by Sultan Iskandar Challenge Trophy Group employees and surrounding Dato’ Dr. Hj. Mohd Fadzilah Kamsah, a 2011, an annual shooting competition, community. motivational talk jointly-organised by KSRT, jointly organised by Johor Clay was held at Persada Johor International Target Shooting Association (“JCTSA”) Convention Centre, Johor Bahru. and Majlis Sukan Negeri Johor (“MSNJ”) was held at Johor Clay 10 9 July 2011 Target Shooting Club, REM Estate, Kulim’s International Women’s Day Kota Tinggi. (“IWD”) 2011 was held at AKLI with 24 December 2011 the theme – ‘Wanita & Ekonomi’. 1-day trip to Universal Studio, Singapore, organised by KSRT. Kulim (Malaysia) Berhad (23370-V) 26 | annual report 2011 RECOGNITIONS AND ACCREDITATIONS
AWARDS RECEIVED IN 2011
RECEIVING COMPANY/ RECOGNITION AND ACCREDITATION AWARDED BY OPERATING UNIT
NACRA 2011 National Annual Corporate Report Award Kulim (Malaysia) Berhad • Winner of Industry Excellence Award (Main Board) – Plantations and Mining
Industry Excellence Award (Plantation Sector 2010/2011) • Basis Holdings Sdn Bhd Kulim (Malaysia) Berhad • Malaysia National News Agency (BERNAMA) • Malaysia External Trade Development Corporation (MATRADE)
Global Leadership Award 2011 - Plantation Sector The Leaders International Ahamad Mohamad (Kulim (Malaysia) Berhad)
The Edge Billion Ringgit Club Award 2011 The Edge Kulim (Malaysia) Berhad • Best Performing Stock - Highest Returns to Shareholders Over Three Years (Plantation Sector) • Highest Profi t Growth Company – Highest Growth in Profi t Before Tax Over Three Years (Plantation Sector)
Scored ‘A’ in Malaysian Corporate Governance (MCG) Index 2011 Minority Shareholder Watchdog Group (MSWG) Kulim (Malaysia) Berhad • Industry Excellence (Plantations)
ACCA MaSRA Awards 2011 ACCA Malaysia Kulim (Malaysia) Berhad • Shortlisted - Sustainability Report within Annual Report
Malaysia’s Best Certifi cate Federal Agriculture Malaysia Authority (FAMA) Kulim Montel Farm (Basir Ismail Estate)
3 Star (SME Competitiveness Rating for Enhancement) SME Corp Malaysia Kulim Civilworks Sdn Bhd annual report 2011 | 27 Kulim (Malaysia) Berhad (23370-V)
PAST AWARDS RECEIVING COMPANY/ RECOGNITION AND ACCREDITATION AWARDED BY OPERATING UNIT 2010 ACCA MaSRA 2010 ACCA Malaysia Kulim (Malaysia) Berhad • Winner – Best Sustainability Report • Commendation – Reporting on Strategy and Governance • Shortlisted – Sustainability Report • Shortlisted – Sustainability Report within Annual Report
NACRA 2010 National Annual Corporate Report Award Kulim (Malaysia) Berhad • Winner of Industry Excellence Award (Main Board) – Plantations and Mining
Prime Minister’s CSR Awards 2010 Ministry of Women, Family and Community Kulim (Malaysia) Berhad • Honorable Mention for Outstanding Work in Development Empowerment of Women
Scored ‘A in MCG Index 2010 MSWG Kulim (Malaysia) Berhad
Skim Amalan Ladang Baik Malaysia Department of Agriculture, Malaysia Kulim (Malaysia) Berhad 2009
Certifi cation for “Sustainable Palm Oil Producer” Executive Board of RSPO Kulim (Malaysia) Berhad – Plantations in Malaysia Global CSR Awards 2009 Pinnacle Group International Kulim (Malaysia) Berhad • Gold Award for Best Environmental Excellence Award CICM Responsible Care Awards 2007/2008 Chemical Industries Council of Malaysia Natural Oleochemicals Sdn Bhd Category: Oleochemicals (CICM) 1. Distribution Code – Merit 2. Process Safety Code – Merit 3. Employee Health and Safety Code – Merit 4. Product Stewardship Code – Gold Kulim (Malaysia) Berhad (23370-V) 28 | annual report 2011
RECOGNITIONS AND ACCREDITATIONS (continued)
RECEIVING COMPANY/ RECOGNITION AND ACCREDITATION AWARDED BY OPERATING UNIT
2009 (continued) ACCA MaSRA 2009 ACCA Malaysia Kulim (Malaysia) Berhad • Shortlisted • Winner of Best First Time Reporter • Commendation - Reporting on Strategy and Governance NACRA 2009 National Annual Corporate Report Award Kulim (Malaysia) Berhad • Silver Award for Most Outstanding Annual Report • Winner of Industry Excellence Award (Main Board) – Plantations and Mining MPOB Code of Practice 2009 for: Malaysia Palm Oil Board (MPOB) Sindora Estate • Good Agricultural Practice Sindora Palm Oil Mill • Oil Palm Nursery • Mill Operations 2009 South East Asia Frost and Sullivan Growth Strategy Frost and Sullivan Natural Oleochemicals Sdn Bhd Excellence Award for Oleochemicals ISO 9001:2008 Certifi cation SIRIM QAS International Sdn Bhd SIM Manufacturing Sdn Bhd National MPC 2009 Malaysia Productivity Corporation (MPC) Kulim (Malaysia) Berhad • Overall Champion • 1st Place for Service Category • 3-Star Award National MPC 2009 – 3-Star Award MPC Kulim (Malaysia) Berhad Kulim Montel Farm – Tereh Selatan Estate National MPC 2009 – 3-Star Award MPC Kulim (Malaysia) Berhad Sindora Palm Oil Mill 2008
Good Manufacturing Practice (GMP) MOODY International Natural Oleochemicals Sdn Bhd Dubois-Natural Esters Sdn Bhd
NACRA 2008 National Annual Corporate Report Award Kulim (Malaysia) Berhad • Winner of Industry Excellence Award (Main Board) – Plantations and Mining • Silver Award for Best Annual Report in Bahasa Malaysia
ACCA MESRA 2008 ACCA Malaysia Kulim (Malaysia) Berhad – Shortlisted
Anugerah Kecemerlangan Pengurusan Keselamatan dan Ministry of Human Resources Selai Estate Kesihatan Pekerjaan Negeri Johor 2008
New Company of the Year Award – 2008 London Stock Exchange New Britain Palm Oil Limited
Certifi cation for “Sustainable Palm Oil Producer” Executive Board of RSPO New Britain Palm Oil Limited
National MPC 2008 – MPC Kulim (Malaysia) Berhad 3rd Placing for Service Category, 3-Star Award Sindora Estate
National MPC 2008 – 3-Star Award MPC Kulim (Malaysia) Berhad Sindora Palm Oil Mill 2007
ACCA MESRA 2007 ACCA Malaysia Kulim (Malaysia) Berhad – Shortlisted
HALAL Certifi cation Jabatan Kemajuan Islam Malaysia Dubois-Natural Esters Sdn Bhd Natural Soaps Sdn Bhd
annual report 2011 | 29 Kulim (Malaysia) Berhad (23370-V) IN THE NEWS Kulim (Malaysia) Berhad (23370-V) 30 | annual report 2011 FINANCIAL CALENDAR 2011
QUARTERLY RESULTS SHARES AND WARRANTS DATE OF ANNOUNCEMENT Units Listed Event and Quoted Listing Date 27 May 2011 26 August 2011 1. Exercise of warrants 2011/2016 500 15.08.2011 – listing of new ordinary shares 1ST 2ND of RM0.25 each QUARTER QUARTER Total warrants converted in 2011 500
Units Consideration Purchase Event Purchased Paid (RM) Date
3RD 4TH 2. Share buy-back – ordinary 3,304,700 10,863,522 17.03.2011 QUARTER QUARTER shares of RM0.25 each 2,561,900 8,824,130 18.03.2011 1,975,000 6,888,084 21.03.2011 25 November 2011 29 February 2012 1,391,400 4,830,305 22.03.2011 858,700 2,988,085 23.03.2011 300,000 1,034,642 24.03.2011 DIVIDENDS 445,000 1,530,515 25.03.2011 2,246,300 7,632,018 28.03.2011 800,000 2,683,666 29.03.2011 INTERIM - FOR YEAR ENDED 100,000 334,801 30.03.2011 31 DECEMBER 2011 234,200 782,660 31.03.2011 110,000 373,724 01.04.2011 70,000 235,678 04.04.2011 25,600 86,502 05.04.2011 ENTITLEMENT DATE 60,000 203,067 06.04.2011 30,000 102,644 07.04.2011 15 December 2011 120,000 410,690 08.04.2011 207,200 691,434 12.04.2044 20% Total share buy-back in 2011 14,840,000 50,496,167 PAYMENT DATE 23 December 2011 Accumulated Treasury Shares As at 31.12.2010 12,642,200* 45,691,040
As at 31.12.2011 27,482,200 96,187,207
* Adjusted for share split
ANNUAL REPORT AND GENERAL MEETINGS
ISSUANCE OF ANNUAL REPORT 2010 1 June 2011
EXTRAORDINARY GENERAL MEETING 10 February 2011 22 December 2011
36TH ANNUAL GENERAL MEETING 23 June 2011
SECTION 2: ABOUT KULIM 34 CORPORATE PROFILE 37 CORPORATE MILESTONES 40 GROUP’S SIGNIFICANT SUBSIDIARIES 42 CORPORATE INFORMATION 44 BOARD OF DIRECTORS 53 MANAGEMENT TEAM 55 ORGANISATION CHART A WE ATTRIBUTE THIS SUCCESS TO OUR ABILITY TO EFFECTIVELY EXECUTE OUR STRATEGIES – OUR BIASNESS TOWARDS ACTION
KULIM HAS BEEN IN EXISTENCE FOR MORE THAN 7 DECADES. WE HAVE GROWN AND PROGRESSED FROM A HUMBLE BEGINNING INTO BECOMING A SUCCESSFUL DIVERSIFIED CORPORATE ORGANISATION. WE TAKE GREAT EFFORT TO ENSURE OUR GOALS AND STRATEGIES ARE TRANSLATED INTO ACTIONABLE PERFORMANCE MEASURES, CONSISTENT WITH OUR MISSION TO BECOME THE MOST PROGRESSIVE CORPORATE ORGANISATION. Kulim (Malaysia) Berhad (23370-V) 34 | annual report 2011 CORPORATE PROFILE WE CARE FOR TOMORROW
THE FOUNDATION OF KULIM
Kulim (Malaysia) Berhad’s (“Kulim”) corporate history dated back to 1933 when it was fi rst incorporated in the United Kingdom as Kulim Rubber Plantations Ltd. Kulim was later incorporated as a public limited company and was listed on the Kuala Lumpur Stock Exchange (now known as the Main Market of Bursa Malaysia Securities Berhad) in 1975. Since Johor Corporation became the major shareholder of Kulim in 1976, Kulim has increased its interest in the plantation industry through acquisition of plantation assets and controlling stakes in Malaysian and regional plantation companies. Currently employing more than 61,000 people, 39,000 of the staff are in Malaysia and the remaining contingent are spread across Papua New Guinea, the Solomon Islands, Singapore, Brunei, Cambodia, India and the United Kingdom. Over the years, Kulim has evolved and now focuses on three core business operations – oil palm plantation, foods and restaurants and intrapreneur ventures. Our diversifi ed business portfolio is a progressive development from our traditional business of palm oil, pursued in line with our aim to sustain value creation for all our stakeholders via the adoption of an evolving and balanced business mix. The imminent exit from the foods and restaurants business would bring us back closer to our root. We welcome the opportunities that this will bring as greater demand are placed in agriculture. annual report 2011 | 35 Kulim (Malaysia) Berhad (23370-V)
CORE BUSINESSES
PLANTATION FOODS AND RESTAURANTS INTRAPRENEUR VENTURES Kulim is recognised as one of the leading Kulim’s subsidiary, QSR Brands Bhd In line with the value-add approach, one palm oil groups in the world with a unique (“QSR”), is currently the leading, fully of our principal growth thrusts is the geographical footprint – in Malaysia, PNG integrated quick service restaurant Intrapreneur Ventures (“IV”) division, which is and SI. Kulim was amongst the earliest enterprise in Malaysia, Singapore and involved in a diverse range of businesses. plantations in the world to be certified Brunei. QSR is also beginning to establish as a sustainable palm oil producer when itself in Cambodia, Mumbai and Pune in The IV companies are subject to a its operations under NBPOL in West New India. In January 2009, KFC Holdings systematic and rigorous process of selection, Britain, PNG and in Malaysia were awarded (Malaysia) Berhad (“KFCH”) offi cially became management and control to ensure they the RSPO certifi cation in 2008 and early 2009 a subsidiary of QSR. continue to deliver value and returns to respectively. Our management and growth shareholders. The IV companies will be strategy is fundamentally guided by “Vision We also operate a host of auxiliary activities developed and nurtured to become leading 30:30” – fruit yields of 30 tonnes per hectare that support the Group’s core restaurant players in their respective industries and and combined palm products extraction business, encompassing feed mills, breeder transformed into strategic business divisions rates of 30%, and sustainable development farms, hatchery, contract broiler farms, of the Group. The Group’s IV companies are principles. poultry processing and other processing involved in businesses ranging from shipping plants, sauce manufacturing and seasoning. and logistics, facilities management and civil Our integrated operation safeguards the works, agricultural machinery, IT services and integrity of the supply chain and ensures development of IT system, trading of tropical all products sold are Halal to meet the fruits and integrated poultry farming. traditional food needs as well as the industrial needs of the world. Kulim (Malaysia) Berhad (23370-V) 36 | annual report 2011
CORPORATE PROFILE (continued)
BUSINESS STRATEGY Plantation and agriculture will dominate our profi le. We will continue to invest in businesses that offer superior long-term potential for growth and profi tability that will collectively minimise earning fl uctuations so as to enable the Group to provide attractive returns to our shareholders. Our pursuit of value and growth is fi rmly underpinned by our commitment to embrace sustainability and strong corporate governance as the overriding philosophy.
KULIM AND SUSTAINABILITY As a socially and environmentally responsible corporate citizen, Kulim embraces the principles of sustainable development and has continued to work towards demonstrating sustainability throughout our operations. We recognise sustainability as an opportunity to change the way we do our business. Our Sustainable Palm Oil (“SPO”) Programme defi nes its ultimate objective as to improve Kulim’s business performance and profitability as well as positioning Kulim as a world leader in SPO. Our efforts with regards to sustainable development will continue to guide our business.
We hope that by being mindful of our surroundings and the socioeconomic impact of our actions, we will move forward by developing business methods that are economically viable, environmentally appropriate and socially benefi cial.
OUR PROMISE, WE CARE Kulim has laid solid foundations for its future growth and will continue to adapt its approach to the ever-changing needs of its businesses and environment. The Group will build upon its strength of experience and expertise in its established core businesses. Guided by a clear vision of where it is heading and with a strong governance culture, the Group is well-positioned to capitalise on emerging opportunities in the market place, locally and globally, to deliver value to all its stakeholders.
We care for tomorrow. We translate this as a responsibility to aspire to international standards and global recognition. Kulim has ambitious plans for this goal: to improve performance, increase sustainability, and manage risks. That is why we are transforming the businesses by bringing technology and teamwork together in innovative ways, making our assets more productive and our people more profi cient.
We care for tomorrow. We believe that we are responsible in shaping tomorrow and must act prudently for the sustainable development of this planet, our home for our people. annual report 2011 | 37 Kulim (Malaysia) Berhad (23370-V) CORPORATE MILESTONES
1933 Incorporation of Kulim Rubber Plantations Ltd (“KRPL”) in the United Kingdom (“UK”) on 4 1933 - 1947 July. THE BEGINNING 1947 KRPL began operations with a 190 hectares rubber plantation in Johor, Malaysia.
1970 1976 On 16 July, KRPL changed its name to Kulim The Johor State Economic Development Group Limited (“KGL”) and listed its shares Corporation (now known as Johor on London Stock Exchange (“LSE”). Corporation or JCorp) became a shareholder of Kulim. 1973 KGL’s businesses expanded from oil 1977 palm and rubber plantations, to include KGL withdrew from the LSE and became property development in the UK, hotels a subsidiary of Kulim. KGL transferred in the Trinidad and Tobago islands in the to Kulim all its assets and liabilities and 1970 - 1979 Caribbean and a rubber plantation in divested its assets in the UK. “REBRANDING” AND Nigeria. RESTRUCTURING 1979 1975 Kulim ventured into property development Incorporation of Kulim (Malaysia) Sdn Bhd through its wholly-owned subsidiary, on 3 July and was later made public as Advance Development Sdn Bhd (“ADSB”). Kulim (Malaysia) Berhad (“Kulim”) on 18 August. On 14 November, Kulim was listed on the main board of the Kuala Lumpur Stock Exchange (now known as the Main Market of Bursa Malaysia Securities Berhad).
1980 1993 Kulim disposed of Minister Bay Hotel Limited Kulim acquired 49% of Yule Catto Plantations 1980 - 1993 in Trinidad and Tobago. Sdn Bhd, now known as Mahamurni Plantations Sdn Bhd (“MPSB”), which owns CONSOLIDATION 1982 AND GROWTH 7,033 hectares of oil palm with a palm oil Kulim disposed of Mount Irvine Bay Hotel mill and rubber estate. Limited in Trinidad and Tobago. Kulim acquired 70% equity in Skellerup 1988 Industries (Malaysia) Sdn Bhd, a rubber-based Kulim acquired 60% of Selai Sdn Bhd. products manufacturer.
1989 Kulim constructed the 21-storey modern intelligent building, Menara Ansar, which was Kulim acquired Labis Bahru Estate, a 2,110 completed and launched in 1997. hectares of oil palm and rubber estate.
1990 Kulim disposed of its entire equity in Waterside Rubber Estates Ltd, Nigeria to focus on its Malaysian plantation. Kulim (Malaysia) Berhad (23370-V) 38 | annual report 2011
CORPORATE MILESTONES (continued)
1994 2001 Kulim diversified into the oleochemicals Kulim disposed of 3,104 acres of land in Ulu 1994 - 2007 business by acquiring 91.38% of Natural Tiram Estate for RM313.7 million. DIVERSIFYING Oleochemicals Sdn Bhd (“NatOleo”) in July. AND FURTHER 2004 GROWTH The acquisition of MPSB was completed Kulim made an entry into Kalimantan, along with Mutiara Estate and Sungai Indonesia when it acquired 100% equity in Sembrong Estate. EPA Management Sdn Bhd (“EPA”).
1995 Kulim acquired 92.99% stake in Kumpulan NatOleo entered into a joint-venture with Bertam Plantations Berhad, injecting an Stearinerie Dubois Fils, a French company to additional 1,016 hectares of plantation land produce specialty esters. NatOleo took 55% into the Group. equity in the new company, Dubois-Natural Esters Sdn Bhd (“DNE”). NBPOL entered into agreement for the formation of Guadalcanal Plains Palm Oil 1996 Limited (“GPPOL”), a company incorporated Kulim’s regional expansion began with the in the Solomon Islands with NBPOL holding acquisition of 90% stake in New Britain Palm 80% equity. Oil Limited (“NBPOL”) in Papua New Guinea (“PNG”). Kulim entered into a joint-venture with TopPlant Laboratories Sdn Bhd, to own 60% Kulim’s subsidiary, Kulim Plantations equity in Kulim TopPlant Sdn Bhd, for the (Malaysia) Sdn Bhd, ventured into plantations production of high-yielding oil palm clones in Indonesia through a 60% stake in PT using tissue culture technology. Padang Bolak Jaya and PT Multrada Multi Maju in Sumatra. 2005 Kulim purchased 52% stake in QSR Brands Johor Land Berhad (“JLand”) became a Bhd (“QSR”), the operator of Pizza Hut and subsidiary of Kulim and was subsequently the controlling shareholder of KFC Holdings listed on the main board of KLSE. (Malaysia) Bhd (“KFCH”).
1997 Expansion of NatOleo’s fatty acids production Commissioning of DNE’s ester plant and capacity from 150,000 TPA to 380,000 TPA. expansion of fatty acids plant from 45,000 tonnes per annum (“TPA”) to 150,000 TPA. 2006 Kulim completed a capital distribution-in- 1998 specie of its entire holding of JLand shares New Britain Nominees Ltd was incorporated in March, signalling the Group’s exit from the by NBPOL as a vehicle for its employees, property business. outgrowers and traditional landowners to acquire NBPOL’s shares and allowing them Kulim divested all of the Group’s plantations to participate in NBPOL’s future growth and in Sumatra in March. prosperity. In June, Kulim completed the acquisition of NBPOL Foundation was established to assist QSR when it gained control over the QSR communities in West New Britain, PNG in the Board at an Extraordinary General Meeting fi elds of health and education. (“EGM”) of the company.
1999 2007 NBPOL was successfully admitted to Port Secondary listing of NBPOL on the LSE in Moresby Stock Exchange, PNG. December for realisation of NBPOL’s true earnings potential in the trading market. 2000 Divestment of Kalimantan plantations Kulim acquired the remaining 40% stake in in August, marking the Group’s exit from Selai Sdn Bhd. plantation operations in Indonesia.
Commissioning of NBPOL’s fourth mill, Numundo Palm Oil Mill and construction of Kumbango Palm Oil Refi nery with a capacity of 100,000 TPA. annual report 2011 | 39 Kulim (Malaysia) Berhad (23370-V)
2008 2010 Sindora became a 77%-owned subsidiary In April, NBPOL acquired 80% stake in 2008 - 2011 of Kulim in May, adding plantation land CTP (PNG) Ltd (now known as Kula Palm SUSTAINABLE and bringing in a number of Intrapreneur Oil Limited), bringing in additional 26,000 GROWTH Venture (“IV”) companies into the Group. hectares of plantation land to the Group’s landbank. In October, NBPOL acquired 100% stake in Ramu Agri-Industries Limited (“Ramu”), PNG, Completion of equity swap in Nexsol (S) Pte further expanding the Group’s landbank to Ltd and Nexsol (M) Sdn Bhd between Kulim 124,833 hectares. and Peter Cremer (Singapore) GmBH in April. Following the exercise, Nexsol (M) Sdn Bhd NBPOL became one of the fi rst plantation became a 100% subsidiary of Kulim, while at companies to receive Roundtable on the same time Nexsol (S) Pte Ltd ceased to Sustainable Palm Oil (“RSPO”) certifi cation in be an associate of Kulim. September. In May, NBPOL offi cially launched its refi nery Construction commenced for NBPOL’s in Liverpool. 200,000 TPA refi nery plant in UK. NBPOL’s subsidiary, Ramu, was officially Expansion of QSR into Cambodia for KFC accorded with RSPO certifi cation in August. restaurants. In September, Kulim concluded the disposal 2009 of NatOleo and its subsidiaries, marking Official RSPO certification was accorded the Group’s exit from the oleochemicals to Kulim-owned plantations in Malaysia in business. January. 2011 In January, QSR increased its shareholding Kulim completed its capital restructuring in KFCH to 50.25% and KFCH became a exercise, involving a share split, bonus shares subsidiary of QSR. and free warrants in March.
Estate swap with Sime Darby Plantations Sdn Kulim announced the acquisition of 6 parcels Bhd (“SDP”) in September, involving Sindora’s of oil palm estates measuring approximately Sungai Simpang Kiri Estate and SDP’s 13,687 hectares and 2 palm oil mills from Sungai Tawing Estate, to realise potential JCorp, for cash consideration of RM700 rationalisation benefits of their respective million. locations. Sindora became a wholly-owned subsidiary Sindora and its subsidiary, E.A. Technique (M) of Kulim and delisted from the offi cial list of Sdn Bhd acquired 20% and 18% respectively, Bursa Malaysia Securities Berhad effective 30 of Orkim Sdn Bhd (“Orkim”), increasing its November. tanker fl eet, bringing along charter contracts with major oil companies.
KFCH received the franchise rights to operate KFC restaurants in Mumbai and Pune, India. Kulim (Malaysia) Berhad (23370-V) 40 | annual report 2011 GROUP’S SIGNIFICANT SUBSIDIARIES AS AT 31 MARCH 2012
PLANTATION FOODS AND RESTAURANTS
100% Kulim Plantations (Malaysia) Sdn Bhd 57% QSR Brands Bhd 100% Sindora Bhd
Ulu Tiram Manufacturing 100% Pizza Hut Restaurants Sdn Bhd 51% E.A. Technique Sdn Bhd 100% Company (Malaysia) Sdn Bhd
100% PHD Delivery Sdn Bhd 31% Orkim Sdn Bhd
100% Mahamurni Plantations Sdn Bhd 100% Multibrands QSR Holdings Pte Ltd 100% Johor Shipyard & Engineering Sdn Bhd
100% Pizza Hut Singapore Pte Ltd 20% Orkim Sdn Bhd 100% Selai Sdn Bhd
55% Kampuchea Food Corporation Limited 75% Metro Parking (M) Sdn Bhd
100% EPA Management Sdn Bhd 51% KFC Holdings (Malaysia) Berhad 75% Pro Office Solutions Sdn Bhd
100% Roaster’s Chicken Sdn Bhd 94% Kumpulan Bertam Plantations Berhad 90% GranuLab (M) Sdn Bhd
100% Ayamas Food Corporation Sdn Bhd 90% MIT Insurance Brokers Sdn Bhd 51% New Britain Palm Oil Limited 100% Region Food Industries Sdn Bhd 75% Epasa Shipping Agency Sdn Bhd
100% Ayamas Integrated 100% Dami Australia Pty Ltd Poultry Industry Sdn Bhd 60% Microwell Bio Solutions Sdn Bhd Integrated Poultry Industry 100% 100% New Britain Oils Limited Sdn Bhd 20% Tepak Marketing Sdn Bhd 100% KFC India Holdings Sdn Bhd 100% Ramu Agri-Industries Limited
100% KFCH Education (M) Sdn Bhd 80% Guadalcanal Plains Palm Oil Limited
100% KFC IC Assets Sdn Bhd 80% Kula Palm Oil Limited
55% Tepak Marketing Sdn Bhd 60% Kulim TopPlant Sdn Bhd
Malaysia Papua New Guinea Others annual report 2011 | 41 Kulim (Malaysia) Berhad (23370-V)
INTRAPRENEUR VENTURES
Under Kulim (Malaysia) Berhad Under EPA Management Sdn Bhd Under KFC Holdings (Malaysia) Bhd
80% JTP Trading Sdn Bhd 75% Extreme Edge Sdn Bhd 100% Roaster’s Chicken Sdn Bhd
Rasamas Taman Universiti 75% JTP Montel Sdn Bhd 89% 95% Pinnacle Platform Sdn Bhd Sdn Bhd
89% Rasamas Tebrau Sdn Bhd 100% The Secret of Secret Garden Sdn Bhd 95% AKLI Resources Sdn Bhd 100% Ayamas Food Corporation Sdn Bhd
75% Renown Value Sdn Bhd 90% Ayamas Farms & Hatchery 90% Kulim Livestock Sdn Bhd Sdn Bhd
85% Ayamas Feedmill Sdn Bhd 75% Kulim Nursery Sdn Bhd 100% Exquisite Livestock Sdn Bhd
75% Semangat Juara Sdn Bhd
100% Palma Bumimas Sdn Bhd 78% Superior Harbour Sdn Bhd 90% Southern Poultry Farming Sdn Bhd
85% Synergy Poultry Farming 90% Special Appearance Sdn Bhd Sdn Bhd
90% Ventures Poultry Farming Sdn Bhd 75% Edaran Badang Sdn Bhd
90% Perfect Synergy Trading Sdn Bhd
100% Optimum Status Sdn Bhd
75% Kulim Civilworks Sdn Bhd
100% KCW Hardware Sdn Bhd
100% KCW Electrical Sdn Bhd
100% KCW Kulim Marine Services Sdn Bhd
100% KCW Roadworks Sdn Bhd
The full list of companies under Kulim Group is set out in Notes 16 to the Financial Statements. Kulim (Malaysia) Berhad (23370-V) 42 | annual report 2011 CORPORATE INFORMATION
BOARD OF DIRECTORS Chairman/ AUDIT COMMITTEE REGISTRAR Non-Independent Non-Executive Director TAN SRI DATO’ SERI ARSHAD AYUB PRO CORPORATE MANAGEMENT KAMARUZZAMAN ABU KASSIM Chairman SERVICES SDN BHD KUA HWEE SIM Suite 12B, Level 12, Menara Ansar Managing Director DR. RADZUAN A. RAHMAN 65, Jalan Trus AHAMAD MOHAMAD 80000 Johor Bahru Johor Darul Takzim Executive Director NOMINATION COMMITTEE Tel : +607-226 7692 / 226 7476 Fax : +607-222 3044 / 222 3022 WONG SENG LEE KAMARUZZAMAN ABU KASSIM Email : [email protected] ZULKIFLI IBRAHIM Chairman DATUK AHMAD ZAKI ZAHID TAN SRI DATO’ SERI ARSHAD AYUB KUA HWEE SIM PRINCIPAL BANKERS Non-Independent Non-Executive Director DATIN PADUKA SITI SA’DIAH SH BAKIR CIMB Bank Berhad ROZAN MOHD SA’AT REMUNERATION COMMITTEE OCBC Bank (M) Berhad RHB Bank Berhad WAN MOHD FIRDAUS WAN MOHD FUAAD KAMARUZZAMAN ABU KASSIM Malayan Banking Berhad Chairman HSBC Bank Malaysia Berhad Independent Non-Executive Director TAN SRI DATO’ SERI ARSHAD AYUB Standard Chartered Bank Malaysia TAN SRI DATO’ SERI ARSHAD AYUB DR. RADZUAN A. RAHMAN Asian Finance Bank Berhad KUA HWEE SIM The Bank of Nova Scotia Berhad DATUK HARON SIRAJ DR. RADZUAN A. RAHMAN SECRETARIES LEUNG KOK KEONG IDHAM JIHADI ABU BAKAR AUDITORS NATASHA KAMALUDDIN (MAICSA 7007381) Ernst & Young NURALIZA A. RAHMAN (LS 0008565) WEBSITE www.kulim.com.my REGISTERED OFFICE Suite 12B, Level 12, Menara Ansar 65, Jalan Trus 80000 Johor Bahru Johor Darul Takzim Tel : +607-226 7692 / 226 7476 Fax : +607-222 3044 / 222 3022
STOCK EXCHANGE LISTING
LISTED ENTITIES WITHIN STOCK EXCHANGE LISTED SINCE STOCK CODE THE GROUP
Kulim (Malaysia) Berhad 14 November 1975 2003 Main Market of QSR Brands Bhd 1 April 2004 9415 Bursa Malaysia Securities Berhad KFC Holdings (Malaysia) Bhd 11 November 1988 3492
Main Market – London Stock Exchange 17 December 2007 NBPO New Britain Palm Oil Limited Port Moresby Stock Exchange 19 December 1999 NBO
Kulim (Malaysia) Berhad (23370-V) 44 | annual report 2011 BOARD OF DIRECTORS
KAMARUZZAMAN ABU KASSIM DATIN PADUKA SITI SA’DIAH SH BAKIR 1 Chairman/Non-Independent Non-Executive Director 6 Non-Independent Non-Executive Director AHAMAD MOHAMAD ROZAN MOHD SA’AT 2 Managing Director 7 Non-Independent Non-Executive Director WONG SENG LEE WAN MOHD FIRDAUS WAN MOHD FUAAD 3 Executive Director 8 Non-Independent Non-Executive Director ZULKIFLI IBRAHIM TAN SRI DATO’ SERI ARSHAD AYUB 4 Executive Director 9 Independent Non-Executive Director DATUK AHMAD ZAKI ZAHID KUA HWEE SIM 5 Executive Director 10 Independent Non-Executive Director annual report 2011 | 45 Kulim (Malaysia) Berhad (23370-V)
DATUK HARON SIRAJ 11 Independent Non-Executive Director 4 11 3 13 8 5 DR. RADZUAN A. RAHMAN 7 12 14 10 12 Independent Non-Executive Director 2 LEUNG KOK KEONG 1 9 6 13 Independent Non-Executive Director NATASHA KAMALUDDIN 14 Independent Non-Executive Director Kulim (Malaysia) Berhad (23370-V) 46 | annual report 2011
BOARD OF DIRECTORS (continued)
KAMARUZZAMAN ABU KASSIM AHAMAD MOHAMAD Chairman/Non-Independent Non-Executive Director Managing Director
Aged 48, is a Non-Independent Non-Executive Director and the Chairman Aged 58, is the Managing Director of Kulim (Malaysia) Berhad and of Kulim (Malaysia) Berhad. He was appointed to the Board of Kulim as was appointed to the Board on 24 January 1991. He graduated Director on 1 January 2008 and appointed as Chairman on 12 January with a Bachelor of Economics (Honours) degree in 1976 from the 2011. He graduated with a Bachelor of Commerce majoring in Accountancy University of Malaya. He joined JCorp in June 1979 as a Company from the University of Wollongong, New South Wales, Australia in 1987. Secretary for various companies within the JCorp Group.
He embarked his career as an Audit Assistant at Messrs K.E. Chan & He was involved in many of JCorp’s projects, among others are Associates in May 1988, later joined an international accounting fi rm, Messrs the Johor Specialist Hospital, prefabricated housing project and PricewaterhouseCoopers (formerly known as Messrs Coopers & Lybrand) in the Kotaraya Complex in Johor Bahru. He is presently a member 1989. In December 1992, he left the fi rm and joined Perbadanan Kemajuan of the Board of Directors of KPJ Healthcare Berhad, New Britain Ekonomi Negeri Johor (currently known as Johor Corporation (“JCorp”)) Palm Oil Limited (Papua New Guinea) and the Deputy Chairman as a Deputy Manager in the Corporate Finance Department and later of QSR Brands Bhd and KFC Holdings (Malaysia) Bhd. He is also promoted to General Manager in 1999. the Chairman and Director of several other companies within the JCorp Group. He is the President and Chief Executive of JCorp with effect from 1 December 2010. He had served as the Acting President and Chief Executive of JCorp from 29 July 2010 to 30 November 2010. Prior to that, he had served as He is also active as the President of the Johor Corporation Football the Chief Financial Offi cer and Chief Operating Offi cer of JCorp beginning Club (“Johor FC”) and Director of Waqaf An-Nur Corporation 1 August 2006, before his appointment as the Senior Vice President, Berhad, an Islamic endowment institution that spearheads JCorp Corporate Services & Finance of JCorp beginning 1 January 2010. During Group’s Corporate Responsibility programmes, including the his tenure as the Johor Corporation’s Chief Operating Offi cer, as well as the unique Corporate Waqaf Concept initiated by JCorp. Senior Vice President, Corporate Services & Finance, Johor Corporation had received Excellence Award For Financial Management Accountability Index Other than as disclosed, he does not have any family relationship with 4-star ratings from the National Audit Department for 4 consecutive with any director and/or major shareholder of Kulim. He has no years from 2007 – 2010. personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended all He was appointed to the Board of Damansara Realty Berhad (“DBhd”) on eight (8) Board of Directors’ Meetings of the Company in the 11 December 1995 before assuming the position as its Executive Director fi nancial year ended 31 December 2011. on 16 August 1999. He was later appointed as its Deputy Chairman on 4 October 2006, then re-designated as DBhd’s Managing Director on 1 January 2010. He resigned as the Managing Director of DBhd with effect from 12 January 2011 and was later appointed as the Chairman of DBhd with effect from the same date.
He sits as the Chairman of Damansara REIT Managers Sdn Bhd, the manager of Al-Aqar KPJ REIT beginning 12 January 2011. He is also the Chairman of KPJ Healthcare Berhad, and a Director of QSR Brands Bhd and KFC Holdings (Malaysia) Bhd, which are JCorp’s Group of Companies listed on the Main Market of Bursa Malaysia Securities Berhad. He is also a Director of Waqaf An-Nur Corporation Berhad, an Islamic endowment institution that spearheads JCorp’s Corporate Responsibility programmes. He also sits as Chairman and/or Director of several other companies within JCorp Group.
Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim. He has not been convicted for any offences. He attended all eight (8) Board of Directors’ Meetings of the Company in the fi nancial year ended 31 December 2011. annual report 2011 | 47 Kulim (Malaysia) Berhad (23370-V)
WONG SENG LEE ZULKIFLI IBRAHIM Executive Director Executive Director
Aged 61, is an Executive Director of Kulim (Malaysia) Berhad. He was Aged 54, was the Chief Operating Offi cer of Kulim (Malaysia) Berhad appointed to the Board of Kulim on 8 January 1996. He is currently since 3 November 2003 and was re-designated as an Executive the Vice President of Marketing and Corporate Affairs. Director when he was appointed to the Board on 1 July 2011.
He qualifi ed as a Certifi ed Accountant in 1974 and is a Fellow of the He is a Fellow of the Association of Chartered Certifi ed Accountants, Association of Chartered Certifi ed Accountants. In 1974, he joined an United Kingdom and a member of the Malaysian Institute of international audit fi rm in Singapore and left to join EPA Management Accountants since 1992. Sdn Bhd as an Accountant in July 1979. He was previously the Financial Controller for Kulim Group. After serving various companies in the private sector since his He is presently a member of the Board of Directors of several other graduation in 1983, he joined JCorp Group in 1990 as the Financial companies within the Kulim Group. Controller of Sindora Berhad. In 1996, he was appointed the Managing Director of Antara Steel Mills Sdn Bhd until 2000 before joining PJB Other than as disclosed, he does not have any family relationship Pacifi c Capital Group in 2001 as the Chief Operating Offi cer. He joined with any director and/or major shareholder of Kulim. He has no Kulim as the Chief Operating Offi cer in 2003. He is also the Chairman personal interest in any business arrangement involving Kulim and and Director of several other companies within the JCorp Group. has not been convicted for any offences. He attended all eight (8) Board of Directors’ Meetings of the Company in the fi nancial year Other than as disclosed, he does not have any family relationship ended 31 December 2011. with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. Since his appointment date, he attended fi ve (5) Board of Directors’ Meetings of the Company in the fi nancial year ended 31 December 2011. Kulim (Malaysia) Berhad (23370-V) 48 | annual report 2011
BOARD OF DIRECTORS (continued)
DATUK AHMAD ZAKI ZAHID DATIN PADUKA SITI SA’DIAH SH BAKIR Executive Director Non-Independent Non-Executive Director
Aged 41, was appointed to the Board of Kulim (Malaysia) Berhad as Aged 59, was appointed to the Board of Kulim on 1 January 2005. an Executive Director on 8 November 2011. She is currently a Non-Independent Non-Executive Director of Kulim (Malaysia) Berhad. He holds a Bachelor of Laws, University of Bristol, England in 1994. He was the Executive Director, Malaysian Resources Corporation Datin Paduka is the Managing Director of KPJ Healthcare Berhad Berhad from May 2009 to October 2011 and was an Independent (“KPJ”) since 1 March 1993. She graduated with a Bachelor of Director, Malaysian Resources Corporation Berhad from January 2005 Economics from University of Malaya in 1974 and holds an MBA from to April 2009. Henley Management College, University Reading, London.
He was a Senior Executive Officer at the Issues and Investment Her career with JCorp commenced in 1974 and she was directly Division of Securities Commission of Malaysia from November 1994 involved with JCorp’s Healthcare Division since 1978. Datin Paduka was to July 1998. Thereupon, from August 1998 to February 2000, he appointed as the Chief Executive of Kumpulan Perubatan (Johor) Sdn worked as a Senior Consultant at Booz Allen & Hamilton (Kuala Bhd (“KPJSB”) from 1989 until the listing of KPJ in November 1994. Lumpur and Singapore). Datin Paduka is the Chairman of various hospitals and companies He assumed the role of Special Assistant to YB Dato’ Seri Hishamuddin in the KPJ Group, as well as MIT Insurance Brokers Sdn Bhd. She is a Non-Independent Non-Executive Director of KFC Holdings (Malaysia) Tun Hussein, Minister of Youth & Sports, Malaysia from March 2000 – Bhd, QSR Brands Bhd and Damansara REIT Managers Sdn Bhd. Datin June 2001. In July 2001, he joined the Deputy Prime Minister’s offi ce Paduka is also a Director of Waqaf An-Nur Corporation Bhd, a non- as the Special Offi cer to YAB Tun Abdullah Hj Ahmad Badawi and was governmental organisation dedicated to the provision of healthcare promoted to Special Offi cer to YAB Tun Abdullah Hj Ahmad Badawi services to the less fortunate. and Head of Policy Unit, Prime Minister’s Offi ce from November 2003 to April 2009. Datin Paduka is an Independent Non-Executive Director of Bursa Malaysia, elected since 2004. He is also the Managing Director of Damansara Realty Berhad and the Managing Director of Damansara Assets Sdn Bhd. Besides Committed to promoting excellence in healthcare, Datin Paduka is that, he is also a Director of several other companies within the the President of the Malaysian Society for Quality in Health (“MSQH”), JCorp Group. elected since its inception in 1997 to date.
Other than as disclosed, he does not have any family relationship She is a member of the Malaysia Productivity Corporation (“MPC”) with any director and/or major shareholder of Kulim. He has no Consultative Panel on Healthcare since 2001 and a member of the personal interest in any business arrangement involving Kulim and National Patient Safety Council, Ministry of Health since 2003. In 2009, has not been convicted for any offences. Since his appointment date, she was appointed as a member of the Malaysian Healthcare Travel he attended two (2) Board of Directors’ Meetings of the Company in Council, Ministry of Health. She was a Board member of MATRADE the fi nancial year ended 31 December 2011. from 1999 to 2010.
In 2010, Datin Paduka was named the ‘CEO of the Year 2009’ by the New Straits Times Press and the American Express. In 2011, Datin Paduka achieved 3 more awards, namely the ‘Asia Leading Woman CEO of The Year’ at the Women in Leadership Forum Asia, the ‘Masterclass Woman CEO of The Year’ by the Global Leadership Awards and the ‘BrandLaureate Transformational Corporate Leader Brand iCon Leadership Awards 2011’ from The Asia Pacifi c Brands Foundation.
Other than as disclosed, she does not have any family relationship with any director and/or major shareholder of Kulim. She has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. She attended all eight (8) Board of Directors’ Meetings of the Company in the fi nancial year ended 31 December 2011. annual report 2011 | 49 Kulim (Malaysia) Berhad (23370-V)
ROZAN MOHD SA’AT WAN MOHD FIRDAUS WAN MOHD FUAAD Non-Independent Non-Executive Director Non-Independent Non-Executive Director
Aged 52, is currently a Non-Independent Non-Executive Director of Aged 29, was appointed to the Board of Kulim (Malaysia) Berhad as Kulim (Malaysia) Berhad. He was appointed to the Board of Kulim on a Non-Independent Non-Executive Director on 9 November 2011. 1 January 2008. He is the Chief Executive of Hospitality Division of He is also currently a Non-Independent Non-Executive Director of JCorp and the Managing Director of Sindora Berhad. Damansara Realty Berhad.
He holds a Bachelor of Economics (Honours) majoring in Statistics He holds a Bachelor of Law (Honours) degree from the University of from Universiti Kebangsaan Malaysia. He started his career in 1983 Nottingham. He is currently the Special Offi cer to the Menteri Besar as an Administrative Offi cer in Planning & Research Department of JCorp before being seconded as an Operations Manager in Sergam of Johor. Berhad, a subsidiary of JCorp in 1986. He is the founder of Young Corporate Malaysians (“YCM”), a business From 1987 to 1988, he served in the Corporate Communications club for young Malaysian professionals and founder of the Institute Department, JCorp as an Administrative Offi cer. From 1988 to 1993, for Democracy and Economic Affairs (“IDEAS”), a think tank promoting he was appointed as the Executive Director of several subsidiaries in free market values. JCorp Group. In 1994, he was appointed as the General Manager of JCorp’s Tourism Division before assuming the post as Chief Executive He is also a Director of Damansara Assets Sdn Bhd. of the same Division on 15 June 1996, a post which he held until his appointment as the General Manager, Business Development, JCorp, Other than as disclosed, he does not have any family relationship beginning January 1999. with any director and/or major shareholder of Kulim. He has no Prior to his appointment as the Managing Director of Sindora Berhad, personal interest in any business arrangement involving Kulim and he served as the Senior General Manager, Business Development of has not been convicted for any offences. Since his appointment date, JCorp from 2000 until August 2002. He is also a Director of Waqaf he attended one (1) Board of Directors’ Meeting of the Company in An-Nur Corporation Berhad, an Islamic endowment institution that the fi nancial year ended 31 December 2011. spearheads JCorp Group’s Corporate Responsibility programmes, including the unique Corporate Waqaf Concept initiated by JCorp.
Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended all eight (8) Board of Directors’ Meetings of the Company in the fi nancial year ended 31 December 2011. Kulim (Malaysia) Berhad (23370-V) 50 | annual report 2011
BOARD OF DIRECTORS (continued)
TAN SRI DATO’ SERI ARSHAD AYUB KUA HWEE SIM Independent Non-Executive Director Independent Non-Executive Director
Aged 83, was appointed to the Board of Kulim on 31 January 1987. Aged 59, was appointed to the Board of Kulim on 22 January 1999. He is currently an Independent Non-Executive Director of Kulim She is currently an Independent Non-Executive Director of Kulim (Malaysia) Berhad. He is the Chairman of the Audit Committee and (Malaysia) Berhad. She is also a member of the Audit Committee. also appointed as a member of the Nomination and Remuneration Committee of Kulim. She is a Fellow of the Association of Chartered Certifi ed Accountants (UK) and a Registered Accountant of Malaysia and Singapore. She has Tan Sri graduated with a Diploma in Agriculture in 1954 from more than 35 years of corporate and fi nancial experience in several Serdang Agriculture College, Selangor and with a Bachelor of Science (Honours) in Economics and Statistics in 1958 from University College industries within Malaysia and overseas. She is currently a Director of of Wales, Aberystwyth in the United Kingdom. He graduated with QSR Brands Bhd and KFC Holdings (Malaysia) Bhd which are JCorp’s Post Graduate Diploma in Business Administration from IMEDE, now subsidiaries listed on the Main Market of the Bursa Malaysia Securities IMD Lausanne, Switzerland. Berhad. She is a member of Audit Committee of all listed companies mentioned. As a professional accountant, she also provides fi nancial He had a distinguished career in the Malaysian Civil Service. Among training for companies within Malaysia. the senior positions he held were First Director, Mara Institute of Technology (1965 –1975), Deputy Governor of Bank Negara Malaysia Other than as disclosed, she does not have any family relationship (1975 – 1977), Deputy Director-General in the Economic Planning with any director and/or major shareholder of Kulim. She has no Unit of the Prime Minister’s Department (1977 –1978) and Secretary- personal interest in any business arrangement involving Kulim and General in the Ministry of Primary Industries (1978), Ministry of has not been convicted for any offences. She attended all eight (8) Agriculture (1979 – 1981) and Ministry of Land and Regional Development (1981 – 1983). Currently, he serves as President of the Board of Directors’ Meetings of the Company in the fi nancial year Malaysian Rubber Products Manufacturers Association (“MRPMA”). He ended 31 December 2011. is also the Pro Chancellor of UiTM and KPJ International University College and Chairman of University of Malaya Board. He also holds directorship in Malayan Flour Mills Berhad, LBI Capital Berhad, Top Glove Corporation Berhad, PFM Capital Holdings Sdn Bhd, Land Rover (M) Sdn Bhd, Bistari Johor Berhad and Zalaraz Sdn Bhd.
Other than as disclosed, he has no family relationship with any Director and/or substantial shareholder of Kulim. He has no personal interest in any business arrangement involving Kulim and has not been convicted for any offences. He attended all eight (8) Board of Directors’ Meetings of the Company in the fi nancial year ended 31 December 2011. annual report 2011 | 51 Kulim (Malaysia) Berhad (23370-V)
DATUK HARON SIRAJ DR. RADZUAN A. RAHMAN Independent Non-Executive Director Independent Non-Executive Director
Aged 68 was appointed to the Board of Kulim (Malaysia) Berhad on Aged 68, was appointed to the Board of Kulim (Malaysia) Berhad on 1 9 January 2006 as an Independent Non-Executive Director. November 2006 as an Independent Non-Executive Director.
He graduated with a Bachelor in Economics (Honours) degree in He graduated with a Bachelor in Agricultural Science (Honours) 1968 from the University of Manchester, United Kingdom and Master degree from the University of Malaya in 1969. Subsequently, he of Development Economics from Williams College, United States of obtained his Master and PhD in Resource Economics from Cornell America in 1975. University, New York in 1971 and 1974 respectively. He had a distinguished career in the Malaysian Civil Service. Among the senior positions he had held were Assistant Controller of Ministry Dr. Radzuan has an outstanding career, both as an academician and of Commerce and Industry (1969 – 1971), Principal Assistant Secretary, corporate practitioner. Amongst the notable distinguished positions Ministry of Primary Industries (1972 – 1974), Minister Counselor held were as Associate Professor and the Dean of the Resource (Economic Affairs) at the Permanent Mission of Malaysia in Geneva, and Agribusiness Faculty, Universiti Pertanian Malaysia (now known Switzerland (1980 – 1986), Director of Industrial Development at as Universiti Putra Malaysia) (1969 – 1980) , Regional Director, Sime Ministry of International Trade and Industry (1986 – 1987), Director Darby Plantations for Melaka, Negeri Sembilan and Johor Regions of International Trade at Ministry of International Trade and (1980 – 1983), Director, Development Division, Sime Darby Plantations Industry (1987 – 1990), Deputy Secretary-General (Trade) Ministry of (1983 – 1984), Director, Corporate Planning, Golden Hope Plantations International Trade and Industry (1990 – 1992), Ambassador, Permanent Berhad (1984 – 1992) and Group Director – Plantations, Golden Hope Representative of Malaysia to United Nations and other International Plantations Berhad (1993 – 1999). He had also served as the Managing Organisations and Specialised Agencies in Geneva, Switzerland (1992 – 1996), Secretary-General Ministry of Primary Industries (1996 – 2000) Director for Austral Enterprises Berhad and Island & Peninsular Berhad and as the Chief Executive Offi cer of Malaysian Palm Oil Promotion (1999 – 2004) as well as Tradewinds Plantation Berhad (2005 – 2006). Council since 2001 until he retired in January 2006. Currently he holds directorships in Idaman Unggul Berhad and Inch He also holds directorships in Scomi Group Berhad, Jerneh Asia Kenneth Kajang Rubber Pte Ltd. Additionally, he sits on the Board Berhad, HSBC Amanah Takaful Sdn Bhd, Apex Communications Group of Malaysian Biotechnology Corporation Sdn Bhd, Marditec Sdn Bhd, Sdn Bhd and MM Vitaoils Sdn Bhd. Kenanga Cergas Sdn Bhd, MAEPS Management Sdn Bhd and Green Capital Sdn Bhd. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of Kulim. He has no Other than as disclosed, he does not have any family relationship personal interest in any business arrangement involving Kulim and with any director and/or major shareholder of Kulim. He has no has not been convicted for any offences. He attended all eight (8) Board of Directors’ Meetings of the Company in the fi nancial year personal interest in any business arrangement involving Kulim and ended 31 December 2011. has not been convicted for any offences. He attended all eight (8) Board of Directors’ Meetings of the Company in the fi nancial year ended 31 December 2011. Kulim (Malaysia) Berhad (23370-V) 52 | annual report 2011
BOARD OF DIRECTORS (continued)
LEUNG KOK KEONG NATASHA KAMALUDDIN Independent Non-Executive Director Independent Non-Executive Director
Aged 44, was appointed to the Board of Kulim (Malaysia) Berhad as Aged 40, was appointed to the Board of Kulim (Malaysia) Berhad as an Independent Non-Executive Director on 9 November 2011. He an Independent Non-Executive Director on 9 November 2011. obtained his Bachelor Degree in Accounting, Curtin University of Technology, Australia in December 1989 and is a Certifi ed Practising She obtained her Masters and Bachelor in Economics (Honours) from Accountant and Chartered Accountant. He is also a member of CPA the University of Cambridge, United Kingdom in 1995. Australia and Malaysian Institute of Accountants. She is currently the Managing Partner of Ethos & Co., a Malaysian Trained as an investment banker, he has signifi cant experience in corporate fi nance and business development as well as management. boutique management consulting fi rm where she has been part of He was the founding member and former Executive Director of the partnership team since June 2004. She is also currently a Partner Newfields Advisors Sdn Bhd, a boutique financial and corporate and Director in Ethos Capital. Prior to Ethos, She was employed with advisory firm from August 2001 - August 2006. He was the Chief Accenture from July 1995 to August 2003. Executive Officer, Platinum Energy Group from September 2006 - February 2008. Amongst her personal achievements are helping to establish several high impact organisations such as the Performance Management His wide and vast experience spanned from his earlier years as and Delivery Unit (“PEMANDU”), Ekuiti Nasional Berhad (“EKUINAS”), an Investment & Corporate Planning Manager, Hong Leong Credit Malaysian Biotechnology Corporation and Northern Corridor Berhad from 1994 to 2001 and was an Audit Senior, Messrs. Coopers Implementation Authority. She was involved in the National Key & Lybrand Kuala Lumpur since 1990 – 1994. Results Area (“NKRA”) and National Key Economic Area (“NKEA”) He is currently an Independent Non-Executive Director of Damansara programmes with PEMANDU under the leadership of Datuk Idris Realty Berhad, a company within the JCorp Group. In addition, he is Jala. She has also led strategy development, transformation and M&A also an Independent Non-Executive Director of Tebrau Teguh Berhad initiatives with large Malaysian companies, including those in the and an Executive Director of Asia Bioenergy Technologies Berhad. plantations sector.
Other than as disclosed, he does not have any family relationship Other than as disclosed, she does not have any family relationship with any director and/or major shareholder of Kulim. He has no with any director and/or major shareholder of Kulim. She has no personal interest in any business arrangement involving Kulim and personal interest in any business arrangement involving Kulim and has not been convicted for any offences. Since his appointment date, has not been convicted for any offences. Since her appointment date, he attended two (2) Board of Directors’ Meetings of the Company in she attended two (2) Board of Directors’ Meetings of the Company in the fi nancial year ended 31 December 2011. the fi nancial year ended 31 December 2011. annual report 2011 | 53 Kulim (Malaysia) Berhad (23370-V) MANAGEMENT TEAM
9 8 6 4 5 3
2 7 1 Kulim (Malaysia) Berhad (23370-V) 54 | annual report 2011
MANAGEMENT TEAM (continued)
1 AHAMAD MOHAMAD 4 DATUK AHMAD ZAKI ZAHID 7 AZLI MOHAMED Managing Director Vice President Vice President Property and Business Development Finance Aged 58, has been the Managing Director since 1993. He holds a Bachelor of Aged 41, he was appointed to the Board Aged 44, appointed as Chief Financial Offi cer Economics (Honours) from University of on 8 November 2011 as Executive Director. of Kulim (Malaysia) Berhad on 1 June 2011 and Malaya. He joined JCorp in June 1976 as a He is currently the Managing Director of re-designated as Vice President of Finance in Company Secretary for various companies Damansara Realty Berhad. He holds a 2012. He is a Member of the Association within JCorp Group. He was involved in Bachelor of Laws from the University of Bristol, of Chartered Certifi ed Accountants, United many of JCorp’s landmark projects including England. Prior to his current position, he has Kingdom and also a member of the the Johor Specialist Hospital, prefabricated held various notable positions in both private Malaysian Institute of Accountants. He was and public sector including Special Offi cer to housing project and the Kotaraya Complex with Messrs. PricewaterhouseCoopers from YAB Tun Abdullah Ahmad Badawi and Head in Johor Bahru. He is also presently the 1992 prior to joining KPJ Healthcare Berhad of Policy Unit, Prime Minister’s Office from Deputy Chairman of QSR Brands Bhd and in 2001 until 2008. He then served JCorp as November 2003 to April 2009. He also sits on the General Manager of Finance Division KFC Holdings (Malaysia) Bhd, and a member the Board of several other companies within until he assumed the current position. He of the Board of Directors for Kulim (Malaysia) JCorp Group. Berhad, New Britain Palm Oil Limited (Papua also sits on the Board of other companies New Guinea) as well as several other within JCorp and Kulim Group. companies within JCorp and Kulim Group. 5 IR. IZHAR MAHMOOD Vice President Plantation Operations 8 SATIRA OMAR 2 ZULKIFLI IBRAHIM Vice President Aged 57, was appointed as Vice President of Risk and System Management Chief Operating Offi cer/ Plantation Operations in 2008. Prior to this, Senior Vice President Aged 45, was appointed as Vice President, he has been the Director of Engineering Risk and System Management of Kulim in Aged 54, was appointed to the Board on 1 Department, EPA Management Sdn Bhd 2012. She graduated with a Bachelor of July 2011. He has been the Chief Operating since 10 May 2002. He holds a First Grade Science majoring in Communication from Officer since 3 November 2003. He is Steam Engineer’s Certifi cate and has been the University of Southern Illinois, United a Fellow of the Association of Chartered a member of the Board Engineer Malaysia States of America in 1992 and holds a Master Certifi ed Accountants, United Kingdom and (“BEM”) since 1988. He holds a Bachelor in of Business Administration from Henley a member of the Malaysian Institute of Engineering (Agriculture) from Universiti Business School, University of Reading, Accountants since 1992. He joined JCorp Pertanian Malaysia (now known as Universiti United Kingdom. She joined JCorp Group in Group in 1990 as the Financial Controller of Putra Malaysia). He is also one of the industry’s panel advisors at 2 local universities 1993 as an Executive before assuming her Sindora Berhad. In 1996, he was appointed in Malaysia on bioprocess engineering. He current position in Kulim in 2012. She also the Managing Director of Antara Steel Mills joined the Company on 1 July 1990 as a Mill sits on the Board of several other companies Sdn Bhd until 2000 before joining PJB Pacifi c Manager. He also sits on the Board of several within Kulim Group. Capital Group in 2001 as the Chief Operating other companies within Kulim Group. Offi cer. He also sits on the Board of several other companies within Kulim Group. 9 UMI KALTHOM SAMSU 6 NASHARUDDIN SHUKOR Chairman Vice President Sustainability and Quality Council 3 WONG SENG LEE Foods and Intrapreneur Ventures Vice President Aged 59, was appointed as the Chairman Marketing and Corporate Affairs Age 47, was appointed as Vice President of the Group’s Sustainability and Quality of Foods and Intrapreneur Ventures on 1 Council in January 2009. Prior to this, she has Aged 61, has been the Executive Director February 2012. He holds Master of Business been the General Manager of Purchasing of Kulim (Malaysia) Berhad since 8 January Administration (“MBA”) and Bachelor of and Contract Department, EPA Management 1996. He qualifi ed as a Certifi ed Accountant Business Administration (Economics) from Sdn Bhd since 1997. She graduated with a in 1974 and is a Fellow of the Association Sam Houston State University, USA. Prior Diploma in Marketing in 1973 from Institute to this, he has been the General Manager of Chartered Certifi ed Accountants, United of Marketing London / Institut Teknologi of Usahawan Bistari Ayamas Sdn Bhd, KFC Kingdom. He is also a member of Malaysian MARA (now known as Universiti Teknologi Marketing Sdn Bhd and Ayamas Integrated Institute of Accountants and Institute of MARA) and began her career with JCorp in Certified Public Accountant of Singapore. Poultry Industry Sdn Bhd from April 2009 to January 2012. He was the Intrapreneur September 1973 as an Assistant Marketing He joined EPA Management Sdn Bhd as an Officer. She joined Johor Estates Agency Accountant in 1979 and was the Financial at JTP Trading Sdn Bhd from July 2009 to March 2009. He joined Johor Corporation on as an Assistant Marketing Offi cer in March Controller for Kulim (Malaysia) Berhad until 2 May 1989 as Administrative Executive. He 1976. She also sits on the Board of several 1994. He also sits on the Board of several also sits on the Board of several companies other companies within Kulim Group. other companies within Kulim Group. within Kulim Group. annual report 2011 | 55 Kulim (Malaysia) Berhad (23370-V) ORGANISATION CHART
BOARD OF DIRECTORS AHAMAD MOHAMAD MANAGING DIRECTOR
PLANTATION INTERNAL AUDIT INSPECTORATE
ZULKIFLI IBRAHIM CHIEF OPERATING OFFICER/ SENIOR VICE PRESIDENT
WONG SENG LEE IR. IZHAR MAHMOOD SATIRA OMAR EXECUTIVE DIRECTOR/ DIRECTOR/ VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT RISK AND SYSTEM MANAGEMENT MARKETING AND PLANTATION OPERATION CORPORATE AFFAIRS
DATUK AHMAD ZAKI ZAHID AZLI MOHAMED NASHARUDDIN SHUKOR EXECUTIVE DIRECTOR/ CHIEF FINANCIAL OFFICER/ VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT FOODS AND INTRAPRENEUR PROPERTY AND BUSINESS FINANCE VENTURES DEVELOPMENT
SECTION 3: PERFORMANCE HIGHLIGHTS AND STATISTICS 58 GROUP 5-YEAR FINANCIAL STATISTICS 61 GROUP QUARTERLY PERFORMANCE 2011 62 GROUP STATEMENT OF VALUE ADDED 63 5-YEAR PLANTATION STATISTICS: • GROUP • MALAYSIA • PAPUA NEW GUINEA • SOLOMON ISLANDS 675-YEAR FOODS AND RESTAURANTS STATISTICS 68 HUMAN CAPITAL STATISTICS 69 SHAREHOLDING STATISTICS 71 WARRANTHOLDING STATISTICS 73 SHARE PRICE PERFORMANCE AND VOLUME TRADED 2011 Kulim (Malaysia) Berhad (23370-V) 58 | annual report 2011 GROUP 5-YEAR FINANCIAL STATISTICS
2011 2010 2009 2008 2007 STATEMENT OF COMPREHENSIVE INCOME HIGHLIGHTS (RM'000) REVENUE 7,041,771 5,488,939 4,702,399 2,449,970 1,646,650 Segment %: Plantation 46% 38% 34% 71% 71% Foods and Restaurants 48% 55% 59% 22% 28% Intrapreneur Ventures 6% 5% 5% 6% 0% Others 0% 2% 2% 1% 1%
PROFIT FROM OPERATIONS (BEFORE UNALLOCATED EXPENSES) 1,445,081 861,275 615,701 637,273 520,969 Segment %: Plantation 78% 78% 59% 89% 91% Foods and Restaurants 20% 32% 39% 8% 9% Intrapreneur Ventures 3% 2% 3% 3% 0% Others (1%) (12%) (1%) 0% 0%
Unallocated expenses (8,393) (10,483) (12,281) (9,929) (5,698)
PROFIT FROM OPERATIONS 1,436,688 850,792 603,420 627,344 515,271 Interest income 12,591 6,370 12,332 16,759 6,281 Finance costs (91,475) (81,440) (68,028) (57,263) (57,170) Share of net results of associates 6,992 2,174 4,010 61,154 43,098 PROFIT BEFORE TAX 1,364,796 777,896 551,734 647,994 507,480 Income tax expense (356,930) (233,681) (177,451) (137,169) (111,715) PROFIT AFTER TAX FROM – Continuing operations 1,007,866 544,215 374,283 510,825 395,765 – Discontinued operations – 151,611 (22,372) 15,728 119,309 NET PROFIT FOR THE YEAR 1,007,866 695,826 351,911 526,553 515,074
Attributable to: Owners of the Company 565,013 385,592 145,837 351,228 426,823 Non-controlling interests 442,853 310,234 206,074 175,325 88,251 NET PROFIT FOR THE YEAR 1,007,866 695,826 351,911 526,553 515,074
GROUP 5-YEAR PROFIT VS AVERAGE CPO PRICE
1,200 1,125
949 1,008 1,000 901 780 800 683 696
600 515 527
400 352 PAT (RM Million) /CPO Price (USD/tonne)
200
0 2007 2008 2009 2010 2011 PAT (RM Million) CPO Price (USD/tonne) annual report 2011 | 59 Kulim (Malaysia) Berhad (23370-V)
2011 2010 2009 2008 2007 STATEMENT OF FINANCIAL POSITION HIGHLIGHTS (RM’000) ASSETS EMPLOYED Other non-current assets 7,852,213 6,254,289 5,365,042 4,832,569 3,665,454 Intangible assets 1,097,799 1,046,895 891,691 320,906 288,159 Total Non-Current Assets 8,950,012 7,301,184 6,256,733 5,153,475 3,953,613
Other current assets 1,925,524 1,492,362 1,412,098 1,021,008 946,390 Cash and bank balances 644,702 452,146 405,227 445,476 648,307 Total Current Assets 2,570,226 1,944,508 1,817,325 1,466,484 1,594,697
Other current liabilities 935,471 1,056,630 844,355 500,129 313,870 Loans and borrowings 571,843 995,410 547,747 566,229 624,642 Total Current Liabilities 1,507,314 2,052,040 1,392,102 1,066,358 938,512 10,012,924 7,193,652 6,681,956 5,553,601 4,609,798 FINANCED BY: Share capital 315,509 159,336 159,336 154,227 148,545 Reserves 1,540,087 1,433,182 1,491,041 1,479,650 1,500,756 Retained profi ts 2,436,500 1,972,850 1,720,988 1,615,436 1,300,978 Shareholders' equity 4,292,096 3,565,368 3,371,365 3,249,313 2,950,279 Non-controlling interests 2,628,603 1,977,374 1,699,037 1,020,621 759,739 Long term borrowings 2,049,101 931,020 1,157,484 899,444 666,547 Other long term liabilities 1,043,124 719,890 454,070 384,223 233,233 10,012,924 7,193,652 6,681,956 5,553,601 4,609,798
Average capital employed 8,603,288 6,937,804 6,117,779 5,081,700 4,312,280 Average shareholders' equity 3,928,732 3,468,367 3,310,339 3,099,796 2,691,872
GROUP 5-YEAR REVENUE VS AVERAGE CAPITAL EMPLOYED
9,000 8,603
RM Million 6,938 7,042 6,118 6,000 5,489 5,082 4,702 4,312
3,000 2,450 1,647
0 2007 2008 2009 2010 2011 Revenue Average Capital Employed Kulim (Malaysia) Berhad (23370-V) 60 | annual report 2011
GROUP 5-YEAR FINANCIAL STATISTICS (continued)
2011 2010 2009 2008 2007
STATEMENT OF CASH FLOWS HIGHLIGHTS (RM'000) Net cash fl ows from operating activities 1,441,145 804,778 641,664 706,541 471,148 Net cash fl ows from investing activities (1,473,307) (1,077,473) (632,855) (617,793) 79,787 Net cash fl ows from fi nancing activities 180,358 316,116 (58,464) (324,781) (26,536)
Net change in cash and cash equivalents 148,196 43,421 (49,655) (236,033) 524,399
KEY FINANCIAL INDICATORS: PROFITABILITY AND RETURNS Operating profi t margin 20.40% 15.50% 12.83% 25.61% 31.29% PBT margin 19.38% 14.17% 11.73% 26.45% 30.82% Profi t after tax and non-controlling interests margin 8.02% 7.02% 3.10% 14.34% 25.92% Return on average shareholders' equity 14.38% 11.12% 4.41% 11.33% 15.86% Return on average capital employed 6.57% 5.56% 2.38% 6.91% 9.90% Net assets per share (RM) 3.48 11.41 10.79 10.75 10.05
SOLVENCY AND LIQUIDITY Gearing ratio (times) – Gross 0.38 0.35 0.34 0.34 0.35 – Net 0.29 0.27 0.26 0.24 0.17 Interest cover (times) 15.92 10.55 9.11 12.32 9.88 Current ratio (times) 1.71 0.95 1.31 1.38 1.70
FINANCIAL MARKET EPS (sen) – basic 45.90 30.86* 47.22 117.04 150.91 – diluted 45.90 30.86* 47.22 114.96 144.66 Gross dividend per share (sen) 5.00 50.00 17.50 15.00 15.00 Gross dividend rate (%) 20% 100% 35% 30% 30% Gross dividend yield (%) 1.45% 5.83% 2.73% 2.09% 2.20% Net dividend payout rate (%) 10.93% 30.38% 28.11% 9.77% 7.53% Average price-to-earnings ratio (times) 7.53 6.94 13.57 6.13 4.52 Average price-to-book ratio (times) 0.99 0.75 0.59 0.67 0.68
* Adjusted to refl ect the effect of share split and issuance of bonus shares. annual report 2011 | 61 Kulim (Malaysia) Berhad (23370-V) GROUP QUARTERLY PERFORMANCE 2011
2011 Q1 Q2 Q3 Q4 FINANCIAL PERFORMANCE (RM’000) REVENUE 1,657,480 1,802,388 1,780,209 1,801,700 Plantations 46% 48% 48% 44% Foods and Restaurants 47% 46% 46% 51% Intrapreneur Ventures 6% 6% 6% 5% Others 1% 0% 0% 0%
OPERATING RESULTS 396,845 373,952 345,932 321,076 Plantations 82% 75% 73% 84% Foods and Restaurants 17% 18% 18% 26% Intrapreneur Ventures 3% 2% 5% 3% Others (2%) 5% 4% (13%)
Share of net results in associates 1,487 1,795 2,149 1,561 Interest income 2,933 3,850 2,433 2,248 Finance costs (20,050) (22,969) (20,858) (27,455) PROFIT BEFORE TAX 381,215 356,628 329,656 297,430
BASIC EARNINGS PER SHARE (SEN) 10.12 11.70 13.97 8.51
OPERATIONAL RESULTS FFB Production (tonnes) – Malaysia 115,615 165,765 184,427 170,954 – PNG and SI 473,818 459,038 399,570 406,201 589,433 624,803 583,997 577,155
CPO Production (tonnes) – Malaysia 34,844 51,217 51,647 47,958 – PNG and SI 152,061 145,752 123,902 129,942 186,905 196,969 175,549 177,900
Kulim (Malaysia) Berhad (23370-V) 62 | annual report 2011 GROUP STATEMENT OF VALUE ADDED
2011 2010 RM'000 RM'000 Revenue 7,041,771 5,488,939 Purchase of goods and services (4,475,946) (3,602,453) Value added by the Group 2,565,825 1,886,486 Other income 321,290 185,327 Finance costs (91,475) (81,440) Share of net results of associates 6,992 2,174 Discontinued operation – 151,611 Value added available for distribution 2,802,632 2,144,158
DISTRIBUTION To employees Staff costs 1,012,142 879,441 To the Government Taxation 356,930 233,681 To providers of capital Dividends to shareholders 61,728 134,700 Non-controlling interests 442,853 310,234 To re-invest in the Group Depreciation and amortisation 425,694 335,210 Retained profi ts 503,285 250,892 2,802,632 2,144,158
No. of employees at year end 61,293 50,835 Value added per employee (RM) 41,862 37,110 Wealth created per employee (RM) 45,725 42,179
No. of shares at year end ('000 units) 1,234,555 312,349 Value added per share (RM) 2.08 6.04 Wealth created per share (RM) 2.27 6.86
VALUE ADDED DISTRIBUTION
33% 27% Employees 36% Government 41% 2011 2010 Providers of capital Re-investment
18% 21% 13% 11% annual report 2011 | 63 Kulim (Malaysia) Berhad (23370-V) 5-YEAR PLANTATION STATISTICS GROUP
2011 2010 2009 2008 2007 OIL PALM Production (tonnes) Fresh Fruit Bunches (FFB) 2,375,388 1,985,619 1,643,810 1,460,600 1,426,430 Crude Palm Oil 737,323 607,653 501,587 431,149 387,531 Palm Kernel 185,009 148,413 124,311 106,988 97,730 FFB processed 3,340,307 2,790,553 2,305,671 1,989,682 1,818,411
Yield and Extraction Rates FFB yield (tonnes per mature hectare) 24.36 21.66 23.97 23.76 25.45 OER (%) 22.07 21.78 21.75 21.67 21.31 KER (%) 5.54 5.32 5.39 5.38 5.37
AREA STATEMENT (HECTARES) Oil palm – mature 101,303 100,185 68,583 62,750 56,057 – immature area 17,352 12,039 15,289 19,894 12,960 118,655 112,224 83,872 82,644 69,017 Sugar 7,720 8,231 8,199 8,193 – Other crops (excluding inter-row planted fruits) 910 900 846 944 111 8,630 9,131 9,045 9,137 111 Planted area 127,285 121,355 92,917 91,781 69,128 Pastures 9,282 9,518 9,729 11,014 – Reserve land, building sites etc 36,453 34,459 22,177 21,755 13,778 Titled area 173,020 165,332 124,823 124,550 82,906
GROUP FFB YIELD AND PALM PRODUCT EXTRACTION RATE (%)
30 27.61 26.68 27.05 27.14 27.10 25.45 23.76 23.97 24.36 21.66
20
10 Yield (tonnes) and Extraction Rate (%)
0 2007 2008 2009 2010 2011 FFB Yield (tonnes per mature hectare) PPER (%) Kulim (Malaysia) Berhad (23370-V) 64 | annual report 2011 5-YEAR PLANTATION STATISTICS MALAYSIA
2011 2010 2009 2008 2007 OIL PALM Production (tonnes) FFB produced - Processed by own mills 554,156 461,016 461,834 444,109 390,707 FFB produced - Sold to others 82,605 90,210 142,151 159,935 131,766 Total FFB produced 636,761 551,226 603,985 604,044 522,473 Purchased FFB 365,151 345,281 372,437 296,135 170,329 Total FFB processed 919,307 806,297 834,271 740,244 561,036
Crude Palm Oil 185,666 163,233 166,059 141,634 105,216 Palm Kernel 53,678 47,758 49,950 42,102 29,256
Yield and Extraction Rates FFB yield (tonnes per mature hectare) 21.89 19.01 21.22 22.70 22.65 OER (%) 20.20 20.24 19.90 19.13 18.75 KER (%) 5.84 5.92 5.99 5.69 5.21
Average Selling Price (RM per tonne) Crude Palm Oil (locally delivered) 3,193 2,604 2,167 2,530 1,774 Palm Kernel (ex-mill) 2,300 1,666 1,052 1,545 1,180
RUBBER* Production (kgs) – 33,398 626,760 360,463 70,746 Yield per mature hectare (kgs) – 362 1,250 719 766 Average selling prices (sen per kg) – 1,032 591 806 758
AREA STATEMENT (HECTARES) Oil palm – mature 32,865 28,997 28,317 27,941 22,525 – immature 7,458 5,416 6,649 7,320 6,254 40,323 34,413 34,966 35,261 28,779
OTHER CROPS: Rubber 498 498 501 501 99 Sentang 25 25 28 28 12 Pineapple 128 118 58 – – Fruits (inter-row planting with oil palm) 546 425 324 466 393 Planted area 40,974 35,054 35,553 35,790 28,890 Reserve land, building sites etc 2,916 2,396 2,516 2,006 2,422 Titled area 43,890 37,450 38,069 37,796 31,312
* Rubber area was leased out w.e.f. 1 April 2010. annual report 2011 | 65 Kulim (Malaysia) Berhad (23370-V) 5-YEAR PLANTATION STATISTICS PAPUA NEW GUINEA
2011 2010 2009 2008 2007 OIL PALM Production (tonnes) FFB produced 1,608,330 1,313,876 932,568 765,801 760,065 Purchased FFB 668,155 538,041 419,456 379,498 378,027 FFB processed 2,276,485 1,851,917 1,352,024 1,145,299 1,138,092
Crude Palm Oil 520,065 415,801 310,405 267,534 257,338 Palm Kernel 122,999 93,123 67,279 58,747 62,180 Refi ned Palm Oil 59,741 66,434 68,798 67,326 73,412 Palm Olein 27,120 34,418 34,413 14,679 27,104 Palm Stearin 16,398 15,448 11,537 13,501 11,540 Crude Palm Kernel Oil 36,283 31,039 27,625 23,219 25,571 Oil palm seeds (million sold) 11.78 8.35 4.51 15.09 3.54
Yield and Extraction Rates FFB yield (tonnes per mature hectare) 25.49 23.60 26.53 25.36 26.00 OER (%) 22.85 22.42 22.96 23.36 22.61 KER (%) 5.40 5.08 4.98 5.13 5.46
Average Selling Prices (Kina per tonne) Crude Palm Oil (fob) 2,359 2,090 1,721 2,181 1,878 Refi ned Palm Oil (cif) - 1,968 2,444 2,896 2,778 Palm Olein (cif) 2,980 2,472 2,127 2,440 2,958 Palm Stearin (cif) 2,851 2,473 2,355 2,971 2,780 Crude Palm Kernel Oil (fob) 3,896 3,094 2,105 3,297 2,909 Seeds (Kina per seed) 1.77 1.99 2.10 1.97 1.57
AREA STATEMENT (HECTARES) Oil palm – mature 63,091 65,306 35,154 30,196 29,604 – immature 8,924 6,191 7,392 10,826 4,553 72,015 71,497 42,546 41,022 34,157 Sugar 7,720 8,231 8,199 8,193 - Other crops 259 259 259 415 - Planted area 79,994 79,987 51,004 49,630 34,157 Pastures 9,282 9,518 9,729 11,014 - Reserve land, building sites etc 32,277 30,800 18,444 18,533 10,557 Titled area 121,553 120,305 79,177 79,177 44,714 Kulim (Malaysia) Berhad (23370-V) 66 | annual report 2011 5-YEAR PLANTATION STATISTICS SOLOMON ISLANDS
2011 2010 2009 2008 2007 OIL PALM Production (tonnes) FFB produced 130,297 120,517 107,257 90,755 71,794 Purchased FFB 14,218 11,822 12,119 13,384 6,138 Processed FFB 144,515 132,339 119,376 104,139 77,932
Crude Palm Oil 31,592 28,619 25,123 21,981 17,152 Palm Kernel 8,332 7,532 7,082 6,139 4,567 Crude Palm Kernel Oil 3,537 3,206 3,098 2,744 –
Yield and Extraction Rates FFB yield (tonnes per mature hectare) 24.37 21.97 20.98 19.67 18.63 OER (%) 21.86 21.63 21.05 21.11 22.01 KER (%) 5.77 5.69 5.93 5.90 5.86
Average Selling Prices (Kina per tonne fob) Crude Palm Oil 2,359 2,090 1,746 2,850 2,014 Palm Kernel Oil 3,896 3,094 1,970 3,789 –
AREA STATEMENT (HECTARES) Oil palm – mature 5,347 5,882 5,112 4,613 3,928 – immature area 970 432 1,248 1,748 2,153 Planted area 6,317 6,314 6,360 6,361 6,081 Reserve land, building sites etc 1,260 1,263 1,217 1,216 799 Titled area 7,577 7,577 7,577 7,577 6,880 annual report 2011 | 67 Kulim (Malaysia) Berhad (23370-V) 5-YEAR FOODS AND RESTAURANTS STATISTICS QSR BRANDS BHD GROUP
2011 2010 2009 2008 2007 Financial (RM Million) Revenue 3,349.91 3,035.83 2,760.29 532.75 466.38 Operating profi t 283.90 277.36 241.93 49.99 47.60 Profi t before tax (PBT) 269.93 266.86 230.26 97.74 80.19 Profi t after tax (PAT) 182.40 189.76 158.39 83.74 67.02 Shareholders' equity 948.99 852.37 687.14 633.68 476.52 Total assets 2,728.19 2,410.10 2,092.79 903.10 801.77 PBT Margin (%) 8% 9% 8% 18% 17% PAT Margin (%) 5% 6% 6% 16% 14% Return on shareholders' equity (%) 19% 22% 23% 13% 14%
No. of Pizza Hut Outlets Malaysia 210 220 208 187 168 Singapore 55 49 50 45 40 265 269 258 232 208 No. of PHD Outlets Malaysia 42 – – – – 42 – – – – No. of KFC Outlets Malaysia 539 515 475 436 403 Singapore 80 77 77 73 69 Brunei 12 9 9 8 7 Cambodia 10 10 7 2 – India 13 7 – – – 654 618 568 519 479 No. of RasaMas Outlets Malaysia 25 39 40 34 22 Brunei 2 3 3 2 - 27 42 43 36 22 No. of Kedai Ayamas Outlets 75 49 35 25 20 TOTAL 1,063 978 904 812 729 Kulim (Malaysia) Berhad (23370-V) 68 | annual report 2011 HUMAN CAPITAL STATISTICS AS AT 31 DECEMBER 2011
BY DIVISION Papua New Solomon Malaysia Singapore Guinea Islands Others* Total DIVISION Plantations and Support 5,206 - 14,257 1,784 - 21,247 Foods and Restaurants 32,563 3,884 - - 1,192 37,639 Intrapreneur and Other Services 1,636 66 - - 705 2,407 39,405 3,950 14,257 1,784 1,897 61,293
BY CATEGORY Papua New Solomon Malaysia Singapore Guinea Islands Others* Total CATEGORY Managerial and Professional 549 65 59 14 50 737 Executives and Assistant Managers 1,042 71 221 16 64 1,414 Offi ce and Field Staff 6,632 506 1,927 110 699 9,874 General Workers - Field Work/Guard 31,182 3,308 12,050 1,644 1,084 49,268 39,405 3,950 14,257 1,784 1,897 61,293
* The Philippines, Hong Kong, Cambodia, Brunei and India.
BY DIVISION BY CATEGORY 31,182 32,563 No. of employees No. of employees 12,050 14,257 6,632 3,308 5,206 1,927 1,644 1,042 1,084 71 3,884 699 549 506 221 59 110 64 50 65 14 16 1,784 1,636 1,192 66 705 Malaysia Singapore Papua Solomon Others New Guinea Islands Malaysia Singapore Papua Solomon Others New Guinea Islands Managerial and Professional Executives and Assistant Managers Plantations Foods and Intrapreneur and Support Restaurants and Other Services Office and Field Staff General Workers - Field Work/Guard annual report 2011 | 69 Kulim (Malaysia) Berhad (23370-V) SHAREHOLDING STATISTICS AS AT 4 MAY 2012
Authorised Share Capital : RM500,000,000.00 Issued & Fully Paid-Up Capital : RM315,512,888.50 less RM6,870,550 Treasury Shares = RM308,642,338.50 Class of Shares : Ordinary Share of RM0.25 each
VOTING RIGHT OF SHAREHOLDERS Every member of the Company present in person or by proxy shall have one vote on a show of hand and in the case of a poll shall have one vote for every share of which he/she is the holder.
BREAK DOWN OF SHAREHOLDING No. of No. of Size of Shareholding Shareholders % Shares % Less than 100 163 2.22 6,574 - 100 – 1000 1,133 15.44 898,838 0.07 1,001 – 10,000 3,768 51.36 17,799,798 1.44 10,001 – 100,000 1,840 25.08 54,118,438 4.39 100,001 to less than 5% of Issued Capital 430 5.86 424,450,046 34.38 5% and above of Issued Capital 3 0.04 737,295,660 59.72 TOTAL 7,337 100.00 1,234,569,354 100.00
TOP THIRTY SECURITIES ACCOUNT HOLDERS (Without aggregating the securities from different securities accounts belonging to the same depositor)
No. of Name Shares % 1 Maybank Noms (T) Sdn Bhd - A/C Johor Corporation (51401100634A) 484,000,000 39.20 2 Johor Corporation 185,795,260 15.05 3 HSBC Noms (A) Sdn Bhd - A/C NTGS LDN for Skagen Kon-Tiki Verdipapirfond 67,500,400 5.47 4 Citigroup Noms (T) Sdn Bhd - A/C Employees Provident Fund Board 52,068,200 4.22 5 Waqaf An-Nur Corporation Berhad 49,391,304 4.00 6 Johor Corporation 22,478,400 1.82 7 Citigroup Noms (T) Sdn Bhd - A/C Employees Provident Fund Board (Nomura) 11,220,000 0.91 8 Citigroup Noms (A) Sdn Bhd - A/C CBNY for Dimensional Emerging Markets Value Fund 9,703,300 0.79 9 Citigroup Noms (T) Sdn Bhd - A/C ING Insurance Berhad (Inv-IL PAR) 9,551,100 0.77 10 AmanahRaya Trustees Berhad - A/C Amanah Saham Wawasan 2020 9,429,820 0.76 11 HSBC Noms (A) Sdn Bhd - A/C Exempt An for The Bank of New York Mellon (Mellon Acct) 7,626,900 0.62 HSBC Noms (A) Sdn Bhd - A/C Exempt An for JPMorgan Chase Bank, National Association 12 7,385,700 0.60 (Norges BK Lend) 13 Johor Corporation 7,336,800 0.59 14 Tabung Amanah Warisan Negeri Johor 6,423,200 0.52 15 HSBC Noms (A) Sdn Bhd - A/C HSBC-FS for Value Partners “A” Fund 6,160,800 0.50 16 AmanahRaya Trustees Berhad - A/C Public Islamic Select Treasures Fund 5,505,000 0.45 17 Malaysia Noms (T) Sendirian Berhad - A/C Great Eastern Life Assurance (Malaysia) Berhad (LSF) 4,982,600 0.40 18 Zalaraz Sdn Bhd 4,800,800 0.39 Kulim (Malaysia) Berhad (23370-V) 70 | annual report 2011
SHAREHOLDING STATISTICS (continued) AS AT 4 MAY 2012
No. of Name Shares % 19 OSK Noms (T) Sdn Bhd - A/C Jedcon Engineering Survey Sdn Bhd 4,700,600 0.38 20 Cartaban Noms (A) Sdn Bhd - A/C SSBT Fund J734 for SPDR S And P Emerging Market’s Small Cap ETF 4,648,800 0.38 21 HSBC Noms (A) Sdn Bhd - A/C Exempt An for JPMorgan Chase Bank, National Association (U.S.A) 4,361,200 0.35 22 Malaysia Noms (T) Sendirian Berhad - A/C Great Eastern Life Assurance (Malaysia) Berhad (LGF) 4,278,700 0.35 23 Malaysia Noms (T) Sendirian Berhad - A/C Great Eastern Life Assurance (Malaysia) Berhad (LPF) 4,220,000 0.34 24 HSBC Noms (A) Sdn Bhd - A/C Exempt An for JPMorgan Chase Bank, National Association (Australia) 3,649,500 0.30 25 Malaysia Noms (T) Sendirian Berhad - A/C Great Eastern Life Assurance (Malaysia) Berhad (DR) 3,605,400 0.29 26 Citigroup Noms (T) Sdn Bhd - A/C Employees Provident Fund Board (CIMB PRIN) 3,049,400 0.25 27 Mak Seng Fook 2,734,400 0.22 28 Maybank Noms (T) Sdn Bhd - A/C Etiqa Takaful Berhad (Family PRF EQ) 2,636,900 0.21 29 HSBC Noms (A) Sdn Bhd - A/C BNY Brussels for Wisdomtree Emerging Markets Smallcap Dividend Fund 2,527,839 0.20 Cartaban Noms (A) Sdn Bhd - A/C State Street Lux Fund 9T47 for State Street Global Advisors Luxembourg 30 2,330,300 0.19 SICAV-SSGA Enhanced Emerging Markets Equity Fund
SUBSTANTIAL SHAREHOLDERS
Direct Indirect No. of No. of Name Shares % Shares % 1 Maybank Noms (T) Sdn Bhd - A/C Johor Corporation (51401100634A) 484,000,000 39.20 221,969,060 17.98 2 Johor Corporation - 3 a/cs 215,610,460 17.46 490,358,600 39.72 3 HSBC Noms (A) Sdn Bhd - A/C NTGS LDN for Skagen Kon-Tiki 67,500,400 5.47 –– Verdipapirfond
ANALYSIS OF SHAREHOLDERS No. of No. of Name Shareholders % Shares % Malaysian – Bumiputra 770 10.50 835,682,272 67.69 – Others 5,632 76.76 195,972,206 15.87 Foreigners 935 12.74 202,914,876 16.44
TOTAL 7,337 100.00 1,234,569,354 100.00 annual report 2011 | 71 Kulim (Malaysia) Berhad (23370-V) WARRANTHOLDING STATISTICS AS AT 4 MAY 2012
BREAK DOWN OF WARRANTHOLDING No. of No. of Break down of Warrantholding Warrantholders % Warrants % Less than 100 443 8.83 13,709 0.01 100 – 1000 2,085 41.56 1,224,165 0.78 1,001 – 10,000 1,929 38.45 7,240,232 4.64 10,001 – 100,000 485 9.67 15,419,407 9.87 100,001 to less than 5% of Issued Capital 71 1.41 38,883,774 24.90 5% and above of Issued Capital 4 0.08 93,378,230 59.80 TOTAL 5,017 100.00 156,159,517 100.00
TOP THIRTY SECURITIES ACCOUNT HOLDERS (Without aggregating the securities from different securities accounts belonging to the same depositor)
No. of Name Warrants % 1 Maybank Noms (T) Sdn Bhd - A/C Johor Corporation (51401100634A) 60,500,000 38.74 2 Johor Corporation 14,717,980 9.42 3 OSK Noms (T) Sdn Berhad - A/C Jedcon Engineering Survey Sdn Bhd 9,722,700 6.23 4 HSBC Noms (A) Sdn Bhd - A/C NTGS LDN for Skagen Kon-Tiki Verdipapirfond 8,437,550 5.40 5 Waqaf An-Nur Corporation Berhad 6,173,913 3.95 6 Voon Chong Kian 5,860,000 3.75 7 Citigroup Noms (T) Sdn Bhd - A/C Employees Provident Fund Board (Nomura) 3,700,000 2.37 8 Johor Corporation 2,809,800 1.80 9 PUJB Capital Sdn. Bhd. 1,315,600 0.84 10 Inter-Pacifi c Equity Noms (A) Sdn Bhd - A/C Mak Seng Fook 1,248,200 0.80 11 HLG Nom (T) Sdn Bhd - A/C Koon Yew Yin (M) 1,043,900 0.67 12 Yeo Hock Kim 1,000,000 0.64 13 Alliancegroup Noms (T) Sdn Bhd - A/C Ong Siew Eng @ Ong Chai (8040800) 919,000 0.59 14 Johor Corporation 917,100 0.59 15 Lee Keng Hong 600,000 0.38 16 Mak Seng Fook 457,500 0.29 17 Toh Cheok 450,000 0.29 18 HSBC Noms (A) Sdn Bhd - A/C Exempt An for JPMorgan Chase Bank, National Association (Australia) 385,350 0.25 19 Maybank Noms (T) Sdn Bhd - A/C Etiqa Takaful Berhad (Family PRF EQ) 384,700 0.25 20 Zalaraz Sdn Bhd 350,000 0.22 21 TA Noms (T) Sdn Bhd - A/C Koon Yew Yin 344,587 0.22 22 RHB Capital Noms (T) Sdn Bhd - A/C Ho Swee Ming (CEB) 340,000 0.22 23 Loh Swee Chong 336,000 0.22 24 Ostrich Enterprises Sdn Bhd 323,500 0.21 Kulim (Malaysia) Berhad (23370-V) 72 | annual report 2011
WARRANTHOLDING STATISTICS (continued) AS AT 4 MAY 2012
No. of Name Warrants % 25 HLG Nom (A) Sdn Bhd - A/C Exempt An for UOB Kay Hian Pte Ltd (A/C Clients) 322,010 0.21 26 Mak Suet Chee 322,000 0.21 27 Yeu Chian Kim 310,000 0.20 28 CimSec Noms (T) Sdn Bhd - A/C Koh Chong Hap (Penang-CL) 300,000 0.19 29 ECML Noms (T) Sdn Bhd - A/C Yu Kuan Chon (001) 300,000 0.19 30 Ng Eng Ewi 300,000 0.19
SUBSTANTIAL WARRANTHOLDERS
Direct Indirect No. of No. of Name Warrants % Warrants % 1 Mayban Noms (T) Sdn Bhd - A/C Johor Corporation (51401100634A) 60,500,000 38.74 28,248,892 18.09 2 Johor Corporation - 3 a/cs 18,444,880 11.81 70,304,012 45.02 3 OSK Noms (T) Sdn Berhad - A/C for Jedcon Engineering Survey Sdn Bhd 9,722,700 6.23 79,026,192 50.60 4 HSBC Noms (A) Sdn Bhd - A/C NTGS LDN for Skagen Kon-Tiki 8,437,550 5.40 – – Verdipapirfond
ANALYSIS OF WARRANTHOLDERS No. of No. of Name Warrantholders % Warrants % Malaysian – Bumiputra 461 9.19 102,955,022 65.93 – Others 3,879 77.32 36,292,705 23.24 Foreigners 677 13.49 16,911,790 10.83
TOTAL 5,017 100.00 156,159,517 100.00 annual report 2011 | 73 Kulim (Malaysia) Berhad (23370-V) SHARE PRICE PERFOMANCE AND VOLUME TRADED 2011
VOLUME CLOSING SHARE PRICE (RM) TRADED MONTH HIGHEST AVERAGE LOWEST ('000)
JANUARY 13.70 13.27 12.76 83,084
FEBRUARY* 15.88 12.21 3.46 355,326
MARCH 3.45 3.33 3.17 763,769
APRIL 3.41 3.31 3.20 382,247
MAY 3.68 3.29 3.20 332,355
JUNE 3.68 3.58 3.52 242,530
JULY 3.75 3.56 3.49 252,604
AUGUST 3.88 3.73 3.57 605,519
SEPTEMBER 3.74 3.56 3.25 258,316
OCTOBER 3.60 3.35 3.11 199,020
NOVEMBER 3.69 3.60 3.47 293,820
DECEMBER 4.22 3.87 3.66 468,534
TOTAL 4,237,124
800,000 20 Price (RM) Price 700,000
Volume Traded (’000) Traded Volume 600,000 15
500,000
400,000 10
300,000
200,000 5
100,000
0 0 Jan Feb* Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Highest Average Lowest Volume Traded
* Completion of share split and issuance of bonus shares in February 2011. SECTION 4: SEGMENT REVIEW 76 PLANTATION 100 FOODS AND RESTAURANTS 108 INTRAPRENEUR VENTURES R WE STRONGLY SUBSCRIBE TO AND UPHOLD THE THREE PILLARS OF RESPONSIBLE BUSINESS OPERATIONS – PEOPLE, PLANET AND PROFIT
CORPORATE RESPONSIBILITY IS THE CORNERSTONE OF OUR BUSINESS PHILOSOPHY AS WE BALANCE OUR ECONOMIC ASPIRATIONS WITH THE WELL-BEING OF OUR PEOPLE, COMMUNITY AND NATURAL ENVIRONMENT. WE ARE PROUD OF OUR SUSTAINABILITY POLICY, BEING AN EMBODIMENT OF OUR COMMITMENT TO BE RESPONSIBLE. Kulim (Malaysia) Berhad (23370-V) 76 | annual report 2011
SEGMENTS REVIEW PLANTATION
INDUSTRY ENVIRONMENT From the global perspective the major oil palm growing regions in South East Asia had a very good cropping year in 2011, contributing to an unprecedented increase in global palm oil production of 9% to some 50.13 million tonnes. The hectarage expansion in Indonesia and other regions coupled with a jump in productivity as palm trees benefi ted from biological yield upswings contributed to the large increase. annual report 2011 | 77 Kulim (Malaysia) Berhad (23370-V)
Despite this massive uplift in production, world demand remained robust. Food demand increased by 4% with much of the growth coming from China, India and other emerging economies while growth from matured economies was almost fl at. The use of vegetable oils in the industrial segment increased at a faster pace of 8.4% as their usage for biodiesel production increased in countries like USA, Argentina, Brazil, Thailand and Indonesia. Growth would have been higher but for the consumption slowdown observed in the European Union owing to unstable macroeconomic conditions. Kulim (Malaysia) Berhad (23370-V) 78 | annual report 2011 SEGMENT REVIEW PLANTATION (continued)
MALAYSIA The Malaysian oil palm industry turned in a stellar performance in 2011 achieving record high prices for palm oil products and registering growth in crude palm oil production and export volumes. The average price of palm oil for the year breached the RM3,000 mark to register RM3,219 per tonne, while the total export revenue earned for palm products reached a record high of RM80.4 billion, an increase of 34.5% against the RM59.8 billion achieved in 2010.
Total exports of oil palm products, consisting of palm oil, palm kernel oil, palm kernel cake, oleochemicals, biodiesel and fi nished products increased by 5.3% or 1.21 million tonnes to 24.27 million tonnes in 2011 from 23.06 million tonnes recorded in 2010. China maintained its position as the largest palm oil export destination for the tenth consecutive year, with off-take totalling 3.98 million tonnes or 22.1% of total palm oil exports, followed by the European Union, Pakistan, India, USA, Egypt and Japan. These 7 markets combined accounted for 11.78 In Malaysia, the average CPO price “THE PLANTED AREA WITH million tonnes or 65.4% of total Malaysian recorded for the year 2011 was the highest OIL PALM IN MALAYSIA IN palm oil exports in 2011. 2011 REACHED 5 MILLION annual ever reaching RM3,219 per tonne, an increase of RM518 or 19.2% against The planted area with oil palm in Malaysia in HECTARES, AN INCREASE OF RM2,701 per tonne in the previous year. 2011 reached 5 million hectares, an increase 3.0% AGAINST 4.85 MILLION During the first quarter of the year CPO of 3.0% against 4.85 million hectares HECTARES RECORDED THE prices traded fi rmer at RM3,659 per tonne recorded the previous year. This was mainly supported by positive sentiments related PREVIOUS YEAR. “ due to an increase in the planted area in to supply tightness of vegetable oils and Sarawak, up 11.0% or by 102,169 hectares. low domestic palm oil stocks level in the Sabah still ranks first as the state with period. Subsequently, during the second the largest holdings of oil palm with 1.43 quarter bullish market sentiments for palm million hectares or 28.6% of the total oil oil were supported by a fi rm Brent crude oil palm planted area in Malaysia, followed by price coupled with the continuing tightness Sarawak with 1.02 million hectares or 20.4%. in world vegetable oils supply, especially for palm and soyabean oils. CPO production in 2011 increased by 11.3% to reach a record high of 18.91 million Despite worries over the prolonged Euro- tonnes. Sarawak’s CPO production increased AVERAGE CPO PRICE zone sovereign debt crisis during the by 23.7% to 2.7 million tonnes while Sabah 2011 IN MALAYSIA second half of the year weakening the and Peninsular Malaysia increased by 9.9% world vegetable oils market, CPO prices and 9.2% to 5.84 million tonnes and 10.37 % were still stable, averaging RM3,027 per million tonnes respectively. The increase in 19.2 tonne, troughing temporarily in October production was mainly due to the recovery in to RM3,219 per tonne at RM2,838 per tonne. Nearer to home, the FFB yield after the 2 year down trend of from RM2,701 per tonne Indonesian refiners offered discounts declining yields in 2009 and 2010. Improved benefiting from a cut in processed palm weather conditions as well as more hectarage oil export taxes and a surge in supply that coming into peak production contributed to lifted margins to realise a cost advantage the increased production. of at least USD100 per tonne for refined palm oil. annual report 2011 | 79 Kulim (Malaysia) Berhad (23370-V)
REVENUE 54.5% to RM3.26 B from RM2.11 billion
OPERATING PROFIT 68.9% to RM1.13 B from RM668.92 million
PAPUA NEW GUINEA AND FINANCIAL RESULTS In line with the higher production and SOLOMON ISLANDS better prices, supported by fairly stable The Plantation Division recorded a signifi cant production costs, operating profi t from the In terms of GDP growth, construction of leap in revenue of 54.5% to RM3.26 billion Plantation Division rose sharply by 68.9% PNG’s Liquefi ed Natural Gas (“LNG”) project from RM2.11 billion in 2010 due to the to RM1.13 billion from RM668.92 million and high Government spending supported increase in oil yield and higher prices. The in 2010. growth in the non-mineral sector while Group made further progress with the favourable commodity prices supported integration of Kula Palm Oil Limited (“KPOL”) In PNG and SI, NBPOL enjoyed a very solid growth in the agricultural sector with oil estates acquired at the end of April 2010. performance in 2011 with revenues of palm and coffee in particular performing The impact of this acquisition is refl ected in USD780.1 million, an increase of 69% over well. The Solomon Islands economy the full year 2011 results. benefited from high log prices. Gold 2010, stemming from increased fruit and oil production, record sales volumes, and higher production is quickly picking up speed and The Malaysian plantation operation oil prices. Total CPO production rose to will increasingly become more important. achieved substantially better CPO and PK 551,657 tonnes in 2011, an increase of 24% price averages at RM3,193 and RM2,300 per over 2010, whilst palm kernel production CPO prices at the start of 2011 traded at tonne respectively compared to RM2,604 increased to 131,331 tonnes, compared to levels around USD1,200 per tonne, peaked and RM1,666 in 2010. Similarly the average 100,655 tonnes in 2010. We have continued at USD1,335 per tonne and found a CPO selling price achieved in PNG and SI using time chartered vessels with larger temporarily low at USD960 per tonne. As at during the year climbed to USD1,108 per loading capacities throughout 2011 to the year end, NBPOL had made forward sales tonne, an increase of 30% against USD850 cater for the increased oil production and of CPO of approximately 144,750 tonnes of per tonne in 2010. its 2012 production at an average price are working with the local port authorities at our various locations to optimise the of USD1,057 per tonne. As at 15 February In Malaysia, there was a general increase movements of our shipments through 2012, the forward sales of NBPOL Group in operating costs as a result of higher these ports. were approximately 220,000 tonnes of 2012 labour and fertiliser costs as compared to CPO production at a slightly higher average the previous year. However, as a result of Profi t before tax increased 110% to a record price of USD1,078 per tonne. increase in FFB production, our Malaysia USD275.5 million. These results include operation managed to maintain a level a one-off net gain of USD8.4 million on unit cost of production of approximately disposal of NBPOL’s 50% joint venture RM1,790 per tonne CPO (2010: RM1,775 per interest in PT Dami Mas Sejahtera. tonne CPO), before kernel credits. Kulim (Malaysia) Berhad (23370-V) 80 | annual report 2011 SEGMENT REVIEW PLANTATION (continued)
ESTATES PERFORMANCE 2011 2010 Variance GROUP’S FFB Group Plantation Highlights PRODUCTION FFB Production (‘000 tonnes) % – Malaysia 636.76 551.23 15.5% 19.6 – PNG 1,608.33 1,313.88 22.4% to 2.38 million tonnes – SI 130.30 120.52 8.1% from 1.99 million tonnes FBB Yield (tonnes/ha) – Malaysia 21.89 19.01 15.1% – PNG 25.49 23.60 8.0% – SI 24.37 21.97 10.9% Industry - Peninsular Malaysia 19.24 17.91 7.4% CPO Production (‘000 tonnes) – Malaysia 185.67 163.23 13.7% – PNG 520.07 415.80 25.1% – SI 31.59 28.62 10.4% OER (%) – Malaysia 20.20 20.24 (0.2%) – PNG 22.85 22.42 1.9% – SI 21.86 21.63 1.1% Industry - Peninsular Malaysia 20.08 19.91 0.9%
The Group recorded a marked increase in FFB and process control will drive the Group oil palm estates from Johor Corporation production of 19.6% mainly due to better towards its 30% palm products yields completed on 30 December 2011 is rainfall and the benefi t of a relatively more target. Indeed, recently some mills under refl ected in the increase in the total oil palm stable workforce compared to the labour NBPOL have been achieving a yield of over hectarage. The geographical distribution of conditions prevailing in 2010. The Group 31%. The key to achieving the overall Vision planted oil palm hectarage was: 34% in remains committed towards achieving its “30:30” target is consistency, and that is the Malaysia, 61% in PNG and 5% in the SI. productivity target of raising the fruit yields focus in terms of raising productivity to the to 30 tonnes per hectare and palm product next level. The Malaysian estates produced a total extraction rates to 30%. of 636,761 tonnes of FFB in 2011, 15.5% Total Group’s FFB and CPO production in higher than the 551,226 tonnes in 2010. The The plantation operation in Malaysia will 2011 was 2.38 million tonnes and 737,323 yield per hectare in 2011 increased to 21.89 require longer time to reach the Vision “30:30” tonnes, an increase of 19.6% and 21.3% tonnes from 19.01 tonnes in the preceding target following the recent acquisitions of respectively over 2010. The increase was year. This performance was superior to the estates from Johor Corporation that have mainly contributed by the PNG and SI average yields achieved by the industry as older palms due for replanting. Additionally, estates with the added benefi t of a full-year a whole in Johor and Peninsular Malaysia replanting with clonal culture materials in a contribution in 2011, versus eight months’ this year which were 19.75 tonnes and modest scale enable the Group to evaluate contribution in 2010, from the Kula Palm 19.24 tonnes respectively. The average FFB its growth, tolerance to pest and disease and Oil Limited (previously CTP (PNG) Limited) yield for the whole country (inclusive of adverse fl uctuations in the climatic conditions. (“KPOL”) acquisition. Peninsular Malaysia, Sabah and Sarawak) Nevertheless, we can expect the Group to increased to 19.69 tonnes per hectare from reap better yields in the years ahead. The Malaysian estates produced 27% of 18.03 tonnes in 2010. total Group FFB (2010: 28%); PNG estates And on the other side of the Vision ratio, we produced 68% (2010: 66%), whilst the SI The Malaysian estates’ performance were have seen that Good Agricultural Practices estates’ contribution shrunk slightly to limited fi rst by fl oods occurring in January (“GAP”) coupled with efficient milling 5% (2010: 6%). The Group’s planted area and February and then again in December technology and Good Manufacturing of oil palm increased to 118,655 hectares 2011 and secondly by the tight labour Practices (“GMP”), such as better system as compared to 112,224 hectares in 2010. situation. The flood affected 12 out of The acquisition of some 6,000 hectares of 18 estates covering approximately 3,915 annual report 2011 | 81 Kulim (Malaysia) Berhad (23370-V)
hectares leading to crop loss both during to implement the Government’s recently negatively impacted by the weather and the post and pre-harvesting period at the introduced Special Gratuitous Payment (“SGP”) the overall palm product extraction rate for fi elds submerged by fl ood water. The tight for eligible workers and staff in the estates 2011 was 28.21%, an increase from the 2010 labour situation in Malaysia especially in the and mills that supplement their income with result of 27.50%. plantation industry has not improved much a further RM200 a month. The payment, to from the previous year. The situation is encourage attendance, productivity and FFB production from the PNG and SI estates further aggravated by the steep competition reduce crop loss, increases FFB production increased to approximately 1.74 million among plantation industry players and also cost by some RM17 per tonne. tonnes with a further 0.68 million tonnes from unrelated industries for the limited purchased from over 15,600 outgrower supply of foreign workers. In 2011, 2,163 The Group has taken proactive measures blocks. The purchased crop represents new foreign workers were recruited, 808 to enhance its mechanisation programmes 28.2% of NBPOL’s total. foreign workers were repatriated and 310 to reduce dependency on labour especially absconded. with regard to FFB harvesting and In PNG and SI, NBPOL has 78,332 hectares evacuations. These steps have included planted with oil palm of which 68,438 In order to improve and sustain the FFB expanding the internally-developed Kulim are under harvest with the balance being yield, a continuous effort has been made Crane Free System to assist in FFB loading immature oil palms that were planted over to ensure that GAP and GMP are adopted and evacuation, application of a mist blower the last 3 years. Yield of FFB per hectare over in all stages of plantation operations for manuring, a rotoslasher, and, the latest the area under harvest was 25.4 tonnes per from plant breeding, nursery preparation, addition on mechanisation, expanding hectare (2010: 23.7 tonnes per hectare). The and fi eld planting, through to estate and the usage of motorised harvesting poles yields of FFB in West New Britain were 28.6 mill processing. In Malaysia, the introduction known as Cantas in the estates for FFB of Structured Block Supervision (“SBS”) harvesting of palms below the height of 5 tonnes per hectare, a creditable increase from on harvesting, manuring, weeding and meters. Cantas have proved to be a success, the 2010 levels of 26.1 tonnes and likewise, other fi eld routines has further improved improving harvesters’ productivity by 80%. yields for Higaturu, Milne Bay and Poliamba the efficiency and effectiveness of Mechanisation has been expanded in 2011. were 23.9 tonnes per hectare, a solid gain plantation operations. from the 2010 levels of 22.7 tonnes. Yields Weather conditions across PNG and SI were at Ramu Agri-Industries Ltd (“Ramu”) were During the year, revisions of the MAPA/NUPW favourable for crop growth during 2011, 14.4 tonnes per hectare, reflective of the collective agreements for harvesters and starting in the fi rst quarter with steady and very young age profile for those estates fi eld workers saw their wage rates increase welcome rainfall, but well below normal and at Guadalcanal Plains Palm Oil Limited by some 8% and 10%, respectively. Kulim monsoon levels. This meant that harvesting (“GPPOL”), yields were 24.4 tonnes per and other Malaysian plantations also agreed and crop recovery operations were not hectare (2010: 22.0 tonnes per hectare). Kulim (Malaysia) Berhad (23370-V) 82 | annual report 2011 SEGMENT REVIEW PLANTATION (continued)
REPLANTING the Malaysian estates’ average palm age decreased slightly to 12.40 years in To sustain higher production, the Group is committed to improving the average age December 2011 from 12.90 years in 2010. profile of its palms. Scheduled replanting The 6,000 hectares newly acquired has an strategies continued during the year with average age of 8.85 years as almost one palms aged older than 25 from the date of third (27%) is immature, while another 44% fi eld planting in Malaysia, and older than 22 is categorised under young prime. years in PNG and SI, being felled and the areas replanted with the latest high yielding In PNG and SI, NBPOL continued to expand palm varieties. their palm oil production base with the addition of 1,582 hectares of new plantings In Malaysia 868.29 hectares were replanted in West New Britain and Ramu. Replanting in 2011 against 1,042.89 hectares scheduled. of 1,544 hectares was completed across The wet weather in the last quarter of GPPOL, Higaturu, Milne Bay and Poliamba. the year affected some of the planting The replants for West New Britain were work, which is in progress now as we placed on hold during 2010 and 2011 due report, and is expected to be completed by early 2012. By the end of 2011, taking to the new acquisitions but are due to into consideration 6,000 hectares of oil recommence in 2012. palm acquired from Johor Corporation,
OIL PALM AREA STATEMENT OIL PALM PLANTED AREA Average palm age Titled area (ha) Mature (ha) Immature (ha) Total (ha) Total (%) (years) Malaysia 43,890 32,865 7,458 40,323 34% 12.40 PNG 121,553 63,091 8,924 72,015 61% 11.18 SI 7,577 5,347 970 6,317 5% 12.79 Total 173, 020 101,303 17,352 118,655 100% 11.69
PALM AGE PROFILE BY COUNTRY AS AT 31 DECEMBER 2011
5% 13% 12% 13% 15% 21% 13%
15% Malaysia PNG SI 40,323ha 72,015ha 6,317ha 28% 27% 13%
35%
42% 32% 16%
1 – 3 years 4 – 8 years 9 – 18 years 19 – 23 years >23 years annual report 2011 | 83 Kulim (Malaysia) Berhad (23370-V)
MILLS PERFORMANCE terms of oil yield, the Malaysian plantations The average OER and KER targeted for the recorded an increase from 5.63 tonnes CPO Group’s Malaysian mills in 2012, inclusive of The total CPO produced by the Group per hectare in 2010 to 6.38 tonnes in 2011. For the soon-to-be acquired palm oil mill from reached 737,323 tonnes (2010: 607,653 the Malaysian operation, although both OER JCorp, is 20.75% and 5.83%, respectively. tonnes) an increase of 21.3% whilst total and KER recorded a slight dip, respectively To achieve this, we will be upgrading and PK produced was 185,009 tonnes (2010: from 20.24% in 2010 to 20.20% in 2011 and rehabilitating the Malaysian mills to improve 148,413 tonnes) an increase of 24.7%. Total from 5.92% in 2010 to 5.84%, we are still milling effi ciency, reliability and safety while FFB processed by the Group climbed to optimising on manpower and cutting ahead of the industry average (Peninsular 3,340,307 tonnes (2010: 2,790,553 tonnes) a costs. The upgrade of the clarifi cation and Malaysia) of 20.08% and 5.45%. rise of 19.7%. The increase in palm products kernel plant at Tereh Palm Oil Mill (“POM”) produced (CPO and PK) was mainly due to is underway with the refurbishments of The Group’s Malaysian mills’ extraction rates the full-year contribution from KPOL estates Sedenak POM and Sindora POM to follow. were affected mainly by wet weather in in 2011, versus an eight-month contribution early 2011 and higher purchases of variable in 2010. OER improved to 22.07% compared Supported by the full year’s contribution of quality third party crops that increased to 21.78% in 2010 and KER to 5.54% in 2011 fruits from the newly acquired KPOL estates from 345,281 tonnes in 2010 to 365,151 from 5.32% last year. at Higaturu, Milne Bay and Poliamba, the tonnes in 2011. On the other hand, third PNG and SI mills registered a record year for party crops enabled the Group’s mills to oil production of 591,477 tonnes of crude In Malaysia, total CPO production was 185,666 operate at a higher capacity and benefit oil (crude palm oil and palm kernel oil), tonnes in 2011 which was higher by 13.7% from marginal costing advantage as well representing a 23.5% increase over 2010. than the 163,233 tonnes in the prior year. PK as accruing additional volumes of palm production was 53,678 tonnes, an increase produce, both CPO and PK. of 12.4% from the 47,758 tonnes in 2010. In Kulim (Malaysia) Berhad (23370-V) 84 | annual report 2011 SEGMENT REVIEW PLANTATION (continued)
Commissioning of the 12th oil mill at Waraston, in West New Britain, PNG commenced in December 2011. This was after considerable delays in the early part of the year when the lead contractor was unable to secure work permits for its staff. The new mill increases the total processing capacity in West New Britain from 260 to 320 tonnes of fruit per hour and will allow greater fl exibility to both manage fruits in a more timely fashion as well as schedule much needed repairs and maintenance to the other existing mills which came under considerable pressure during 2011.
In the Solomon Islands, the mill upgrade at Tetere from 25 to 45 tonnes per hour was completed with further work on the kernel mill ongoing. At Ramu, work commenced at At the same time, NBPOL’s first methane food and personal care markets. For NBOL, the Gusap POM during the year to increase capture plants in West New Britain are also 2011 has really been about building on the capacity from 30 to 45 tonnes per hour. nearing completion. This is a major step the initial successes and steadily gaining Across the new acquisitions, considerable forward for NBPOL as it begins to utilise bulk oil market share within the UK while progress has been made during the year the potent greenhouse gas as an energy simultaneously executing expansion plans in upgrading and refurbishing several mills source and reduce its carbon footprint. into packed products. with the objective of not only increasing Commissioning of the plants is expected processing capacity, but improving milling in the fi rst half of 2012. The power will be NBOL will also be producing its fi rst packed effi ciency and reliability. utilised to supply the housing estates and products for sale into the UK bakery and refi nery as well as supplying the local grid foodservice sectors in the first quarter of Unlike NBPOL’s existing facilities, the oil in support of rural electrifi cation through 2012. This will give NBOL the largest range mills at Higaturu (apart from the Sangara an agreement with PNG Power. NBPOL of fully traceable sustainable products in POM), Milne Bay and Poliamba, have no is embarking on the construction of a the market. capacity to crush palm kernels and therefore further 3 CDM projects in West New Britain, have traditionally sold and exported palm Higaturu and Milne Bay. kernels to Malaysia. To maximise the value SUGAR PRODUCTION of palm kernels, work on building palm In Liverpool, New Britain Oils Limited (“NBOL”) Marketed under the brand “Ramu Sugar”, kernel crushing facilities and associated refinery operation marked a significant sugar sales were 32% lower in 2011 where kernel oil storage tanks started during 2011 milestone when in 2010 it began supplying 28,404 tonnes of sugar were sold in PNG, with commissioning of the new facilities directly to manufacturers in the European expected during the second half of 2012. This will have immediate savings on shipping costs whilst also increasing the sales value of the palm kernels by selling palm kernel oil and palm kernel expeller.
Kulim’s first methane capture plant in Malaysia at Sedenak POM is due for completion before the end of 2012. The Clean Development Mechanism (“CDM”) project utilising biogas from the mill’s POME will mitigate greenhouse gas emissions and generate power for our own downstream plants, adding another potential revenue stream. We are working on similar projects for the other Group mills. annual report 2011 | 85 Kulim (Malaysia) Berhad (23370-V)
due to the cane production shortfall in 2010. During the year Ramu faced the challenge of meeting demand and had to import over 4,000 tonnes to meet the shortfall. Despite the industry enjoying protection in the form of a tariff of 35% for all imported sugar, several consumers against the backdrop of reduced supply, imported sugar directly which impacted negatively on the year’s sales. World sugar prices remained robust during 2011, further reducing the threat of competition from imported sugar. One of the most important limiting factors to increased sugar consumption in PNG is overcoming logistical challenges. Ramu has gone some way to addressing this with a bulk depot and distribution office in Mt. Hagen, the largest centre in the Highlands.
During the year the sugar operation from 79.3% in 2010. Further improvements receive investment or that beef production harvested some 397,328 tonnes of cane from in cane delivery from the fi eld, maintenance cannot be signifi cantly improved to provide 7,311 hectares. This was an improvement and milling planned for 2012 are expected a valuable resource to supplement the on 2010 when 375,822 tonnes of cane was to support sugar recovery. earning capacity of NBPOL, especially in harvested. Improved planting techniques areas where cattle and oil palms can be incorporating a legume fallow period has intercropped, or in areas where oil palms reduced weed competition, this as well as BEEF PRODUCTION are unsuited as a sole commercial crop. The increasing the area replanted every year NBPOL remains the largest producer of herd size showed some growth with 20,000 will go some way to increasing yields. The beef in PNG, however beef production will cattle managed in 2 separate locations. The sugar factory with a capacity of processing continue to play only a minor role in the herd produced some 1,284,000 kilograms of 500,000 tonnes of cane was therefore under overall investment strategy. This does not beef for the PNG market generating revenue little pressure. Overall sugar recovery from mean that the beef operations will not of K14.9 million. cane processing improved in 2011 to 81.4%
The herd at Ramu has approximately 16,500 heads of cattle. The feedlot has a capacity to fi nish up to 1,000 head 120 days prior to slaughter. Good effi ciencies and standards in the abattoir combined with the improved weights have yielded much improved quality in the final product. Additional investment in stock yards and machinery for both silage production and pasture improvement are all contributing to better effi ciencies. The herd at West New Britain has approximately 3,500 heads of cattle. The total number of animals processed fell short of budget by 9% affected by shipping schedules and lower numbers through the feedlot. However, due to strong weight gains in the feedlot, increased selling prices and a larger proportion of high value sales of butchered products into the local community, revenues were in line with budget. Kulim (Malaysia) Berhad (23370-V) 86 | annual report 2011 SEGMENT REVIEW PLANTATION (continued)
RESEARCH AND DEVELOPMENT Due to our geographically-diverse to identify under-performing areas operations, the Group’s R&D services that require close attention. Precision The main attraction of palm oil is its are provided separately by the Kulim agriculture management aims for low production cost and high yield Agro-Tech Centre based in Kota Tinggi, specifi c mitigation to specifi c areas and per hectare and the goal of the whole Johor for its Malaysian operation, and by signifi cantly enhances effective fertiliser industry is to make sure that we maintain NBPOL’s Dami Oil Palm Research Station usage, reduces fertiliser inputs and boosts our lead in these areas. (“OPRS”) based in West New Britain yields through the higher yield attainable. Province, Papua New Guinea for PNG and Applying the right amount of inputs in Harnessing technology and science, SI operations. the right place and at the right time our Research and Development (“R&D”) benefi ts the trees, soils and groundwater, initiative applies new techniques to PRECISION AGRICULTURE AND and thus the entire crop cycle. The aim build the Group’s competitiveness in the ANALYTICAL SERVICES of precision agriculture is to vary the market and create greater value providing All the Group’s estates in Malaysia have allocation of production inputs on a fi eld- agronomic and laboratory services and been mapped and digitised capturing by-field or palm-by-palm basis so that carrying out innovative research. R&D agronomic and management data each fi eld within the plantation reaches personnel are involved in advisory using the Kulim Agrotech Information the maximum economic yield. The services, seed production, plant breeding, Systems (“KATIS”) which is an integrated system increases the accuracy of the area and feasibility studies on land suitability. system comprising of a Global computation, analyses yield gap, planting R&D goals include yield optimisation, Positioning System (“GPS”), Geography material selection, nutrient management, reducing palm immaturity period and Information System (“GIS”) and Oil Palm natural resource management and other agro by-products utilisation. Monitoring Programme. The data offers agronomic parameters. Consequently, a quick overview of the estate’s current precision agriculture has become a performance and enables managers cornerstone of sustainable agriculture. annual report 2011 | 87 Kulim (Malaysia) Berhad (23370-V)
Kulim has a policy of sharing scientific AGRONOMY research findings with the research The Agronomy department’s oil palm community. Our agronomists and scientists management database in Malaysia now attend and present papers on oil palm holds information collated over the past breeding, palm nutrition, oil palm by- 17 years. Programmes based on the data products and new technologies at national are used to determine the performance and international forums in the interest of of different fields across the locations, disseminating knowledge for the benefit providing analysis and recommendations of the industry as a whole. The latest on best practices, determining sites for new impressive test results gathered from low agronomy trials, and to generate information cost aerial photo-mapping using unmanned for optimising planting schedules. The model auto-pilot aircraft were presented at section’s responsibilities have escalated from the 2011 International Palm Oil Congress providing technical advice and services to held in Kuala Lumpur. Aerial photographs the plantations to full involvement with enable cross checking and updating of research and development. Interpreted estate census data to reflect true status. data is made available to estates in The information obtained enables accurate order to enhance the monitoring of field palm inventory, palm health checks and performance, benchmarking individual surveillance of field conditions including estates against the leaders. roads, water body, slope stability and other parameters. This data enhances Agronomic services based on Best the efficiency of field management by Management Practices (“BMP”) are provided facilitating assessment of the current land to all Group estates in order to apply condition for better yield forecasting. optimum inputs to achieve maximum yield and production in a sustainable We firmly advocate the development of manner. The service covers precision and agri-science and technology to improve site specific management proposals to crop and oil yields to meet increasing ensure maximum sustainable yield through demands. The Ulu Tiram Central Laboratory determining the yield gap between fi elds (“UTCL”) analytical service provides technical to elucidate fertiliser response through the support for the Group’s plantations and provision of nutrient management and soil mills. The laboratory offers soil, foliar and characterisation and conservation strategies, nutrient analyses, agronomic and fertiliser all aimed at improving soil management. recommendations for high crop productivity, and quality and effluent testing for the In line with RSPO targets that single out soil palm oil mills, using leading-edge testing fertility as a principle criterion for achieving equipment such as the Atomic Absorption sustainability, long-term fertiliser studies are Spectrophotometer, Flame Photometer, aimed at increasing the effi ciency of specifi c UV-spectrophotometer and Buchi Auto nutrient application as well as evaluating distillation to ensure reliable and accurate herbicides that are less toxic and more analytical results. Accredited under MS ISO/ environmentally friendly. Improving soil IEC 17025 SAMM (Skim Akreditasi Makmal health is one of the ways to ensure vigorous Malaysia) since 2007, the laboratory’s palm growth thus preparing the trees competency is also recognised globally and for unexpected pest and disease threats. supported by the ILAC – MRA (International Emphasis is given to the integration of Laboratory Accreditation Cooperation inorganic and organic fertilisers to promote – Mutual Recognition Agreement), an effi cient energy usage and sustainable high international co-operation of laboratory palm oil yields especially in the current inspection accreditation bodies. economic climate where the prices of inorganic fertilisers have been steadily rising. Effi cacy trials on weedicides continue Kulim (Malaysia) Berhad (23370-V) 88 | annual report 2011 SEGMENT REVIEW PLANTATION (continued)
in order to provide estates with information on the rodent populations, predatory fertilisers. The return of organic matter on the most cost-effective chemical for insects, parasitoids and entomopathogenic also improves the physical and chemical weed control. Application of biocompost, fungi eliminate defoliating insects. Benefi cial properties of the soil. Besides being non- an organic fertiliser currently produced by plants are cultivated to provide shelter polluting, zero-burning also contributes the Group’s mills has enabled effi cient by- and supplementary food such as nectar in positively towards efforts in minimising product utilisation covering larger planting encouraging the population of predators global warming. Felling and clearing is areas. A study carried out by R&D indicates and parasites. Insecticides are only resorted no longer dependent on the vagaries of biocompost acts as a soil ameliorant and its to in outbreak situation where natural weather. In the past, wet weather often application results in better soil health thus enemy predation is no longer sufficient delayed burning and thus replanting. Such producing further and faster root growth. to manage the pest population. Once the delays are now avoided. In the absence situation is within control, natural controls of burning, the cost of land clearing is Integrated Pest Management (“IPM”), the use are reactivated. substantially cheaper. Zero-burning is non- of holistic and compatible methods of pest polluting, contributes positively towards and disease control, has long been practised The practical and environmentally sound minimising global warming, and complies and refi ned by research, experience and on- technique of zero-burning replanting with environmental legislation. the-ground breakthroughs. A balanced IPM has been adopted and implemented approach removes the overdependence on by the Group. This is the best option to PLANT BREEDING pesticides, making the control process more the previous practice of burning and is By selecting plants with desirable biosustainable. The typical pests within an suitable for converting other crops into characteristics, the Plant Breeding unit oil palm estate include rats, bagworms, palm cultivation or for replanting. Using develops new varieties that are higher- nettle caterpillars and rhinoceros Oryctes the zero-burning replanting technique, old yielding, resistant to pests and diseases, beetles. These pests are controlled using and uneconomical stands of oil palm are drought-resistant or regionally adapted direct biocontrol agents such as viruses and shredded and left to decompose in situ. This to different environments and growing fungi to infect the pests, such as Cordyceps technique also allows all plant tissues to conditions. High yielding oil palms are the militaris to manage the population of the be recycled, enhancing soil organic matter, bedrock of the Group’s “30:30” strategy and nettle caterpillar. Predatory animals and helping to restore and improve soil fertility. the most influential driver of profitability, insects such as barn owls that feed on rats The biomass of the palm residue through other than commodity prices. During the are fostered to control pest populations. decomposition recycles nutrients into the year a set of progeny testing involving 150 While barn owls and snakes keep a check soil and reduces the input of inorganic annual report 2011 | 89 Kulim (Malaysia) Berhad (23370-V)
crosses were completed that tested elite duras from Dami, ex-OPGL, Kulim-Nigerian and Kulim duras with AVROS pisiferas from the Malaysian Palm Oil Board (“MPOB’), Kulim, Dami. The objectives of this trial were to fi nd new sources of better duras and pisiferas for future planting materials and select ortets for clonal propagation. The seeds will be germinated in 2012 for 2013 fi eld planting in Sungai Papan Estate. Using Connected Design (Incomplete North Carolina Mating Design II) in the crossings, selection of elite dura and pisifera parental palms will be more meaningful as the General Combining Ability (“GCA”) and Specifi c Combining Ability (“SCA”) can be A Single Seed Descend (“SSD”) programme Through rigorous and wide scale fi eld trials estimated instead of the ordinary North involving 7 ex-OPGL and 15 Dami duras that cover an extensive range of genetic Carolina Mating I (“NCMI”) which can was completed. The materials are in big materials, the plant breeding team has been estimate only the GCA of the pisiferas while polybags and will be fi eld planted in 2012. able to identify a number of high yielding the duras performance is based on the This programme is an alternative path to parental crossing combinations, producing mean value. shorten the period of creating an inbred elite progenies that have the characteristics line in a 5-year cycle instead of 10-year of early yields, high bunch numbers, high A total of 100 MPOB Ganoderma tolerant cycle using a standard selfi ng programme. total oil yields of CPO and palm kernel oil, DxP materials planted in a Ganoderma large fruits and good oil extraction rates. hot spot area in one of our managed- The plant breeding and seed production operations based at Dami in West New Britain This material is used across the estates estates in 2009 were in bearing. Further supply planting material that is both high for NBPOL’s replanting and new planting negotiations with MPOB progressed to yielding and suited to its environment aiming programme. progeny test some duras and teneras/ to deliver oil yields in excess of 9 tonnes per pisiferas of Zaire, Cameroon and Nigerian hectare on a consistent basis under New In 2011 NBPOL also focused on elite parent populations and self-pollination of the dura Britain’s growing conditions. Improvement in palm conservation through cloning, since and tenera parental palms for future genetic the oil yield of each subsequent generation some of its most valuable palms are now improvement. The crossing programmes are of palms over the last 3 decades showed reaching the end of their useful lives. expected to be completed by end of 2012. that the average yield of CPO in progeny Although NBPOL will continue to clone Screening of tolerant materials through testing trials has increased from 6.1 tonnes these parent palms in 2012, it also plans to inoculation technique on the three-month per hectare to over 9.0 tonnes per hectare. sample more elite crosses, which have the old seedlings using rubber wood block will In addition the palms are maturing faster and are in full harvest at 24 months after potential of producing CPO yields in excess be carried out in February 2013. fi eld planting. of 10 tonnes per hectare per year.
SEED PRODUCTION In Malaysia, a total of 1.80 million commercial DxP seeds were produced and 0.86 million germinated seeds were sold by the Group’s Malaysian Plant Breeding unit in 2011. In PNG and SI, seed sales reached 11.8 million, a 42% increase from the sales achieved in 2010. Of those sales, 8.1 million were to customers overseas and 3.7 million for internal use and within PNG. The high and stable palm oil prices combined with the ongoing economic recovery supported sales, which were actively pursued by the Dami Oil Palm Research team. NBPOL’s international customer base includes companies from Indonesia, Thailand, Philippines, Honduras, Cameroon and Sri Lanka. The Dami seed Kulim (Malaysia) Berhad (23370-V) 90 | annual report 2011 SEGMENT REVIEW PLANTATION (continued)
by using genetic relationship studies to determine desirable oil palm breeding partners. Palms can be cloned both for increasing the number of elite breeding trees and for improving the quality of new oil producing feedstock. Advances in molecular biology have transformed biotechnology in recent years. Whereas in the past, crop improvement depended on selective breeding within species, tissue culture, through which plants can be cloned from a single cell, has sped up the process of making new varieties available. It allows rapid multiplication of uniform planting materials with desired characteristics. This enables improvement of planting materials using existing individuals which have all or most of the desired qualities such as good oil yield and composition, slow vertical growth and disease resistance.
The research, development, production and supply of high quality oil palm plantlets through a tissue culturing process for Malaysia-based operations continued through the year at Kulim TopPlant Sdn Bhd (“Kulim TopPlant”) in REM Estate. Commissioned in July 2007, Kulim TopPlant was awarded BioNexus Status by the Malaysia BiotechCorp in 2008, a status that carries signifi cant tax incentives. During the reporting period, the production of clonal ramets at Kulim TopPlant went on smoothly; over 40,000 units were delivered to estates within the Group in 2011. With more trained laboratory technicians and higher plant culture inventories, tissue culture production in the year ahead is expected to double. Some orders from estates outside the Group have been received for 2012.
The Group is also constructing a new dedicated R&D establishment to house genome research. This investment for production unit successfully maintained its ISO 9001:2008 Quality Management System the future is being taken because of the certification giving further independent assurance and confidence to the customers of many advantages to work independently Dami’s reputation as a producer of high grade oil palm planting material. The sales forecast on genome research in our own facilities, for 2012 remains buoyant with budgeted sales of 12 million seeds for the year. among others, a more accurate result when the legitimacy of the off-spring can be BIOTECHNOLOGY confirmed through DNA finger printing; Research and development in this fi eld being explored by the Group focuses upon genetic research methodology and progress can be improvement through modern molecular techniques using tissue culture methodology secured and remained confi dential before to clone elite trees. The research also seeks to hasten traditional breeding programmes being published. annual report 2011 | 91 Kulim (Malaysia) Berhad (23370-V)
Over the past 3 years, the biotechnology HUMAN CAPITAL previous year. The increase was mainly team at Dami Research Station has attributable to the expansion of business at The Group considers human capital planning developed and tested a new high effi ciency NBPOL in PNG and SI. The composition by a critical business process because of its palm reproduction technology. During countries was: Malaysia at 5,206 (25%), PNG transformational impact to the business 2011, further gains were made as the tissue at 14,257 (67%) and SI at 1,784 (8%). and the way it delivers that value. Some culture protocols were refi ned, enabling us of the most important strategic decision- to carry out tissue culture processes only 16 Learning programmes are a critical tool making we make is in the selection, training weeks after sampling the palms, which is a in the transformation of employees and and promotion of human capital because substantial reduction in time compared to their development. To this aim, the Group of the deep implications on corporate the 50 to 100 weeks taken with traditional endeavours to employ the best talent and strategy. Financial resources are insuffi cient tissue culture protocols. continuously hones skills. Formal courses, without people to drive the strategy toward seminars, and workshops, both internal success. As part of the process of moving from and external, were held during the year. laboratory to field, cloned palms were The scope of training modules ranged The future of our organisation depends on assessed in the Dami nursery for any from corporate culture familiarisation developing a people strategy that enables abnormality and exhibited encouraging to awareness, productivity, effective every employee to remain competitive in results. From the initial sampling of elite communication, sustainability and executive a global economy. The Group’s ongoing material, Dami has exceeded the goal of and leadership development. ‘People Excellence’ campaign is about having at least 5 clones for large-scale developing people to excel, to be the best, production technology. The first of these Formal training programmes directly and do their best for customers. clones has been moved from the laboratory related towards enhancing our operational into the nursery and production will management capability were emphasised. As at the end of 2011, our plantations accelerate as embryos from tissue culture In 2011, 10 employees were registered for operations employed 21,247 personnel, begin to accumulate. an Executive Diploma programme with representing a 12% increase over the their fi nal assessment and results expected in April 2012. Another employee was placed in an Executive Master in Business Administration programme in collaboration with Johor Corporation and UTM-SPACE. The pre-retirement programme was continued during the year to ensure upcoming prospective retirees over the next 2 years are well prepared fi nancially, physically and mentally after they leave the Company’s employment. During the year, our Malaysian operations invested RM1.3 million or 4.45% of payroll towards training and recorded an average training man-day of 4.13 per employee, which exceeded our target of 3 man-days.
Following on from last year’s Organisational Climate Survey, in 2011, the Group conducted a Salary Survey to review and revise scales for current competitiveness in the market. The new emphasis on performance appraisal and merit pay is to maximise our people resources to make our business even more successful by boosting employees’ productivity. The performance appraisal system is communicated to all employees via a series of road shows to underscore the value the Group places on high performance in the organisation. The Kulim (Malaysia) Berhad (23370-V) 92 | annual report 2011 SEGMENT REVIEW PLANTATION (continued)
evaluation of each person’s performance Discussions between the organisation, rounded assessment of an individual objectively, fairly and systematically is relevant Government officials, staff and employee’s performance revealing areas an integral part of our Performance workers’ union officials and Hospital for further improvement. Questions were Management System (“PMS”) which aims Assistants Association representatives, expanded to assess leadership qualities to measure the individual employee’s enable the exchange of information and and management style. The resulting performance against critical targets, in the maintenance of good rapport among feedback guides employees to further particular Key Performance Indicators the parties. Besides that, regular ongoing improve performance in the areas of (“KPIs”). Sustainability-related dimensions consultations resolve any differences, teamwork, communication, leadership and such as Safety and Health, participation in grievances and disputes. It has been a core organisational values. social and recreational activities as well as principle of the Company to responsibly in Non-Governmental Organisations, were manage the whole workforce with full The Group’s Malaysian operation had maintained in the assessment, refl ecting the adherence to the Code of Conduct for in December 2011, organised a retreat Group’s commitment to embrace the ethos Industrial Harmony and at the same time programme for the Senior Management of corporate responsibility. respect each other obligations. members at Selesa Beach Resort, Port Dickson. During the programme, 10 groups were The Group’s Malaysian operations are The establishment of a performance- formed to look at the various material issues dependent on foreign labour, especially management based organisational culture within the operation. Areas covered, among migrant workers from Indonesia. We involves a coaching environment and others, inclusive of plantation operations, welcome the move by the Malaysian and conscious attempt at continuous dialogue internal control and human resource Indonesian Governments to regularise and between management and staff to achieve management. An interactive dialogue session protect the rights of each nation’s citizen. a balance between driving for results with the Managing Director was held to share This is in line with the Group’s practice of and listening to feedback. The annual all the identifi ed stumbling blocks and also to working with bona fide labour suppliers Peers and Reverse Feedback (“PARFEED”) address current business development. Task to ensure the legality of its manpower and appraisal system is achieving its objective forces are being formed to address each issue eliminate making any distinction based of complementing the usual top-down and generate creative solutions in enhancing upon an employee’s race and origin. appraisal approach and provides a better- the organisation performance. annual report 2011 | 93 Kulim (Malaysia) Berhad (23370-V)
Pedoman, the Group’s annual gathering issues raised. The Asset Declaration exercise of employees, is a forum for the open was extended to all executives who were and transparent exchange of ideas, plans also requested to individually declare and opinions. The motivational theme income, assets and liabilities to eliminate the for Pedoman 2011 was ’Membina dan risk of corruption and confl ict of interest. Membela’. Every year at this popular event, the management team provides updates To protect our security, eliminate risk to the on the Group’s performance, extols the health, welfare and safety of the staff, and highlights of the preceding year, identifi es to increase productivity in the workplace, it the challenges we face, and tables a road is the Group’s policy that the use of illegal map to reach our vision. The gathering again drugs and alcohol not be tolerated in the presented an opportunity for employees workplace. Every employee is responsible for from all levels to hold an open dialogue complying with this policy and the Group with the management team as well as raise promotes a drug-free workplace programme questions and offer suggestions. Educational requiring all employees to adhere to the certificates were presented, awards given required policies. The prohibition includes for quality and operational achievements, policies and procedures, objectives, and and service milestones celebrated. guidelines concerning the nature, frequency, and type of drug testing to be instituted, The Ethics Declaration form embedded in including random testing, voluntary testing, the organisation is an important instrument and testing as part of, or as a follow-up to, to promote a positive working culture by counselling or rehabilitation. An inspection encouraging employees to whistle-blow and programme to vet all internal grocery shops alert the management about any ethical in the operating units for illegal medication wrong-doings that might occur below the and alcohol has also proven to work as a compliance radar. In 2011, all employees fi rst-line deterrence initiative. provided their valuable feedback and appropriate action was taken to address Kulim (Malaysia) Berhad (23370-V) 94 | annual report 2011 SEGMENT REVIEW PLANTATION (continued)
TOTAL QUALITY MANAGEMENT The Group’s Total Quality Management (“TQM”) looks at the overall quality measures used including managing quality design and development, quality control and maintenance, quality improvement, and quality assurance. We recognise that a good quality management system is effective when we can quantify the results that will then help set the Company’s goals for the future and ensure that every department is working toward the same result.
We remain committed to the continuous improvement of the service and product quality of the operating units through maintenance of the current standards certifi cations. The Roundtable on Sustainable Palm Oil (“RSPO”) certification, a global, Various Islamic-based activities are promoted The Group has a human resource outreach multi-stakeholder initiative on sustainable throughout the organisation to promote and external public relations strategy, to palm oil, held by the Group’s plantation religious precepts amongst employees and publicise our success and attract the best operations in Malaysia, PNG (except KPOL) their families. The Qurban programme is a and brightest talent to further our goal of and SI is a seal of approval that our palm highlight of each year when we witness the building a winning organisation, that includes oil is produced in a sustainable manner charitable spirit of our staff sharing their road shows to school leavers and university and volumes are traceable. In 2011, NBPOL blessings. In 2011, 319 employees in the graduates. The promotional schedule this has successfully completed an audit for Malaysian operations pooled resources and year included visits to institutions of higher RSPO certification for Poliamba Limited distributed meat to less fortunate families learning and our participation in career and in New Ireland, PNG. In 2012 we hope to in the operating units and surrounding educational fairs and exhibitions where the have undergone audits at the remaining 2 communities, a noble way indeed for Group expounded to prospective recruits on sites of KPOL at Milne Bay and Higaturu as employees to contribute towards realising the the adventure and passion of the plantation part of the Group’s commitment to have organisation’s corporate social responsibility business and the direction the Group is all units and supply chains traceable and to society. This year we pay tribute to the taking to maintain its leadership position. certifi ed as fully sustainable by the end of highest level of participation since the 2012, delivering production assurance and implementation of the programme in 2006. product knowledge of carbon values to customers who value such supply sources. annual report 2011 | 95 Kulim (Malaysia) Berhad (23370-V)
4 of the Group’s operating units in Malaysia; Sedenak Palm Oil Mill (“POM”), Sindora POM, Tereh POM and Tereh Selatan Estate successfully underwent the reassessment of their Quality System, that entailed the re-certifi cation of the ISO 9001 accreditation. ISO 9001:2008 is the internationally recognised standard for the quality management of businesses. It applies to the processes that create and control the products and services an organisation supplies and prescribes systematic control of activities to ensure that the needs and expectations of customers are met. It is designed and intended to apply to virtually any product or service, made by any process anywhere in the world.
OUR ACCREDITATIONS CERTIFICATIONS RSPO ISO 9001:2008 ISO 14001:2004 IEC 17025
Receiving Company/ All Malaysian, PNG and Malaysian operations – All PNG operations and Ulu Tiram Central Operating Units SI estates and mills Sedenak POM, Sindora for Malaysian operations Laboratory (UTCL) (except KPOL) POM, Tereh POM and – Sedenak Estate, Sindora Tereh Selatan Estate Estate and Sindora POM
Customers, consumers and shareholders and calibration results. Our Ulu Tiram laboratory uses ISO/IEC 17025 to implement a are increasingly concerned over the quality system aimed at improving their ability to consistently produce valid results. The environmental impact of the activities, standard places great emphasis on the responsibilities of senior management, with explicit products and services they consume. requirements for continual improvement of the management system itself, and particularly, They expect companies to comply with communication with the customer. In January 2011, to meet increasing demand from environmental standards and demonstrate internal and external customers, Ulu Tiram Central Laboratory (“UTCL”) added accreditation their commitment to reducing their environmental impact in daily operations. The ISO 14001:2004 environmental management standard helps us minimise the impact of our operations on the environment (air, water, land, community and natural resources), and comply with applicable laws and regulations. Sedenak Estate, Sindora Estate and Sindora POM successfully underwent the surveillance of their ISO 14001:2004 certification during the year under review.
ISO/IEC 17025 is the main standard used by testing and calibration laboratories issued by the International Organisation for Standardisation. It applies directly to those organisations that produce testing Kulim (Malaysia) Berhad (23370-V) 96 | annual report 2011 SEGMENT REVIEW PLANTATION (continued)
The key areas addressed by OHSAS 18001 are planning for hazard identification, risk assessment and risk control, the OHSAS management programme, structure and responsibility, training, awareness and competence, consultation and communication, operational control, emergency preparedness and response and performance measuring, monitoring and improvement. The Group’s adoption of OHSAS 18001 embeds a formal procedure to reduce the risks associated with health and safety in the working environment for employees, customers and the general public, reducing and preventing accidents and accident-related loss of lives, time and resources.
To involve employees in productivity and effi ciency improvement activities, a team- based environment has been developed in which they can participate actively for their foliar testing service. Foliar chemical The internationally recognised assessment in improving their process, product, or analysis identifies deficiencies of nitrogen, specification Occupational Health and service performance. One such employee phosphorus, potassium, magnesium and Safety Assessment Series (“OHSAS”) 18001 participation programme is the Quality calcium and other metals in samples. The guidelines are implemented as part of Control Circle (“QCC”) directed towards report will indicate the normal and defi cient the Group’s risk management strategy to improvements in the workplace focusing on levels of these elements and recommend address changing legislation and protect areas such as cost, safety and productivity. a prescription for a remedial fertiliser our workforce. OHSAS promotes a safe and Other complementing initiatives such as application. healthy working environment by providing Innovative and Creative Circles (“ICC”) and a framework that allows the organisation to the Japanese 5S System are also an integral A series of refresher training courses consistently identify and control health and part of enhancing operations. on Understanding, Documenting and safety risks, reduce the potential for accidents, Implementation of ISO 9001:2008 and ISO aid legislative compliance and improve overall 14001 were conducted for 45 personnel performance. OHSAS 18001 is designed to be from the respective certifi ed operating units. compatible with ISO 9001 and 14001 and An integrated audit training on ISO 9001 helps the organisation meet health and safety and 14001 was conducted in June 2011 and obligations in an effi cient manner. a session of ISO/IEC 17025 audit training also conducted for laboratory operators.
73 personnel make up our TQM Internal Audit team in Malaysia. The team functions as Group Internal Auditors for ISO certifi cation with 17 members trained as Lead Auditors for both ISO 9001 and ISO 14001. The awards received by the various operating units in 2011, and in prior years, are a testament to the Group’s ongoing journey towards quality management excellence. With such dedication, the Group is confi dent that each certifi ed unit will continue to excel, perform and conform to international standards. annual report 2011 | 97 Kulim (Malaysia) Berhad (23370-V)
Management makes every effort to help employees provide suggestions for the betterment of job processes and to harness the power of in-house creative ideas.
PROSPECTS AND PLANS 2012 continues to present mixed offerings. Concerns on Eurozone remains. However, in emerging markets, risk perceptions have eased since the beginning of 2012 and capital fl ows resumed into emerging Asia, Latin America and South Africa economies. Higher crude petroleum oil prices are a risk to global growth and the impact of an oil supply shock in the Middle East could be large if supplies were not increased elsewhere.
Looking at the outlook for the global vegetable oil market in general and palm oil in particular, the signs on the horizon look constructive, as demand for palm oil is sure to remain robust over the coming months because of tightening soya oil availability. The world’s stocks of vegetable oil at the end of 2011 remained virtually unchanged which suggests that despite the expected bumper palm oil production the global appetite for vegetable oil remains strong. Global production of the 8 major vegetable oils for 2012 is forecast at 152.4 million tonnes, up 3.9% over the previous year. Palm oil production growth is expected to slow down as a result of an expected drop in yields due to biological stress following periods of record production.
An important factor could be the intensifying competition between Malaysia and Indonesia to capture market share. Indonesia looks set to wrest a larger market share next year because of the new Indonesian tax structure. Over the fi rst half of the year CPO is most likely to trade at an average of around RM3,100 a The Group organises annually its internal ICC/ The CEMPAKA Suggestion Scheme tonne with a RM200 movement on either QCC competition and regularly participates in provides the mechanism for employees to side. Prices are expected to weaken as we those organised at its holding company level channel their suggestions and ideas for move towards the second half. While higher by JCorp and by the Malaysian Productivity improvements. Annual awards tied to the crude oil prices and weather aberrations can Corporation (“MPC”) at both regional and level of participation help publicise the disturb the outlook and push prices higher, a national levels. Hari Mekar, the Company scheme which has also been strengthened major commodity sell-off or concerns about level quality convention, was successfully by incentives. To maintain an adaptable and global economic growth prospects could organised on 15 and 16 November 2011 responsive organisation we have developed pull prices down. drawing participation from 5 ICC groups and a culture that actively solicits input and 47 presentations from CEMPAKA. recommendations from every level of staff. Kulim (Malaysia) Berhad (23370-V) 98 | annual report 2011 SEGMENT REVIEW PLANTATION (continued)
We expect a positive impact from the new acquisition areas, are targeted at application in May 2010 whilst Sg. Tawing acquisition of plantation assets from JCorp, 20.75% and 5.83% respectively, whilst the Estate in 2011. Its usage is expected to by way of higher volumes of FFB, CPO and estimated milling cost is RM41 per tonne increase yields. A cost-benefi t assessment on PK in 2012. So far, we have completed the FFB processed. the trial will be reviewed before extending acquisition of 2 estates from JCorp and the application of biofertilisers to other have started accruing production and The labour supply next year should be Group estates. earnings from these estates since January adequate with an ample quota secured th 2012. The remaining 6 operating units to from the Government to bring in foreign NBPOL has commissioned its 12 palm oil be acquired, comprising 4 estates and 2 workers, especially harvesters. The continued mill in West New Britain, adding an annual POMs, are expected to reach completion attention to improving our workers’ income processing capacity of over 300,000 tonnes by mid-2012. and living environment, by providing better of FFB, giving NBPOL increased capacity and housing amenities and local community fl exibility to mill the rising West New Britain Including the impact of these acquisitions, activities, encourages foreign labour to work crops and it also increased processing crop production from the Group’s Malaysian harder and stay longer with the Group. capacity in the SI from 30 to 45 tonnes of operation is expected to increase by 20% to fruit per hour. 25% in 2012. The estimated yield for 2012 2 estates, Sindora and Sg. Tawing, are is set at 22.95 tonnes per mature hectare currently using biofertiliser supplied by Our RSPO certification process continues with an estimated cost of production of Microwell Bio Solutions Sdn Bhd, a Group and in 2011 we successfully completed RM216 per tonne of FFB or RM4,522 per company, for manuring of some 4,000 an audit at Poliamba. NBPOL is targeting hectare. OER and KER, inclusive of the hectares. Sindora Estate commenced having the remaining sites at Milne Bay and annual report 2011 | 99 Kulim (Malaysia) Berhad (23370-V)
Higaturu audited under RSPO as part of its To tap another stream of income for the Underlining the importance of research in commitment to have all units and supply Group in the coming years, we are embarking producing high quality planting material, chains certified as fully sustainable and upon downstream processing, turning the the Group will construct a new purpose- traceable by the end of 2012. mills’ by-products such as biomass, POME and built R&D complex in Malaysia, scheduled biogas into high value-added end products to be ready by 2013. The new establishment NBPOL has also released its first Carbon that can generate additional revenue. The will house the dedicated genome research. Footprint report. The reporting and mitigation master plan for the multiphase integrated Along with other major players such as of Carbon Dioxide and other greenhouse downstream process plants aims at Sime Darby Plantation, Felda and Applied gas emissions can now be quantified and generating additional revenues and meeting Agricultural Resources, the goal of the this is an excellent way for companies down corporate social responsibilities while at research is to develop biotechnological the supply chain to see how “sustainable” the same time improving compliance to tools to support and complement our palm oil differs from other sources. statutory requirements and maintaining crop improvement and agronomic research the sustainability of the palm oil industry, programme, which encompasses oil palm NBPOL is also expected to commission 2 especially relevant to our overseas clients. breeding, tissue culture, pests and diseases, methane capture plants in West New Britain The long term goal is to balance between and agronomy. in the coming months which will substantially the “wants and needs” in the Group’s effort reduce its carbon footprint as well as deliver to strive for sustainability by creating value renewable energy for its operations and the through embracing opportunities and wider community. managing risks derived from economic, environmental and social demands. Kulim (Malaysia) Berhad (23370-V) 100 | annual report 2011
SEGMENTS REVIEW FOODS AND RESTAURANTS
INDUSTRY ENVIRONMENT 2011 proved to be another resoundingly successful year for the Foods and Restaurants Division, despite international economic turbulence. QSR Brands Bhd (“QSR”) and its subsidiaries continued their programmes of restaurant expansion and image enhancement, always reaching out to new markets and strengthening the loyalty of existing customers. Innovative menu items were a feature throughout the year, giving people even more reason to stop by and try something different. annual report 2011 | 101 Kulim (Malaysia) Berhad (23370-V)
Meanwhile, developing and retaining a skilled workforce remained a key priority, and QSR invested heavily in a broad range of training for its personnel. The KFCH International College also expanded further during the year, now spanning 2 campuses, and is positioned to provide the Foods and Restaurants organisation with excellent candidates for managerial roles. Kulim (Malaysia) Berhad (23370-V) 102 | annual report 2011 SEGMENT REVIEW FOODS AND RESTAURANTS (continued)
REVENUE RESULTS OPERATIONS PERFORMANCE % QSR Group registered revenue of RM3.35 PIZZA HUT 10.3 billion for 2011, representing an increase Malaysia and Singapore of 10.3% over RM3.04 billion in the Pizza Hut Malaysia’s sales jumped 7.4% to to RM3.35 B corresponding period in 2010. Profi t before from RM3.04 billion RM441.9 million in 2011, thanks in part to tax increased marginally by 1.1% to RM269.9 the growing number of outlets. The year’s million against RM266.9 million in the excellent performance reflected creative previous year. new products, promotional offers which exceeded their initial goals, joint marketing The combined sales of the Pizza Hut chains campaigns with corporate partners, and an PROFIT BEFORE TAX in Malaysia and Singapore grew by 7.9% to increasing number of ways for customers to RM638.2 million, lifting their profi t before tax order Pizza Hut’s meals. % by 18.3% to RM69.7 million. KFC Holdings 1.1 (Malaysia) Bhd (“KFCH”) achieved revenue of 10 promotions were launched during the to RM269.9 M RM2.80 billion representing growth of 11.1% year, with new product releases tied to festive seasons. January opened with the launch of from RM266.9 million over RM2.52 billion in 2010. However, profi t a new menu, while the Ring of Fortune Pizza before tax declined marginally by 2.8% to marked Chinese New Year. In the shape of RM215.5 million from RM221.8 million in an old Chinese coin and topped with char- 2010. Specifi cally, the Group invested some grilled chicken, capsicum and pineapple, this RM104.2 million during the year in vital offering promised auspicious beginnings. supply chain facilities, while its operations The Ring of Fortune Pizza lived up to its in KFC India and KFCH International College name, generating 24% of all sales during the incurred initial start-up cost as they build the promotional period. critical mass. The Pizza Hut Delivery (“PHD”) service As at December 2011, the total number commenced in 2011, offering its own of outlets operating under QSR’s brands - promotions, menu and ordering mechanisms Pizza Hut, KFC, Kedai Ayamas and RasaMas - to busy customers. The separation of PHD exceeded the 1,000 mark for the fi rst time by from the dine-in business allows staff to growing to 1,063 units from 978 in 2010. focus on the needs and challenges unique to the delivery sector. Customers can, of course, order by telephone, but as of October 2011, they could order online as well. Delivery is free of charge, with a 30-minute delivery guarantee. The online ordering service got off to a promising start, accounting for 8% of all delivery orders.
Pizza Hut Malaysia ended 2011 with 210 outlets, including 12 new openings and 3 closures. 10 outlets underwent image enhancement during the year, and Pizza Hut Kotaraya is currently closed for a major upgrade that will make it a fl agship restaurant.
2011 brought QSR Group widespread recognition. Yum! presented Pizza Hut Malaysia with the Franchisee of the Year Award in the dine-in category, the People’s Choice Best Remodel Award, and the Best Advertising Award. BrandLaureate voted Pizza Hut the Best Brand in the Food & Beverage Pizza category, and Readers’ Digest presented us with their Trusted Brand Gold Award. annual report 2011 | 103 Kulim (Malaysia) Berhad (23370-V)
and increase transaction counts. The KDS will be implemented in high sales volume restaurants in early 2012. A Self-Order Kiosk also succeeded in reducing queue time during its trial run at Wisma KFC.
To keep the menu fresh, KFC introduced 8 new items during the year, each launched with a promotional event. Offerings such as the Fish Donut, Chicken Chop with Mushroom Gravy, Quarter Chicken with Black Pepper Sauce, Olé Pocketful, Tom Yum Crunch, Double Zinger Burger and Krushers with new fl avours enticed customers craving new tastes.
A large number of promotions implemented throughout the year meant customers could always fi nd something new and exciting, and several media channels were employed to keep them informed of the latest events. The year kicked off with a celebration to mark “YUM! PRESENTED PIZZA HUT MALAYSIA WITH THE the opening of KFC’s 500th restaurant, and FRANCHISEE OF THE YEAR AWARD IN THE DINE-IN customers enjoyed the Celebration Combo CATEGORY, THE PEOPLE’S CHOICE BEST REMODEL AWARD, which came with a limited edition 24-karat gold-inscribed Celebration Mug. Chinese AND THE BEST ADVERTISING AWARD.” New Year followed soon after, and the new Fish Donut made its debut. This was a very Net revenue achieved by Pizza Hut Singapore In September, the Cheesy Bite Treats, a great successful limited time offer, and accounted climbed 9.1% to RM196.3 million, an increase hit in 2010, returned for another limited time for about 10% of the total sales during the of RM16.4 million over 2010. This success offer. Varieties included chicken sausage and promotional period. was driven by strategic menu enhancements three-cheese fillings, and nacho-flavoured and attractive promotional campaigns. cheese or Texan chicken toppings. This KFC Malaysia operates a continuing campaign contributed to our support for the programme of image enhancement for its Pizza Hut Singapore celebrated the Chinese World Hunger Relief Programme, with Pizza outlets, and 18 restaurants were renovated New Year festivities by launching a Prosperity Hut donating RM2.40 for every Cheesy Bite last year. The expansion schedule to the Pizza in the shape of a golden Chinese Treat purchased. The fund-raising drive was a network in 2011, added 24 new outlets and coin topped with barbecued chicken and huge success, raising RM391,000, an increase retained market dominance. pineapple. This proved to be a successful of 77% over 2010’s donation. start to the year’s special promotions. To KFC Singapore’s performance mirrored the honour the 30th Anniversary of our presence KFC healthy economy in early 2011, achieving a in Singapore, Pizza Hut rolled out a signature Malaysia, Singapore and Brunei record high sales fi gure of RM409.1 million. Pan Pizza and also introduced a host of new This represented a RM40.5 million, or 11.0%, non-pizza menu items in April and May. The KFC Malaysia achieved revenue of RM1.66 increase over 2010. The Chinese New Year menu change was deemed one of the most billion last year, up 10.6% on the RM1.50 celebrations featured the KFC Fortune Feast, a successful campaigns of the year. billion figure reported the year before. A combined effort to provide exciting new seasonal offering in a collectible bucket with a gift of complementary cushion covers. The Staying true to the promise of hot pizza menu variations and attractive promotions Mandarin Orange Egg Tart – sold individually delivery, the team introduced HOT Power drew customers into its outlets. and in colourful boxes of 6 – was an inspired technology, a battery pack that charges the new variation on the classic Egg Tart. heating elements in the pouch throughout Several projects were initiated during the the delivery to keep food piping hot all the year to increase operational efficiency, way to the customer’s doorstep. A number especially during peak hours. The Kitchen of specifi cally targeted deals also gave the Display System (“KDS”) has proven to reduce delivery segment a further boost. queue length, improve operational effi ciency Kulim (Malaysia) Berhad (23370-V) 104 | annual report 2011 SEGMENT REVIEW FOODS AND RESTAURANTS (continued)
was consistently in the public eye as the Brunei team established a busy calendar of product launches, activities and premiums. Customers were lured by new offerings such as the Fish Donut and Tom Yum Chicken, and corporate marketing partners collaborated on 10 various month-long promotions. Staff members also attended 9 different in-house training seminars throughout the year. 2 new in-line restaurants, 2 drive-throughs, and image enhancements for the KFC Berakas locations are all on KFC Brunei’s agenda for 2012.
Cambodia and India KFC Cambodia once again exceeded its previous performance, generating sales of RM12.5 million in 2011, a 9.5% increase over the RM11.4 revenue figure for 2010. KFC’s The new ‘So Good’ marketing slogan excited anticipation of the premiere of the operations in the country faced a number made its debut in Singapore in February ‘Transformers 3 – Dark of the Moon’ movie, 2011, emphasising fresh ingredients and KFC Singapore designed a new ‘big eat’ for of challenges in 2011, including increased superlative preparation techniques. A series Transformer fans with hearty appetites. In chicken prices, high electricity and fuel costs, of special offers and a photography contest July, KFC Singapore introduced the Cheesy steep taxes on prepared food items, and drew Singaporeans into the ‘So Good’ spirit. Crunch, a fusion of chicken and 2 cheeses, a shortage of skilled workers. Nonetheless, Product innovation was a strong draw in to popular acclaim. the team devised a packed schedule of 2011. The Blueberry Pancake rejuvenated promotions, celebrations, contests and the KFC breakfast menu. The Ultimate Box KFC Brunei’s revenue of nearly RM20.5 concerts to draw customers into KFC. ‘More launched in January, and the box meal million represented an impressive gain of Value, More Variety, More Choice’ was the line expanded further in April to include 25% over 2010, while the addition of 3 more year’s strategic message, and it proved a the Ultimate Roasta Box. Joining in the restaurants brought the total to 12. KFC successful one. annual report 2011 | 105 Kulim (Malaysia) Berhad (23370-V)
was an Offi cial Partner in the 2011 ICC World Cup. The staff donned special tournament T-shirts, and customers took advantage of the limited-time offer of meals served in a cricket-themed Fan Bucket.
Always mindful of attracting the more than 40% of Indians who are vegetarian, KFC launched 2 new meatless combos in August. The Veg Rizo Meal is fl avourful rice and spicy gravy, served with 3 veg strips and a regular Pepsi. The Veg Zing Kong Box contained a spicy crunchy Veg Zinger, 3 veg strips, regular fries, a regular Pepsi and a chocolate. The September launch of the Fiery Grilled featured a unique combination of KFC’s signature spices grilled with the ‘steam roast’ technology in the combi oven. This offering, specially aimed at young working adults, accounted for 15% of total sales during the The launch of the ‘So Good’ campaign in road to building the brand through music. launch period. July 2011 resulted in doubled transactions. Live music in some outlets on Friday nights The menu expanded to include 12 different continues to draw customers. The number of RASAMAS AND KEDAI AYAMAS burgers, such as beef, fi sh and shrimp. The KFC Cambodia outlets held steady at 10 last 15 RasaMas outlets in Malaysia and Brunei introduction of the new Value Chicken year, which is still the highest count for any were closed in 2011 as part of a consolidation Burger selling at USD1 was the single most restaurant chain in the Kingdom. initiative, resulting in lower sales of RM19 popular item, driving up sales in all outlets, million, a 23% drop from 2010. RasaMas especially in Siem Riep, where transactions KFC India, with 13 outlets in Pune, Mumbai pursued an energetic marketing schedule soared by 70%. and Aurangabad, registered RM19.8 million using inventive tactics and varied media. A in sales in 2011, its second year of operation. new menu attracted customers in February, KFC sponsored a two-night concert to mark This is a stunning increase on 2010 sales of and April saw a celebration of the brand’s the birthday celebration of the King of RM6.2 million. Promotions were successfully ‘Typically Malaysian’ identity. The team Cambodia. The concert received tremendous tailored for the local market and capitalising redesigned the website, and over 10,000 support from loyal fans, and KFC is on the on the Indian passion for Cricket, KFC India visitors had checked in by July. Kulim (Malaysia) Berhad (23370-V) 106 | annual report 2011 SEGMENT REVIEW FOODS AND RESTAURANTS (continued)
Kedai Ayamas, meanwhile, achieved a 41% HALAL COMMITMENT leap in sales to RM77.7 million. The new Kedai QSR and its subsidiaries guarantee full Ayamas (Sabah) brought in an additional halal compliance to customers in all RM743,000. 26 new stores were opened in of their markets. Every aspect of the 2011, bringing the total to 75. Delivery service food manufacturing processes, including from 40 outlets in the Klang Valley and e-pay raw materials procurement, preparation, terminals in several branches now offer extra packaging, storage and utensils follow strict convenience. Among the most successful controls. QSR pays keen attention to any product launches in 2011 were the Percik, products acquired from foreign suppliers, Auspicious and Spicy Siam Roasters, and requiring that they be halal certifi ed within corporate partners Digi and Bank Rakyat the source country, and accepts only helped Kedai Ayamas to promote them far certifi cates recognised by the Department and wide. of Islamic Development Malaysia (“JAKIM”).
The Group’s internal Shariah and Halal KFCH INTERNATIONAL COLLEGE Department reports directly to the Shariah The College’s enrollment currently stands at Advisory Council. The Department’s members over 800 students on campuses in Puchong foster increased awareness and understanding and Johor Bahru. It offers 9 diploma of halal among all stakeholders. They devise a programmes in a variety of hospitality- wide range of activities to this end, including related disciplines, as well as Early Childhood halal awareness training for all staff, halal Education, Business Administration and audits of existing and prospective suppliers, Information Technology. and media campaigns for open discussion of halal beyond the boundaries of the Group. During the year, the College achieved a The Shariah and Halal Department is the revenue of RM4.3 million from its diploma front line for QSR’s steadfast commitment programmes and a further RM325,675 from to halal. short courses. annual report 2011 | 107 Kulim (Malaysia) Berhad (23370-V)
PROSPECTS The Malaysian economy continued to be The economies of the other markets sustained by public spending under the where we operate such as Singapore, While celebrating 2011’s financial and Government’s Economic Transformation Brunei and India appear resilient with operational success, the Foods and Programme (“ETP”) as well as by private moderate GDP growth. The plan is to Restaurants Division is looking forward to capital spending. Coupled with incentives continue growing in these markets greater progress next year. Though the announced during the 2012 Budget, it through sustained development global economic outlook still appears is expected the domestic economy will and refurbishment of stores besides uncertain in view of the lingering debt achieve a GDP growth of 5% in 2012. executing operational excellence. crisis in Europe there are nascent signs of Cambodia’s economy remains weak recovery in the US economy judging by The food sector is relatively resilient but and the intention is to consolidate the improving jobs market and corporate it faces inflationary cost pressures. QSR our position and improve operations earnings released thus far. The positive expects profi t margins to be tight and it by aligning menus and promotions in data from US appears to outweigh the plans to generate earnings by continuing response to market dynamics. concerns in Europe at this moment and to drive the topline aggressively through if sustainable will be pivotal to win back new and repeat customer purchases. The investors’ and consumers’ confi dence in the Foods and Restaurants Division will strive global economy. to develop and introduce new winning products, launch successful promotions that provide value to consumers, invest in new facilities and refurbish existing ones, and improve customer service and experience. QSR is also continuously seeking better cost effi ciencies and improving productivity at all its business segments. Kulim (Malaysia) Berhad (23370-V) 108 | annual report 2011
SEGMENT REVIEW INTRAPRENEUR VENTURES
INTRODUCTION Despite challenging global fi nancial conditions in 2011, the Malaysian economy expanded with growth being underpinned by domestic demand as exports increased at a more moderate pace. Federal Government development expenditure during the year was mostly channelled into the transportation, and trade and industry sectors. Crude oil prices rose worldwide because of political unrest and upheavals in the Middle East sustaining upstream exploration and benefi ting the Intrapreneur Ventures (“IV”) Division’s shipping arm. Oil prices are likely to remain high and volatile as long as concerns about supply disruptions continue. annual report 2011 | 109 Kulim (Malaysia) Berhad (23370-V)
The concept of an intrapreneurship scheme was fi rst introduced to Kulim in 2005 as a novel market-driven approach to develop entrepreneurial talent amongst the Group’s employees. The recent acquisition of Sindora concluded in 2011 brought in an experienced well-seasoned management team that further strengthened the Group’s involvement in IV. The aim of the Division is to add diverse revenue streams by nurturing businesses that will evolve into future growth engines for the Group. The strategy looking ahead is to provide the seed funding, mentoring and operational support necessary to give each venture the greatest chance for success. Kulim (Malaysia) Berhad (23370-V) 110 | annual report 2011 SEGMENT REVIEW INTRAPRENEUR VENTURES (continued)
OPERATIONAL REVIEWS AND PROSPECTS OF SELECTED KEY COMPANIES E.A. TECHNIQUE (M) SDN BHD Our involvement in the shipping business through EA Technique (M) Sdn Bhd (“EA Technique”) and Orkim Sdn Bhd (“Orkim”) has seen the Group emerge as a key player in the maritime sector and positioned as the second biggest shipping company in Malaysia in the clean petroleum product tanker category.
Acquired in 2006, EA Technique has a paid- up capital of RM44.04 million while Orkim, which was acquired in 2009, has a paid-up capital of RM37.60 million. Both companies operate in niche markets providing long- term charter contracts for the transportation of clean petroleum product and upstream exploration support for oil majors. In combination, the value of the contracts is worth more than RM1.4 billion.
The Group also provides offshore support “THE COMMENDABLE FINANCIAL PERFORMANCE vessels and manages third party vessels. Currently, EA Technique provides 9 vessels PERFORMANCE The Group’s IV Division recorded remarkable for offshore support services that included THIS YEAR WAS improvements in both revenue and 2 fast crew boats, 4 mooring boats, 2 ATTRIBUTABLE MAINLY operating profi t. Revenue in 2011 increased harbour tugs and a security boat, while by 35.5% to RM396.62 million from TO THE GROWTH Orkim manages 2 vessels owned by a third RM292.80 million in the previous fi nancial party for an oil major. OF THE SHIPPING year. Operating profi t more than double to SEGMENT.” RM42.94 million from RM13.23 million. As at the end of 2011, the Group’s fl eet of 28 owned vessels was comprised of 15 tankers, The commendable performance this year 6 mooring boats, 6 harbour tugs (of which 4 was attributable mainly to the growth of the are under construction) and a security boat. shipping segment. Revenue rose to RM169.94 The total carrying capacity today of more million from RM87.15 million in 2010, fl owing than 144,500 dwt marks an exponential from successful deliveries of 10 newly increase from the 8 vessels with a combined REVENUE constructed vessels. Operating profi t soared 14,500 dwt carrying capacity when Sindora to RM37.47 million. All 10 newly constructed originally acquired EA Technique in late % vessels entered long-term charter contracts 2006. The biggest vessel owned by the 35.5 with oil majors with staggered deliveries Group, the 40,000 dwt MT Nautica Muar is to RM396.62 M beginning in 2010 through to mid-2011. temporarily operating uneconomically on a from RM292.80 million The full year contributions from these new spot charter basis pending the securing of vessels will be wholly appreciated in 2012. long-term charter contracts or a possible disposal or trade-in. The IV portfolio’s other start-ups are in early stage investing, building prototypes and The construction of the new tankers and gathering feedback and data from their disposals of ageing vessels have resulted in OPERATING PROFIT customers to build sustainable businesses. a much lower average age profi le for the We will continue identifying promising start- fleet and enabled the Group to position % ups for incubation and give them access itself to seize opportunities in the shipping 224.6 to the resources needed to grow, prosper, market. The IV Division’s shipping arm is set to RM42.94 M improve earnings, add value, and maximise to expand its operations and emerge as one of the major players in the Malaysian from RM13.23 million returns to shareholders. maritime industry. annual report 2011 | 111 Kulim (Malaysia) Berhad (23370-V)
JOHOR SHIPYARD AND ENGINEERING SDN BHD The establishment of our own shipbuilding and ship repair facility was critical to meet the maintenance scheduling of the Group’s fl eet of 28 vessels in light of the diffi culties experienced in booking slipways for repairs. The shipyard business has in fact the potential to become the main business enterprise of the Group considering that the high demand for ship repairing facilities is currently being met by a limited number of yards around the region.
The shipyard project is currently handled by EA Technique’s wholly-owned subsidiary, customers’ expectations and enhance Due to the challenging economic Johor Shipyard and Engineering Sdn Bhd its reputation as one of the top service environment, revenue declined 9.5% to (“JSE”). JSE successfully constructed its fi rst providers in the country. This has led to a RM30.4 million, margins were squeezed vessel the 5,500 dwt MT Nautica Johor high level of customer loyalty and attracted and profit declined to RM0.53 million, a Bahru (“MTN JB”) in 2008 at a leased site other reputable clients. disappointing fall from the profi t of RM2.9 in Teluk Intan, Perak. With the experience million recorded in 2010. gathered from the construction of MTN JB, Pro Offi ce is a Business Process Outsourcing During the year under review, the venture JSE proceeded to build a larger vessel, the (“BPO”) company that provides total continued to provide services to renowned 10,000 dwt MTN Maharani, which entered solutions in the Data and Document Processing (“DDP”) industry. The company and reputable corporate and government into service in the second quarter of entities. This role call is a testament to our 2011. This vessel holds the record as the is principally involved in the provision of integrated outsourcing solutions in DDP clients’ confi dence and satisfaction in the biggest double-hulled tanker built locally in superior services provided by Pro Offi ce. to telecommunication companies, fi nancial Malaysian history. institutions, insurance companies and a In line with the Group’s business exit strategy number of government-linked agencies. under its Intrapreneur Venture concept and The successful voyages of MTN JB and DDP includes services that ranged from in order to maximise returns and mitigate MTN Maharani were important testaments data extraction, conversion, formatting of to the expertise and ingenuity of the shipyard risks, Pro Office has been identified as documents to data printing and preparation a potential candidate company to be in building small and medium-sized sea- of printed documents for distribution restructured and harvested. Meanwhile, Pro going vessels. via post. Pro Office has also diversified Office has taken steps to scale down its its services to include other value-added operations to improve efficiency and will JSE has identifi ed a 10-acre site located at services such as Mailroom Management, relocate to more economical and cost Hutan Melintang, Bagan Dato, Perak for its Direct Marketing, Handmail/Admail and effective offi ces. permanent shipyard base. Currently, JSE is Courier/Parcel Services. preparing basic facilities for the shipyard that is expected to become fully operational by the end of 2012. The shipyard will be able to accommodate vessels of up to 10,000 dwt for construction or repair. To diversify revenues, the yard will also involve in steel fabrication for the offshore oil and gas industry.
PRO OFFICE SOLUTIONS SDN BHD 2011 was a challenging year for Pro Office Solutions Sdn Bhd (“Pro Office”). In an extremely competitive business environment major clients imposed stringent requirements while expecting very competitive rates. Despite the demanding nature of the business, the company was able to consistently meet or exceed Kulim (Malaysia) Berhad (23370-V) 112 | annual report 2011 SEGMENT REVIEW INTRAPRENEUR VENTURES (continued)
MICROWELL BIO SOLUTIONS SDN BHD Sindora’s involvement in the biotech sector, specifi cally in biofertilisers, is through the 60% equity acquisition of Microwell Bio Solutions Sdn Bhd (“Microwell”), concluded on 24 April 2010. Microwell is a biotechnology company with soil remediation and conditioning, crop protection and biofertiliser as its main areas of expertise. The company is involved in research and development and commercialisation of combinatorial technology of organic substances and micro-organisms for biotechnology products in agriculture, aquaculture and the environment.
Micro-organisms in biofertilisers produce organic nutrients which are extremely effi cient in enriching the soil and protecting chemical based fertilisers throughout its KNSB’s nurseries are strategically located the palms from harmful diseases such as oil palm estates. In addition to its solutions around Johor to cater for the Group’s Ganoderma, which is prevalent in oil palm to enhancing soil fertility and productivity, oil palm seedling offtake as well as for plantations throughout Malaysia. Biofertilisers Microwell has started collaborating with smallholders and other oil palm plantations. provide nitrogen and growth promoting several GLCs in researching and developing The nurseries have been certifi ed with the substances such as hormones, organic “Oil Palm Nursery Competency Certificate” solutions to rectify other agronomic acids and amino acids. The company has by the Malaysian Palm Oil Board (“MPOB”), problems in order to widen its range of successfully formulated its own biofertilisers a quality assurance that acknowledges the products and services. under the brand names GroAgro 1 – GroAgro commitment by KNSB towards producing high quality seeds. KNSB is also certifi ed with 4, which are pending patent trademarks. KULIM NURSERY SDN BHD RSPO accreditation as well as ISO 14001. Trial runs on the biofertilisers have been Kulim Nursery Sdn Bhd (“KNSB”), comprising conducted for the past 2 years and the The company’s market for ornamental plants, results have been promising. the nursery, biocompost and landscaping businesses, doubled its sales to RM10.2 million, on the other hand, includes Government and registered a pre-tax profit of RM2.4 agencies, housing developers and individuals. Microwell also provides technical advisory The environmentally friendly biocompost million which was 130% higher than in the and consultancy such as assistance in Good organic fertiliser, produced from oil palm previous year. The nursery and biocompost Agriculture Practices, Good Manuring Practices, by-products, enriches the soil. KNSB’s plan segments remain the stalwart businesses. Clean Development Management projects, for 2012 will include controlling operating Landscaping projects are commissioned and costs, improving quality, expanding the agro-biotechnology input formulation, executed on a contract basis. market feasibility of innovative biotechnology market and increasing sales. products and organic farming.
In 2011, the company registered a pre-tax profi t of RM2.1 million on the back of revenue of RM11.1 million, a substantial increase from RM0.2 million pre-tax profi t on RM4.9 million sales registered respectively in 2010. The company trades and imports biofertilisers from a manufacturer in Indonesia that uses Microwell’s own formulation.
The Intrapreneur-Manager is the researcher who has the knowledge and know-how in formulating and producing the biofertilisers. The superiority of Microwell’s biofertiliser is expected to allow the Kulim Group the opportunity to substantially substitute annual report 2011 | 113 Kulim (Malaysia) Berhad (23370-V)
EXTREME EDGE SDN BHD Extreme Edge Sdn Bhd (“EESB”) is committed to becoming a premier information technology solution integrator and business performance enhancer, while recognising that it faces some established competitors in the ICT business landscape in Malaysia. EESB was incorporated on 1 January 2010. The Intrapreneur’s team consists of system engineers, application consultants, system analysts, application programmers and technical support engineers.
EESB is a one-stop centre that provides various solutions from hardware to applications. The services include networking and communications, backup, recovery, and maintenance of hardware. The company also offers website design, development, hosting and management, advisory service and project management. EDARAN BADANG SDN BHD In the year under review, EBSB registered a creditable performance with an increase Edaran Badang Sdn Bhd (“EBSB”) is Demonstrating determination and resilience, of revenue by 64% to RM24.4 million from principally involved in the manufacturing EESB registered revenue of RM6.9 million, RM15.0 million in 2010. The company and selling of a motorised three-wheeler a 97% increase over RM3.5 million in 2010. achieved a handsome pre-tax profit of named the Mechanical Buffalo, designed EESB improved its revenues by securing new RM1.84 million compared to a loss of for the mechanised evacuation of FFB in contracts in both the private and Government RM0.18 million in previous year. Sales of oil palm estates, sold under the trademark sectors and sharpening its competitiveness the Mechanical Buffalo and spare parts are of BADANG. EBSB also sells a motorised through better operating efficiencies. Pre- expected to increase in the coming year crawler that can manoeuvre on soft peat tax profit was up by 27% to RM727,000. with more demand coming from Sabah for EESB plans to achieve its vision by greater terrain. The successful penetration into these versatile and labour saving agricultural specialisation of its products and services. new markets, especially in Sabah, saw sales machines. improve to 371 units in 2011 compared to 201 units in the prior year. Machinery sales are increasingly being supplemented by stable and recurring income from the supply of agricultural tools and equipment, Personnel Protective Equipment (“PPE”), and machinery spare parts for oil palm plantations. EBSB is set to further expand its horizons in 2012 by supplying fertiliser and chemicals and also offer palm oil mill maintenance and fabrication works via its 2 subsidiary companies, Perfect Synergy Trading Sdn Bhd and Optimum Status Sdn Bhd. SECTION 5: SUSTAINABILITY 116 PART I: KULIM’S SUSTAINABILITY IN CONTEXT • POLICY FRAMEWORK • POLICY, STRATEGY AND MANAGEMENT SYSTEM • STAKEHOLDERS ENGAGEMENT • COMMITMENTS AND TARGETS 122 PART II: ENVIRONMENTAL PERFORMANCE • PROTECTING AND CONSERVING BIODIVERSITY • WATER CONSERVATION • ADDRESSING CLIMATE CHANGE ISSUES 128 PART III: SOCIAL PERFORMANCE • LABOUR STANDARDS • EMPLOYEES RETENTION E • OCCUPATIONAL HEALTH AND SAFETY • EMPOWERING WOMEN • COMMUNITY AND ECONOMIC CONTRIBUTIONS 136 PART IV: DOING OUR PART FOR THE PALM OIL SUPPLY CHAIN OUR ETHICAL BUSINESS CONDUCTS ARE A CULMINATION OF MANAGEMENT PRACTICES THAT ESPOUSE TRANSPARENCY AND ACCOUNTABILITY
UNDERLYING OUR COMMITMENT TO EMBRACE THE TRUE SPIRIT OF CORPORATE RESPONSIBILITY IS OUR PLEDGE TO UPHOLD THE HIGHEST STANDARDS OF ETHICS, INTEGRITY AND PROFESSIONALISM. ETHICS IS OUR CORE VALUE AND EMBEDDED AT THE HEART OF OUR BUSINESS AS CLEARLY SET OUT IN OUR ETHICS POLICY, TO GUIDE ALL OUR ACTIVITIES AND CONDUCTS. Kulim (Malaysia) Berhad (23370-V) 116 | annual report 2011
Part I: Kulim’s Sustainability in Context POLICY FRAMEWORK We integrate our business strategy with sustainability through a commitment to People, Planet and Profi t (“3Ps”). The 3Ps govern how we create sustainable value for all our stakeholders. To meet our goals and deliver the sustainable returns expected of us, we embrace a deep commitment towards building a fair, ethical and responsible company. This sits at the heart of our sustainability approach and structures our relationships with our stakeholders and the operating environment. annual report 2011 | 117 Kulim (Malaysia) Berhad (23370-V)
CORPORATE VISION AND MISSION
SUSTAINABILITY POLICY
PEOPLE PLANET PROFIT
People Policy Environmental Policy Business Policy
Core Labour Standards Malaysian Palm Oil Association Ethics Policy Environmental Charter OSH Policy Social Contributions
Workplace Drug Policy Profits with Responsibility
HIV/AIDS Policy Fraud Policy
Sexual Harassment Policy Quality Policies for Estates and Mills
Grievance Procedure Production Charter (30:30)
POLICY, STRATEGY AND Kulim will maintain a safe, healthy and maintenance of biodiversity, protection of MANAGEMENT SYSTEM viable working environment and conduct cultural heritage and customary land use, POLICY all operations in a manner consistent with and the capability of the land to sustain the its SMS framework. Kulim will operate in proposed agricultural activities. Kulim embraces the principles of sustainable compliance with all applicable national and development and the Company’s goal is to international legislation and ensure that long Kulim upholds the principles of free, prior ensure that future generations will continue term economic viability does not compromise and informed consent and undertakes to to benefi t from today’s actions. its ethical and business policies. use this principle in all negotiations and interactions with stakeholders. Kulim defines sustainable development Kulim is committed to investing in the as encompassing social responsibility, development as well as advancement of Kulim will continue to be a responsible resource stewardship, appropriate its employees and will, through training corporate citizen, making positive environmental control and the capacity to improve knowledge, skills and competency, contribution to the communities within produce effi ciently. The goal of sustainable in order to enhance performance, processes which it operates. development will be achieved by balancing and career. the considerations for People, Planet and Kulim conducts its operations in a Profit in all management decisions and Kulim is committed to ensuring that land transparent manner and complies with operations. management practices are consistent with all relevant legislation in the countries it the long-term productivity of the resource, operates in. Kulim is acutely conscious of its varied so that the land remains suitable for responsibilities in respect to People, agricultural use. By implementing the principles of the RSPO, Planet and Profit. Kulim is committed to Kulim is adopting a planned approach to continuous improvement of its performance. Kulim will not undertake new developments achieve the balance between People, Planet The implementation of a Sustainable in areas of primary forest or on land and Profi t. Kulim believes that this approach Management System (“SMS”) will provide containing one or more High Conservation is the safest, most efficient and socially the framework to realise these goals. The Value (“HCV”). Land development undertaken and environmentally responsible way of SMS will be wholly based on the principles by the Company takes into account the operating sustainably. and criteria set out by the RSPO. Kulim (Malaysia) Berhad (23370-V) 118 | annual report 2011 SUSTAINABILITY Part I: Kulim’s Sustainability in Context (continued)
People Profi t We prioritise our issues by developing a “materiality matrix.” This approach In order to ensure and establish a In order to remain competitive whilst combines the fi ndings from our stakeholder adhering to sustainable practices, corporate sustainable social development in Kulim engagements with our organisational efficiency through compliance efforts that addresses social stability, security and priorities. In 2008 our senior management will enable Kulim to deliver value to all equality, various social considerations are team developed the matrix based on our stakeholders – shareholders, partners, factored in, such as: the prevailing stakeholders’ concerns, employees and the public. complemented by other management • Opportunities for education and tools such as social impact assessments Our corporate philosophy enables us to training; and regulatory frameworks. We have since provide: updated the “materiality matrix” to refl ect • Health and availability of medical current realities and concerns in this Annual services; • Commitment to transparency; Report. • Human rights and equal opportunities; • Compliance with applicable laws and regulations; and The top 3 material issues that are signifi cant • Crime and social disorder levels; and • Commitment to long-term economic to our stakeholders and our organisation are: • Housing provisions and quality. and fi nancial viability. • the use of chemicals such as paraquat, herbicides and pesticides in our Planet Strategy estates; In ensuring environmental sustainability, Sustainability is central to our business various factors are assessed and deliberated. strategy and stakeholders’ concerns are • the amount of water used for our Issues that need to be addressed and key inputs in mapping out the corporate estates and mills; and highlighted include: strategy. We believe active stakeholder • health and safety standards in the engagement will highlight potential risks or workplace. • Commitment to continuous opportunities for our business. improvement in key areas of activity; • Infrastructure analysis to ensure proper, sustainable procedures are implemented; • Environmental responsibility and conservation of natural resources and MATERIALITY MATRIX biodiversity;
• Life cycle analysis to quantify the use RSPO premium Environment rehabilitation Chemicals of materials and energy as well as Ethnic diversity Biodiversity Water environmental interaction of products Waste management Health and safety Worker unions and processes; Climate change • Responsible development of new Foreign workers plantings; • Research & Development (“R&D”) – product design, process improvement Gender diversity Employee development and recycling methods for greater Agricultural productivity Talent attraction sustainability; Smallholder Sand mining • Use of appropriate best practices by Community and workers’ lives growers and millers; and
• Responsible consideration of Air pollution employees and of individuals and Practices in the marketplace communities affected by plantations Good Agricultural Practices (growers) and mills. High Stakeholder Concerns / Support Company Values / SupportHigh Stakeholder Concerns Company
Business Risk / Opportunity annual report 2011 | 119 Kulim (Malaysia) Berhad (23370-V)
MANAGEMENT SYSTEMS As part of a bigger supply chain that extends Management to assess and control risks while Certifi cation – RSPO to the end consumer, we are working developing programmes to capitalise on with our customers, mainly the refineries, opportunities. The SQC uses targets to monitor Our overall sustainability management to implement the RSPO mechanism for the performance in achieving these tasks and system is guided by the Principle and traceability – the Mass Balance and the co-ordinates sustainability initiatives across Criteria (“P&C”) developed by the multi- Green Palm Book and Claim system. As one departments. stakeholder initiative, the RSPO. The of the fi rst few palm oil companies RSPO standard’s international credibility and certifi ed globally, we continue to manage The SQC has prioritised employee engagement, commitment to stakeholder inclusion our social and environmental risks in including HIV and sexual harassment awareness, makes the certifi cation credible and robust, accordance with the guidelines developed work-life balance and capacity building as though there are always opportunities for by the RSPO. For us, the adaptation of RSPO areas of priority. This is based on the belief improvement. We believe that this standard P&C is also connected to Islamic teachings that employees at all levels form the backbone represents the most responsible way to which focus on value creation, sustainable of our Company and there is a need to embed grow oil palm. use of biodiversity and engagement of a sense of ownership amongst them. stakeholders. The RSPO P&C provides a robust framework Audits and Assessments to articulate issues fundamental to us. These Sustainability and Quality Council We take pride in our integrated management issues include stakeholder engagement and In 2010, we consolidated the structure of our and agricultural practices. The framework is value creation for the larger society. Corporate Responsibility (“CR”) governance set in motion by systematic guidelines and through the launch of the Sustainability operating procedures. Our Internal Audit We achieved the RSPO certification for all and Quality Council (“SQC”). The role of Department oversees and reviews all processes our estates in January 2009 and were one the SQC is to oversee our CR strategy and and procedures. of the fi rst palm oil companies to strive for activities on behalf of the Board. the RSPO certification globally. Our second Our environmental performance is guided by annual surveillance audit in March 2011 The SQC has established a Company wide the ISO 14001 framework. All our Papua New included the relatively new estate, Sungai data collection system for monitoring and Guinea operations (except newly acquired Tawing Estate. This new estate was acquired reporting against agreed matrix. The Council areas) and 1 of our mills and 2 of our estates in by exchanging one of our small estates with also ensures that our day-to-day business operations respond to the opportunities Malaysia have been certifi ed to this standard. another plantation company in August 2009. and avoid the risks posed by sustainability Under the ISO 14001 framework, mills and issues. To do this, the SQC challenges the estates are to implement environmental policies with third party certification. The framework was also used as a basis for implementing the RSPO Principles and Criteria.
Our social impact assessments are framed around the SA8000 standard – the leading international standard on labour conditions. We have also adopted the methodologies of the Occupational Safety and Health Administration (“OSHA”) to measure and manage our health and safety performance as well as using the human rights-based concept of Free, Prior and Informed Consent (“FPIC”) in our dealings with communities and land rights.
We carry out ongoing Social Impact Assessments (“SIA”) based on Principle 6 of the RSPO Principles and Criteria as well as SA8000 (established by Social Accountability International). SIA incorporates interviews with workers, dependents and local communities, and forms the basis of improvement plans for all areas identifi ed as common complaints, or areas which are considered high risk in terms of impact or legal compliance. Kulim (Malaysia) Berhad (23370-V) 120 | annual report 2011 SUSTAINABILITY Part I: Kulim’s Sustainability in Context (continued)
International Standards In addition to the RSPO P&C, we adhere to other frameworks which form the basis of the current sustainability management systems. These frameworks include ISO14001 Environmental Standard and SA8000 Labour Standards. We are also looking at to embark on the International Sustainability and Carbon Certifi cation (“ISCC”).
On the environmental front, we have 1 mill and 2 estates which have attained the ISO 14001 certifi cation. The ISO 14001 provides a framework for a strategic approach to our environmental policy, plans and actions. As for biodiversity-related framework, while there is no presence of High Conservation Values (“HCV”) in our estates, we have developed HCV management plans and toolkits with the help of our partners, to manage biodiversity issues such as human-wildlife confl icts due to our proximity to national parks.
As for our social issues, our social impact assessments for the local communities adopt the SA8000 framework, a global social accountability standard for decent working conditions. We have also adopted methodologies of the Occupational Safety and Health Administration (“OSHA”) to measure and manage our health and safety performance. We embrace the concept of Free, Prior and Informed Consent (“FPIC”) in our dealings with communities and land rights, which is based on the principle of human rights.
We have recently adopted the ISCC certifi cation standards. The ISCC certifi cation standard is for biomass and bioenergy and meets the Renewable Energy Directive of the European Union. We plan to complete the ISCC certifi cation by 2012 and start the sale of ISCC-certifi ed oil in January 2013.
STAKEHOLDERS ENGAGEMENT Stakeholders engagement is crucial to sustainability and organisational success. Stakeholder engagement enhances accountability by allowing an organisation to identify, understand and respond to sustainability issues – a valuable tool to better manage our risks and identify opportunities. It is also an excellent avenue to tap into expertise and existing networks. Most importantly, it enables us to develop trust and transparency in our relationship with the stakeholders.
STAKEHOLDER GROUP ISSUE METHOD OUTCOME Employees a. Talent retention Ongoing dialogues, annual Feedback from employee climate survey was b. Employee development surveys and workshops incorporated into our strategies for employee retention and attraction. Workers a. Labour policy and workers’ lives Annual Social Impact Improved workers’ welfare and housing. Created a safe b. Occupational Health and Safety Assessments (“SIAs”) working environment. Quarterly OSH committee meeting Non-Governmental a. Biodiversity loss Partnerships, annual multi- a. Tree Pledge for Wild Asia Natural Corridor Organisations b. Climate change stakeholder forums and Programme. c. Environment rehabilitation ongoing joint projects b. Established the Kulim Wildlife Defenders to d. Good Agricultural Practices prevent poaching and at the same time providing Member of the Malaysian educational support for wildlife conservation. Nature Society c. Human/wildlife confl ict management project with Wildlife Conservation Society (“WCS”) Programme. Investment Investor relations initiative, benefi ts Ongoing meetings, road shows Incorporated sustainability issues into our investor Community and drives and conference calls relations communications strategy. Industry a. Chemicals Annual multi-stakeholder Kulim was one of the fi rst growers to be certifi ed by Bodies b. Water usage initiative – Roundtable on RSPO globally. c. Occupational Health and Safety Sustainable Palm Oil (“RSPO”) d. Climate Change e. Biodiversity loss f. Community and workers’ lives g. Good Agricultural Practices Outgrowers Commitment to certify 100% of the Annual SIA, public meetings, Pilot project with a controlled group of smallholders crops processed by our mills. workshops, individual meetings to implement outgrower certifi cation. Customers a. Supply chain certifi cation Ongoing joint ventures and Our Certifi ed Sustainable Palm Oil (“CSPO”) is sold to b. Customer survey meetings our buyers via the Mass Balance and Green Palm Book and Claim Traceability Mechanisms. annual report 2011 | 121 Kulim (Malaysia) Berhad (23370-V)
COMMITMENTS AND TARGETS – MALAYSIA PLANTATIONS TARGET DATE STATUS TARGET (YEAR-END)* AS AT 31 DECEMBER 2011 People Establish a gender committee to promote diversity and address gender- 2009 Achieved related issues Rollout of identity card programme to all foreign workers 2011 Revised 100% of external fruit to be certifi ed 2011 2013 – revised Reduce lost time accident rate to 10 Maintain 2009’s Achieved – 5.8 performance Reduce severity rate to 3.5 2009 Not achieved - 4 Zero fatalities 2009 Not achieved - 1 No breaches of excessive overtime Maintain 2009’s Not achieved performance Assist Johor Corporation-owned estates in achieving RSPO certifi cation 2010 Achieved Planet Reduce herbicide usage by 10% (base year FY2009) 2020 Achieved – reduction by 30% Reduce paraquat usage by 10% (base year FY2009) 2020 Achieved – reduction by 30% Reduce water usage to 0.7 tonnes per tonne of FFB (base year FY2009) 2011 Not achieved – 0.94 tonnes CDM projects launched for all 3 mills 2011 Launched at 1 mill
CO2 equivalents reduced by 90% 2011 Not achieved No increase in peat development 2009 Achieved No development in land containing one or more High Conservation Values 2009 Achieved No penalties for environment-related incidents 2009 Achieved Carbon footprint for the whole Group 2013 In progress Profi t Achieve average FFB yield per hectare of 30 tonnes 2013 In progress Achieve average combined palm product extraction rate of 30% 2013 In progress ISCC certifi cation 2013 In progress * Where target is an ongoing commitment or has already been achieved, the date denotes next status reporting. Kulim (Malaysia) Berhad (23370-V) 122 | annual report 2011
Part II: Environmental Performance PROTECTING AND CONSERVING BIODIVERSITY In 2009, we commissioned detailed surveys to assess the state of the fl ora and fauna present in and around our estates. Since our last report, the majority of the IUCN Red-listed mammals are in a more precarious state, except for the Southern Pig-tailed Macaque. We recognise our critical role to address this issue, as our plantation operation in Johor borders an important national park, the Endau-Rompin National Park in the southern part of Peninsular Malaysia. This is factored into the strategy for our biodiversity initiatives. annual report 2011 | 123 Kulim (Malaysia) Berhad (23370-V)
Our broad approach is underlined by the precautionary principle for unplanted areas, complemented by High Conservation Value (“HCV”) management tools. Our strategy for biodiversity is largely aimed at enhancing or improving biodiverse areas or mitigating the negative impacts on biodiversity. We are strengthening our internal monitoring and control mechanisms, as well as working very closely with our Non-Governmental Organisation (“NGO”) partners to provide the additional resources.
PRIMARY FOREST
Kulim Wildlife Defenders to safeguard against illegal poaching
Buffer zone to mitigate negative impacts from agricultural practices
OIL PALM Enhance remaining forest patches within our estates
Initiatives to mitigate negative impacts to the environment by our agricultural practices, especially to minimise human-animal confl ict
UTILISING HCV TOOLS ENHANCING POTENTIAL MITIGATING IMPACTS In 2011, we commissioned a birds and BIODIVERSE AREAS We have several initiatives to mitigate our bats survey on major water bodies in Although our estates do not contain HCVs, negative impacts on the environment, respective recommended estates by the we have started a process of planting trees especially in view of the updated IUCN Rapid Biodiversity Assessment (“RBA”) to enhance the small areas of vegetation Red List, including working on managing Report. The survey is mainly to identify within our estates. All remaining forested the human-wildlife confl ict. All our estates and understand the areas of high interest areas within the estates are managed for are required to provide a regular update for the seasonal East Asian – Australasian development into full-fl edged HCV forests on the species found in and around the Flyway migratory route as the area may or preparation for biological corridors. All estates, and track incidents of wildlife play an important role for these migratory estates have to identify and demarcate their encroachment, particularly elephants. birds’ species that has implications to our buffer zone area with white and blue peg replanting planning and management. On stands, especially in the areas designated We have buffer zones around major water the other hand, bats in plantations are for replanting. We have 61 hectares of bodies in or around the estates and the normally potential pollinator agent and buffer zone and 44 hectares of jungle patch national park. We conduct regular Rapid biological insect controller, at the same its in our estate. Biodiversity Monitoring in these buffer zones. existence is an indicator for forest health All the estate managers have to update their around our plantation. buffer zone mapping twice yearly. Kulim (Malaysia) Berhad (23370-V) 124 | annual report 2011 SUSTAINABILITY Part II: Environmental Performance (continued)
To minimise soil erosion, we re-aligned We have programmes for ongoing training to our estates. These forest reserves are our roads and constructed silt traps in as well. We conducted a programme in linked to the national parks. Selected our drains. We made sure that there are 2010 and 2011 entitled ‘Biodiversity for security guards are trained in techniques buffer zones around the major water bodies Busy Managers’ to enhance the estate for vehicle inspections and the use of GPS and that replanting is done in stages, with managers’ understanding of conservation (Global Positioning System) for recording never more than one side exposed to the and the importance of the biodiversity the locations of animal sightings and replanting process at any given time. improvement programme. poaching incidents during patrols. These security guards are known as Kulim Wildlife Defenders within the Company. Going Within the estates, we have a Conservation WORKING BEYOND OUR ESTATES forward, we hope to register the Kulim Policy that prohibits hunting, fishing and We understand that one company’s effort Wildlife Defenders as registered NGO. taking of fauna within the estate and at mitigation is not enough; we need to adjacent areas. According to our second push beyond our Company boundaries. As We have also worked with Wild Asia on RSPO surveillance report by our auditor, neighbours to the Endau-Rompin National the Natural Corridor Initiative. This initiative fi eld inspections and interviews confi rmed Park, we work with Wildlife Conservation Society (“WCS”) Johor, Malaysia to mitigate aims to provide green corridors to link that employees and contractors are aware human-wildlife conflicts, in particular, natural habitats separated by human- of our Conservation Policy. elephants, for our recently acquired Sungai modified landscapes, thereby increasing Tawing Estate. the functional space for wildlife. STRENGTHENING MONITORING AND CONTROL We work with WCS to protect the areas Lastly, we reported on a possible project in Since 2009, we have had in place an with HCVs adjacent to our estates too. 2009 to acquire a neighbouring (degraded) environmental unit within the Sustainability Together with the Johor National Parks forest area and provide a breeding site for and Quality Department to analyse wildlife Corporation, the Wildlife Department, the the Rhinoceros Hornbill, as well as restore data and communicate with estates on Forestry Department and the police force, linkages with other forest patches within the estate. However, we regret to note that outcomes and results of our studies on the Johor Wildlife Conservation Project aims the area has already been acquired by other biodiversity. to eliminate poaching through intervention and enforcement, by protecting the estates and planted with crops. boundary of the forest reserves adjacent annual report 2011 | 125 Kulim (Malaysia) Berhad (23370-V)
WATER CONSERVATION from local rivers, the continued reduction in water usage can reduce our reliance on Our updated materiality matrix has shown the local rivers. As for our estates, we do that water usage in the estates and mills not use much water due to the abundant and the risk of water contamination by rainfall in this region, which provides water chemicals continued to be the top issues for the trees. Only a small amount of water raised by our stakeholders. Clean water is is used to maintain our nurseries. critical to our business. Most importantly, it is fundamental to life on this planet. Our PREVENTING ERODED SOIL stakeholders are concerned that this precious PARTICLES FROM GETTING INTO THE resource faces significant challenges in NATURAL WATERWAYS estates such as environmental degradation and the impacts from climate change. We There is still a risk of contamination in the need to manage the use of water from the natural waterways due to soil erosion. As natural water bodies responsibly and to part of our standard operating practice, we prevent chemicals and soil particles from use fast-growing leguminous cover crops to contaminating the water sources. prevent eroded soil particles from polluting the water bodies, most importantly to We are glad to note that each of our mills prevent the erosion of the valuable topsoil. The effluent is first treated before being achieved significant reductions in water recycled as fertiliser for our fields, in a usage. For example, our Sedenak Mill has Moreover, we refrain from using synthetic process known as land application. The reduced average annual water usage from fertilisers to avoid pollution from heavy effluent for land application is measured 1.02 tonnes per tonne FFB in 2010 to 0.94 metals. We utilise organic fertilisers such by the level of Biological Oxygen Demand tonnes per tonne FFB in 2011. The initiatives as Empty Fruit Bunch (“EFB”) produced (“BOD”). The average BOD for our 3 mills to reduce water usage include restricting after milling, whenever possible. Another decreased from 292 ppm in 2009 to 261 the use of water for cleaning mill fl oors. As example of an organic fertiliser is the Palm ppm in 2011. the main source of water for the mills comes Oil Mill Effluent (“POME”) from our mills. Kulim (Malaysia) Berhad (23370-V) 126 | annual report 2011 SUSTAINABILITY Part II: Environmental Performance (continued)
USE OF HERBICIDE AND PARAQUAT REDUCING USAGE OF CHEMICALS – We ensure that those who handle, store, (Active ingredients in litre/hectare) PESTICIDES AND HERBICIDES use, spread or dispose of any chemical that could pollute the water, soil or air are aware 2.00 Another source of potential waterway 0.07 2.0 of their responsibilities. We also collaborated 0.064 contaminants is chemicals such as with the Malaysian Croplife and Public Health 0.06 pesticides and herbicides. We seek actively to fi nd biological alternatives for chemical Association and Department of Agriculture 1.5 (Malaysia), in an initiative known as ‘Empty 0.05 1.34 pesticides, whenever possible. The Integrated Pesticides Containers Recycling Programme’. 1.37 Pest Management (“IPM”) techniques are 0.04 0.041 0.04 central to our operations, as IPM techniques 1.0 are responsible for managing the issues MINIMISING SOLID WASTE 0.03 0.03 0.72 of pests, diseases, weeds and invasive All the solid waste output from our mills 0.84 0.02 introduced species and for minimising is used in line with standard operating 0.02 0.5 the use of pesticides. The use of chemical procedure within the industry. The EFB are control is considered only as a last resort used as biocompost for our estates. The 0.01 when all biological methods fail. fi bre and shell are used as biomass for our
0.00 0 mills. Burning the biomass generates a small 2007 2008 2009 2010 2011 For example, barn owls have been amount of boiler ash, which can be used Paraquat Herbicide introduced at each estate to control the rat for reducing acidity in soil. We do generate population. Paraquat is used in small doses a small amount of hazardous waste that is to treat young palms. We have reduced transported to designated public facilities by our use of paraquat from 0.041 in 2009 to an authorised agent. BOD LEVELS (ppm) 0.030 in 2011 (active ingredients in litre per 500 485 hectare), in line with our 10% reduction target, based on 2009 fi gures.
400
300 292 298 262 261
200
100
0 2007 2008 2009 2010 2011
WATER USAGE PER TONNE FFB (Tonnes Per Tonne FFB)*
2.0 1.79
1.5
1.07 1.02 1.0 0.92 0.94
0.5
0 2007 2008 2009 2010 2011
* Mills only. Figures do not cover irrigation in estates and nurseries. annual report 2011 | 127 Kulim (Malaysia) Berhad (23370-V)
ADDRESSING CLIMATE CHANGE ISSUES INTERNATIONAL SUSTAINABILITY We believe that climate change constitutes the most significant environmental threat AND CARBON CERTIFICATION to livelihoods and the environment, and we believe that any sustainable business must We plan to work towards the publication contribute to reducing greenhouse gas (“GHG”) emissions. We support the initiative by of a full carbon footprint of our operations the Malaysian Government to reduce GHG emissions by up to 40% by 2020, as well as the and will also be moving towards ISCC recommendations of the RSPO GHG2 Working Group’s recommendations to incorporate certification. It is one of the certification GHG emission reduction requirements into the RSPO Principles and Criteria. standards for biomass and bioenergy which We cannot tackle climate change alone, so we will work in partnership with peers and meets Europe’s Renewable Energy Directive. stakeholders. We hope to learn from others and develop our own initiatives to provide We plan to complete the ISCC certifi cation inspiration and guidance to our industry and beyond. by 2012 and start the sale of ISCC-certifi ed oil in January 2013. The following presents a system boundary of the GHG balance calculation and illustrates the sources of emissions, based on the RSPO GHG calculator for oil palm products. The RSPO GHG calculator is a harmonised framework that is compatible with international GHG accounting methodologies such as IPCC and ISCC, which are the applicable standards for CO2 EQUIVALENT PER TONNE FFB the sustainable palm oil industry. (Tonnes)
0.2 0.19 0.18
0.16 0.16 0.16 Emissions due to land clearing (loss of stored Emissions avoided by excess 0.15 carbon in the biomass) – Emissions vary greatly, Emissions energy production - as depending on previous land use, but can avoided with the standard operating constitute 60-70% of all emissions. As we have no by carbon Emissions practices in the industry, all plan for expansion or land conversion, due to fuel power generation in the mills our operations do not have a signifi cant sequestration combustion. is based on biomass, (shell impact, although we do recognise that any carbon in the palm and fi bre) with only a small 0.10 footprint would take into account biomass. volume of diesel used for the original land type. back-up generators.
INPUT OUTPUT 0.05
0 2007 2008 2009 2010 2011
Emissions due to Allocation of the transport and environmental use of fertilisers. burden between CPO and PK.
Emissions due to peatland cultivation - these represent a signifi cant source of GHG emissions. We have a small portion of peat within the cultivated area – 1,380 hectares (slightly over 1% of our cultivated land). This land was cultivated in 1999-2002 and the total area has remained unchanged since. We are mindful of the need for a continued responsible management of this area, via effective water table management – the best way to prevent additional GHG emissions.
Emissions due to harvesting Emissions due to POME treatment, including possible avoidance and collection of the fruits through methane capture - capturing the methane gas that arises (fuel combustion during from the mill effl uent – a potent form of GHG – and to use the collection and transport of captured gas as fuel to generate electricity. We are working on fruits to mills). methane capture projects to mitigate the production of methane by about 90%. These projects are classifi ed as a Clean Development Mechanism (“CDM”) defi ned by the United Nations’ Kyoto Protocol. We have launched CDM projects at one of our mills. Kulim (Malaysia) Berhad (23370-V) 128 | annual report 2011
Part III: Social Performance LABOUR STANDARDS Our fundamental guiding principle is that all employees – including workers – must be treated equally, fairly and with respect. Our labour policy is based on the International Labour Organisation (“ILO”) Declaration on Fundamental Principles and Rights at Work, covering the core labour standards on the rights to collective bargaining, the elimination of forced or compulsory labour, the abolition of child labour as well as the elimination of discrimination in respect of employment and occupation.
A highly motivated and productive workforce is critical to our business. While our earlier work aimed at improving the welfare and housing of our workers, we are now focusing on end-of-career training and contributing to fulfi lling, active and decent retirement for our workers. annual report 2011 | 129 Kulim (Malaysia) Berhad (23370-V)
We have 5,206 full-time employees in created vast discomfort. Other problems WORKERS’ UNION Malaysia as at 31 December 2011, of which included the lack of transport for workers There is a local committee consisting of 4,443 (85.3%) are categorised as workers. to get to their work site and the practice of union representatives elected by members Our workers are predominantly from open burning of rubbish – a safety hazard. at each mill and estate. While 1,334 Indonesia. We are currently working on measures to employees or 26% of our employees are mitigate these issues. union members (as at 31 December 2011), MONITORING AND CONTROL all workers including foreign workers, are covered by a collective bargaining We conduct Internal Social Impact WORKERS’ WAGE RATE agreement. Assessments (“SIA”) based on the SA8000 Although there is no legal minimum wage Labour Standards to manage our social in Malaysia, there are recommended rates NON-DISCRIMINATION performance. This is also done as part of by the Malaysian Agricultural Producers We recognise value of diversity and the our commitment to the RSPO. The SIAs help Association (“MAPA”) and the National benefi ts of a diverse workforce. We practise us to identify corrective actions in areas Union of Plantation Workers (“NUPW”). Our non-discrimination towards women, ethnic where these standards were compromised. workers receive above the current MAPA/ or religious minorities and foreign workers. NUPW rate. Eligible workers are also entitled We have equal pay for equal work for all Our updated SIAs in 2011 revealed workers’ to a special gratuitous payment of RM200 fi eld, offi ce and management staff based on concerns such as presence of dogs and per month, as part of a voluntary code predefi ned grades. bats in the workers’ residential areas, which recommended by the MAPA council. In addition, we have guidelines on HIV/ AIDS. Workers who have the disease are guaranteed confidentiality and retained in employment as long as they are Kulim (Malaysia) Berhad (23370-V) 130 | annual report 2011 SUSTAINABILITY Part III: Social Performance (continued)
healthy and able to perform. This policy is institutionalised in our Sustainability Handbook for employees and the Foreign Workers Handbook for our workers. During the induction of foreign workers, an interpreter (usually a senior worker from respective nationality) will explain the terms to the workers. OVERTIME Overtime is a prioritised social issue and was mentioned in our earlier Sustainability Reports. During peak crop season, mill workers tend to work long hours to ensure the fruits are processed before the quality deteriorates. To manage the number of ADDRESSING THE ISSUE OF ID CARDS FOR FOREIGN WORKERS hours worked in the interests of the workers, FOREIGN WORKERS IN MALAYSIA the departmental heads have to update The first SIA in 2007 identified the the mill manager weekly on overtime and Our industry is highly dependent upon withholding of foreign workers’ passport as a adhere to the Department of Labour’s labour, especially non-Malaysian workers. potential breach of the ILO’s conventions, as it seemed that the Company is denying the guidelines on monthly overtime limits. As foreign workers comprise the majority free movement of workers. The Government of our labour force, we provide induction We regret to note that our target for zero has since come up with the 6P Programme, programmes to ensure that these workers excessive overtime is yet to be achieved. The which is a new programme by Ministry of understand their rights, entitlements and overtime cases are due to isolated individuals, Home Affairs for all foreign workers working not the entire workforce. We are working responsibilities. We provide all our workers in Malaysia and for all industries. This replaces with the specifi c cases on this issue. with an individual copy of the Foreign the iKAD scheme that was also mentioned Workers Handbook. in our 2009 Sustainability Report. While the HOUSING iKAD scheme is an ID card specifi cally for foreign workers, the new 6P scheme aims The earlier SIA identifi ed issues regarding In recent years, with the public spotlight to compile a comprehensive biometric the availability and quality of housing, on Malaysia’s reliance on foreign labour, database, instead of having identification particularly for new workers. In response, the Malaysian Government has introduced documents to reduce incidents of fraud. we are upgrading housing facilities and regulations to curtail the recruitment of constructing new houses. In general, there foreign workers. This has deep implications CHILDREN are 4 workers in 2-bedroom 48m2 quarters to our industry in the longer term. The or 3-bedroom quarters. As a fundamental principle, we do not labour shortage was particularly pronounced employ children or young people under 16. Moving forward, we have a 5-year plan during the fi rst half of 2010, following the Many of our workers of course reside with that covers housing, which is particularly introduction of new regulations. their families, and hence there are children focused on better sanitation, water and living in and around our estates. They have electricity facilities. access to schools and do not work for us.
WORKERS BY COUNTRIES (AS AT 31 DECEMBER 2011) 3%
24%
73%
Malaysian Indonesian Bangladeshi annual report 2011 | 131 Kulim (Malaysia) Berhad (23370-V)
EMPLOYEES RETENTION A company without skilled management talent will not be able to progress much further. According to a report by the World Bank in April 2011, the Malaysian economy faces an acute brain drain – the migration of talent across borders – the skilled diaspora is now 3 times larger than 2 decades ago. This development has a signifi cant impact upon our future. In the longer term, we need to prepare for a possible shortage in skilled management talent in the oil palm plantation industry. A skilled managerial workforce is crucial for our future growth. In 2011, we worked on strengthening our talent management programmes and instilling a performance-driven culture.
We have 5,206 full-time employees and workers in Malaysia as at 31 December 2011, of which 14.7% are categorised as employees, comprising of our staff and management. The women make up about 30% of the employees.
EMPLOYEE POLICY AND GUIDELINES Our fundamental guiding principle is that all employees must be treated equally, fairly and with respect. Our labour policy is based on the ILO Declaration on Fundamental Principles and Rights at Work, covering the core labour standards such as the elimination of discrimination in respect of employment and occupation. These topics are covered in our Kulim Sustainability Handbook. The handbook is distributed to all our employees and is translated into standard operating procedures, guidance documents and training throughout our operations. It is also available on our corporate website. Kulim (Malaysia) Berhad (23370-V) 132 | annual report 2011 SUSTAINABILITY Part III: Social Performance (continued)
INCORPORATING FEEDBACK FROM EMPLOYEE DEVELOPMENT consultants. The Human Resource and Administration Department is responsible THE EMPLOYEE CLIMATE SURVEY Our employees are one of our key for coordinating the training, which A total of 977 employees took part in the stakeholders for engagement. In our covers myriad subjects such as effective Employee Climate Survey as compared engagement workshop, one of the issues communication, sustainability, productivity, to 674 when it was first undertaken in highlighted was the lack of young people in executive development and induction 2005. The updated Climate Survey in 2010 the plantation business and the problem of programmes for new employees. indicated that the employees are generally retaining talent. We will need to prepare for satisfied with the working conditions a possible shortage in skilled management We spent about 5% of payroll cost on and employment policies; 83.8% of the talent in the plantation industry when the training in 2011 as compared 4% in 2009, participants responded positively. current batch of older employees retires. One and achieved an average training man- of the main ways to retain young people, or days of 4.13 per employee, which exceeded On the other hand, the survey has commonly known as Gen Y, is to give them our target of 3 man-days. In addition, 11 highlighted employees’ concern with room to develop their professional skills employees received formal qualifications remuneration, especially relating to market and provide opportunities for feedback. funded by Kulim, one of whom was on an competitiveness and fairness of the current Executive Master of Business Administration salary scheme. In response, we have We have training and development Programme – a programme collaborated conducted a salary benchmarking survey programmes for our Gen Y employees with Johor Corporation and UTM-SPACE. to review the competitiveness of the salary and generally for all levels. These scheme. Going forward, we will focus on programmes are structured around formal DEVELOPING LEADERSHIP strengthening our remuneration package courses, seminars and workshops, which and offering employees other benefi ts. are organised internally or by external We have a management trainee programme, Strategic Enhanced Executive Development System (“SEEDS”). The first batch of management trainees in 2008 has a retention rate of 77%, of which 20 participants are still with the Company and are working in the different operating units.
ANNUAL GATHERING OF EMPLOYEES We recognise the need to provide platforms for employees at the estates, mills and head offi ce. The annual gathering of our employees, Pedoman, addresses this need and also provides a communication platform for the Senior Management, giving an opportunity to communicate performance highlights, the goals, challenges and aspirations for the future, as well as gather feedback from employees.
MEASURING PERFORMANCE We are constantly communicating our performance appraisal system via road shows within the Group’s operations. The Performance Management System (“PMS”) aims to measure individual employee’s performance against critical targets, in particular Key Performance Indicators (“KPIs”). The PMS include a peer review appraisal system, while the KPIs also include dimensions on sustainability such as Health and Safety. annual report 2011 | 133 Kulim (Malaysia) Berhad (23370-V)
OCCUPATIONAL HEALTH AND SEVERITY RATE LOST TIME ACCIDENT RATE SAFETY We managed to meet our target for severity 12 9.7 Occupational Health and Safety (“OHS”) is rate for 2010 but not for 2011. We have set one of the top priority impact areas for a targeted severity rate of 3.5. As with our 10 7.8 the Company. Our external and internal 2009 report, the severity rates are due to 7.5 7.6 the same types of injuries that prevail in stakeholders want to be assured of a 8 workplace that is safe from work-related our fi eld. The major causes of injuries were 5.8 thorn pricks and cuts from palm fronds. accidents and illnesses. Given the tight 6 labour market for workers, a low accident Workers often have to remain absent for rate is critical for productivity. It is also, our 2-4 days before returning to work, due to the risk of wound infection. In 2011, there 4 ethical and social responsibility to ensure were 149 incidents of thorn pricks and 87 the wellbeing of our workers. incidents of cuts from palm fronds. We are 2 working on a plan to solve the root cause Each mill and estate has a designated of this issue. 0 OHS Coordinator who is responsible for 2007 2008 2009 2010 2011 organising safety training, meetings, BEYOND OHS LTA rate Target investigation and reporting of accidents and incidents. These OHS Coordinators Issues beyond OHS in the workplace are prioritised because these also have an report to the Corporate Offi ce. impact on productivity in the workplace. FATALITY RATE For example, we operate a strict No Drugs We have an OHS plan to improve the 4 policy that is enforced through regular safety of employees, which is also reviewed and random drug testing. We conducted periodically to reflect current realities periodic inspections on all internal grocery at work. The OHS plan is documented 3 shops in the operating units for illegal 3 and effectively communicated to all our medication and alcohol. employees. We have a set of matrix to measure the effi cacy of our OHS plan. We also have a HIV/AIDS policy for the 2 workers. We provide training to ensure that LOST TIME ACCIDENT RATE our employees are aware of the policy. 1 1 1 We are glad to note that our Lost Time There is a non-discrimination clause if there 1 Accident (“LTA”) rate has consistently met are affected workers on our plantations. The targets for the past 3 years. We aim to keep policy also guarantees the confi dentiality of the workers. 0 the LTA rate under 10. Our LTA rates were 0 7.5 in 2009, 7.6 in 2010 and 5.8 in 2011. 2007 2008 2009 2010 2011 We have also expanded our scope of health Fatality rate Target ZERO ACCIDENT AND ZERO and safety measures to include occupational illness. This means that we monitor for FATALITY the prevalence of any longer term health We aim for zero accident and zero fatality. issues arising from our operational activities, SEVERITY RATE Nevertheless, it was with great regret especially the risk of lumbago for our 5 that we report 4 work-related deaths in harvesters. We are making changes to our the past 2 years. We have one fatality in earlier assumptions, with experimental 4.2 4 2011 and 3 in 2010, an increase from zero controls to fi nd out the root cause. The main 4 3.6 3.5 fatality in 2009. All of us at Kulim offer problem may lie in the way that harvesters 3.34 lift the FFB. A FFB can weigh between 25- our condolences to the families of the 3 deceased. Decisive action has been taken 30kg, which can be quite heavy for a worker, to avoid such occurrences in the future. especially for his back, on a prolonged Safety measures include monitoring system basis. Thus, we provided extra training on 2 of safety targets, awareness training and lifting techniques. The number of reported incidents was subsequently reduced by 47% safety talks, awareness campaigns, dedicated from 171 in 2010 to 91 in 2011. 1 health and safety offi cers.
0 2007 2008 2009 2010 2011 Severity rate Target Kulim (Malaysia) Berhad (23370-V) 134 | annual report 2011 SUSTAINABILITY Part III: Social Performance (continued)
WOMEN IN MANAGEMENT AS AT 31 DECEMBER 2011 17%
83%
Male % Female %
WOMEN EMPLOYEES AS AT 31 DECEMBER 2011
EMPOWERING WOMEN 2010 and June 2011. The celebration in 2010 was themed Memperkasa Hak-hak 30% Our commitment to gender equality Wanita (Empowering Women) and had is seeing positive results. Our Women motivational and spiritual enhancement OnWards initiative goes from strength programmes conducted at all operating to strength, increasing opportunities for units. The celebration in 2011 was based on women at all levels. We are also supportive the theme of Wanita & Ekonomi (Women & of the recommendations adopted by the Economy). As at the time of writing, WOW Government and Bursa Malaysia that 30% of is planning for its third KIWD, slated to be decision-makers in PLCs should be female. held in June 2012. This year the theme will 70% be based on healthy and active lifestyles. Composition of women employees within our management group is now at 17%. Male % Recent Board changes included the addition WOW also aims to develop and equip the of a woman director, bringing female ladies with entrepreneurship skills, particularly Female % representation up to 21%. We believe that among the female employees, with free this diversity is creating a more balanced, trainings that can provide additional income, such as sewing, handcrafting and baking. productive and attractive workplace for all Regardless of the low numbers of reports, employees. SEXUAL HARASSMENT we will continue to refine our outreach programme to encourage more women to WOMEN ONWARDS (“WOW”) Our efforts in reaching out to the women speak up and to seek advice, if applicable. WOW was originally called Panel Aduan in the Company and getting them to report cases on sexual harassment are proving to Wanita or the Women’s Grievance Panel, RETURN TO WORK AND MATERNITY be successful. The women in the Company part of a larger strategy to reach out to all LEAVE levels of employees, in particular the fi eld are now more aware of their rights and are workers. It is endorsed by the management more open to reporting cases on sexual All our female employees are entitled to 60 and the activities are fully funded by the harassment. consecutive days of paid maternity leave, in Company. In the early days, WOW conducted accordance to the Malaysian Government awareness programmes of its existence and We have no reported incidents of sexual regulations. The number of female employees how WOW can help the women. harassment in 2010 and 2 incidents in 2011, who took maternity leave was 17 in 2011. As for the 2 incidents in 2011, the employee All employees returned to work after their Kulim recognised the celebration for found to be at fault was terminated for 1 maternity leave ended and remain employed International Women’s Day annually. case, while the other case was dropped with the Company 12 months after their WOW organised the Kulim International because there was not enough evidence to return to work. We are proud of the 100% Women’s Day (“KIWD”) programme in March prove guilt. retention rate. annual report 2011 | 135 Kulim (Malaysia) Berhad (23370-V)
COMMUNITY AND ECONOMIC CONTRIBUTIONS We recognise that our presence among the local communities impacts the social environment surrounding our operations, and not just the economics. Our business has strong dependencies on the surrounding communities for continuity and growth.
We adopt a management approach that has a holistic understanding of the net impact of our presence. We conduct annual SIA to measure our overall impact and review the Social Action Plan based on these SIAs. We try to create a positive impact with an active community investment programme that combines cash contributions, in-kind donations and employee volunteering activities.
COMMUNICATING WITH LOCAL COMMUNITIES We have an open approach to communication with the local communities. Local communities can contact the estate or the mill manager directly if they wish to address any issues regarding our operations. The communication process is complemented by annual SIAs, which are conducted by our internal and external auditors.
MEASURING OUR COMMUNITY INVESTMENTS The key themes of our community investments are community sports, community health and infrastructure as well as children and education. The community investment activities are structured around a Company-wide programme as ‘We Care We Share’. This programme was rolled out in January 2009 to promote the spirit of volunteerism amongst our staff.
In 2011, we participated in the following community programmes: APPROXIMATE INSTITUTION/ CONTRIBUTIONS PROGRAMMES PURPOSES (RM’000) Johor FC National sports 5,330 (Football Club) sponsorship Darul Hanan Orphans and under- 53 privileged Tabung Tijarah A programme to help 40 Ramadhan the under-privileged Bistari Young Sponsorship for Tunas 150 Entrepreneur Bistari Programme Kulim (Malaysia) Berhad (23370-V) 136 | annual report 2011
Part IV: Doing our part for the palm oil supply chain The bulk of our crop is sold to refineries, which in turn produce food ingredients and cooking oils largely for domestic sales. There is a growing pressure on the palm oil players to ensure an ethical and sustainable supply chain that is fully traceable to the origins of the crop. We are working on full certifi cation of all the FFB processed by our mills, as part of our commitment to RSPO. More than 35% of our FFB are purchased from independent FFB traders, outgrowers and smallholders. Our strategy is to map out the suppliers of external FFB to our mills, identify partners who can help us increase awareness for RSPO certifi cation and most importantly, enhance understanding on practical implementation in the estates. annual report 2011 | 137 Kulim (Malaysia) Berhad (23370-V)
The sale of palm oil for non-food use, consultation with a sample group of especially biofuel, has been largely reduced suppliers, comprising of outgrowers and FFB PROCESSED BY OUR MILLS in recent years. Our biofuel plant is currently FFB traders, most of them were aware of 2011 not in operation. RSPO but did not have detailed knowledge of the RSPO requirements. 6% ENGAGING FFB TRADERS, OUTGROWERS AND SMALLHOLDERS We developed a work plan in 2010 to According to the RSPO, smallholders conduct an awareness and training 30% produce much of the world’s palm oil. In programme for outgrowers and FFB traders. the 2 major producing countries – Indonesia Currently we are conducting a trial with a and Malaysia – which account for over 80% controlled group of smallholders at Asam of the world’s production, smallholders Bubok Estate (“ABE”). We aim to include cultivate about 40% of the oil palm area in ABE for coming surveillance due at the these 2 countries. end of this year. The Sustainability and Quality Department (“SQD”) is responsible Outgrowers and smallholders are therefore for implementing the RSPO P&C with the 64% key stakeholders for a fully traceable outgrowers and independent FFB traders. sustainable supply chain, as they supply Kulim estates’ FFB most of the crops to the mills. As with most We are also working with MPOB on the FFB traders mill owners, it is challenging to include Smallholder Certification Programme, external FFB in the certification. We have which started in February 2010. The first Other outgrowers’ FFB set a target initially to certify 100% of the smallholder engagement session was outgrowers’ FFB in our mills by 2011. We attended by 68 smallholders and FFB traders are still working on this target, but we have who supplied to the Sedenak Palm Oil Mill. extended the timeline to 2013 instead. The first smallholder engagement session The certifi cation is challenging because of for Sindora Palm Oil Mill was attended by 44 the complexity in tracing the individual smallholders and FFB traders. The programme outgrowers, given a substantial amount of aims to foster greater understanding of the FFB processed in our mills are purchased RSPO P&C for smallholders and to establish from independent FFB traders. In an initial a smallholder cooperative. Kulim (Malaysia) Berhad (23370-V) 138 | annual report 2011
ESTABLISHING AN ETHICAL AND Kulim’s sustainable palm oil is sold to the This method is slightly more stringent and SUSTAINABLE SUPPLY CHAIN market via the Green Palm Book and Claim complex than the Book and Claim system. and the Mass Balance mechanisms. The The RSPO has made signifi cant progress in Green Palm trading mechanism, a Book and CONSUMING PALM OIL sustainable sourcing since our last report. Claim system, allows our customers to buy Obesity among Malaysians is increasingly a Over the last 2 years, industry players have certifi cates for the volume of certifi ed palm health concern due to changes in lifestyle worked hard to iron out issues on practical oil required. The Book and Claim mechanism and diet. Obesity can lead to other chronic implementation of the mechanisms is the most simplifi ed method for a buyer diseases such as high blood pressure, heart – testimony to the strength of a formal to obtain certified oil without the high and kidney problems. Malaysian consumers multi-stakeholder initiative. For example, administrative costs and complex logistics. are also concerned about high fat intake some of the rules were changed to better On the other hand, the Mass Balance and the types of fat they consume, which reflect commercial realities, rather than mechanism allows certifi ed palm oil to be translates into choices on cooking oil types. from a technical and process engineering mixed with conventional palm oil, but the perspective. entire process is monitored administratively. annual report 2011 | 139 Kulim (Malaysia) Berhad (23370-V)
Palm oil is a basic and inexpensive ingredient Often labelled as vegetable oil, palm oil Moreover, palm oil in its solid state is for cooking in Malaysia, where we sell most is actually a type of fruit oil, much like much better for health as compared to of our palm oil. The vast majority of our coconut and olive oil. Many people mistake other edible oils, as it does not have to palm oil is used for edible consumption, palm oil for coconut oil. However, the 2 undergo a chemical composition known either as cooking oil or further processed have distinct uses and compositions. It is as hydrogenation. Hydrogenation produces into other food ingredients. palm kernel oil that is similar to coconut oil trans-fat, along with saturated fatty acids in terms of chemical composition, physical and modifies cis-fatty acids. Trans-fat has The palm oil is rich in natural chemical characteristics and uses. Besides fatty acids been linked as a contributory factor to compounds important for health and composition, palm oil also differs from breast and colon cancer, and heart disease. nutrition. It is a natural source of Carotenoids coconut oil with regard to its potential (including pro-vitamin A), Vitamin D, E and impact on the heart, as palm oil contains K, as well as supplying fatty acids and other distinctly less saturated fat to coconut oil. important fat-soluble micronutrients. No other vegetable oil has as much Vitamin E as palm oil and Vitamin E is a powerful anti-oxidant.
SECTION 6: GOVERNANCE STATEMENT 142 CORPORATE GOVERNANCE REPORT 153 INTERNAL CONTROL STATEMENT 160 AUDIT COMMITTEE REPORT 164 ADDITIONAL COMPLIANCE INFORMATION 165 ADDITIONAL DISCLOSURE Kulim (Malaysia) Berhad (23370-V) 142 | annual report 2011 CORPORATE GOVERNANCE REPORT
INTRODUCTION The Board of Directors of Kulim (Malaysia) Berhad subscribes to and supports the Malaysian Code on Corporate Governance (Revised 2007) (“The Code”) as a minimum basis for practices on corporate governance. The Board is pleased to report that it had continued to practise good corporate governance throughout the fi nancial year ended 31 December 2011. Pursuant to Paragraph 15.25 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”) and except for matters specifi cally identifi ed, the Board, to the best of their knowledge, confi rms that the Group has applied the Principles as set out in Part 1 and has complied with the Best Practices as set out in Part 2 of The Code throughout the year under review.
The Board however, recognises that good corporate • The Edge Billion Ringgit Club Award 2011 governance practices should extend beyond mere under the following categories:- compliance. It should seek to attain the highest standards of business ethics, accountability, 1. Best Performing Stock – Highest Returns integrity and professionalism across all the Group’s to Shareholders Over Three Years activities and conducts. In addition, the Board (Plantation Sector) considers strong governance as one of the key strategy determinants in building a competitive 2. Highest Profit Growth Company – organisation, achieving its set corporate and Highest Growth in Profit Before Tax business objectives and ultimately in realising Over Three Years (Plantation Sector) investors’ confi dence and shareholders’ value. Hence, the Board is committed to continuously improve • National Annual Corporate Report Awards the Group’s standards of corporate governance in (“NACRA”) 2011 – Industry Excellence Award ensuring that all stakeholders’ interest is protected (Main Market) for Plantation and Mining and value enhanced. • Industry Excellence (Plantations) and Scored The Board of Directors plays a key role in the ‘A’ in The Malaysian Corporate Governance governance process through its review and (“MCG”) Index 2011 organised by Minority approval of the Group’s direction and strategy, its Shareholders Watchdog Group (“MSWG”) monitoring of professional standards and business performance, its review of the adequacy and • Global Leadership Award 2011 (Plantation integrity of the Group’s internal control systems, Sector) – Ahamad Mohamad including the identifi cation of principal risks and ensuring the implementation of appropriate Being amongst the earliest plantation companies systems to manage those risks, and the acceptance in the world to be certifi ed as a sustainable palm of its underlying duty to ensure that the Company oil producer under RSPO serves as a testament and the Group meets its responsibilities to its to the Group’s commitment towards enhancing shareholders. its governance standards. The Group took its sustainable commitment to the next level when it Kulim’s commitment to strong governance and became the fi rst within the plantation industry to the continual enhancement of shareholders’ value publish sustainability reporting. The Group produced is evidenced by the following recognitions and its inaugural Sustainability Report 2007/2008 in accreditations conferred on the Group in 2011: October 2008, published separately for both its Plantation operations in Malaysia and Papua New • Malaysia 1000 – Industry Excellence Award Guinea. Subsequently, the bi-annual Sustainability under Plantation Sector 2010/2011 organised Report was published in June 2010. As at the time by BASIS Holdings Sdn Bhd in collaboration of writing, Kulim is in the process of producing its with BERNAMA and MATRADE. third Sustainability Report, emphasising the Group’s annual report 2011 | 143 Kulim (Malaysia) Berhad (23370-V)
commitment in subscribing to the RSPO The Board views that the number and The profiles of the Directors’ biographies Principles and Criteria. The reports which composition of the current Board members are set out in page 44 to 52 of the Annual are benchmarked against the international is sufficient and well-balanced for the Report. Global Reporting Initiative guidelines seek to Company to carry out its duties effectively, present transparent overview, performance whilst providing assurance that no individual The Company has in place a Board Policy evaluation and the Group’s target towards or small group of individuals can dominate Manual to assist the Board in discharging Sustainable Palm Oil practices. It also forms the Board’s decision making. its duties effectively. Among others, the the basis of additional communications Board Policy Manual covers the following and engagement with Kulim’s broader There is clear segregation of duties between important scopes: stakeholder groups. The Report is available the Chairman and the Managing Director. The Board is led by the Chairman, Kamaruzzaman upon request and can also be downloaded • Group Organisation Abu Kassim whose principal responsibilities is from the company website. to ensure the effective running of the Board • Board Organisation and is independent of the management. The current Chairman has never held the BOARD OF DIRECTORS post of Managing Director of the Company. • Board Responsibilities Size, Composition and Effectiveness of The post of Managing Director or the Chief Board Executive Officer of the Group is held by • Board Procedures Ahamad Mohamad whose primary task is Kulim (Malaysia) Berhad is led by an effective to report, communicate and recommend • Director Evaluation Guidelines and Board of Directors. The Board, as at the date key strategic and operational matters and Procedure of this Statement, consists of: proposals to the Board for decision making purposes as well as to implement policies • Managing Director Evaluation Guidelines • 4 Executive Directors and decisions approved by the Board. The and Procedure. Non-Independent Non-Executive Directors • 4 Non-Independent Non-Executive are from varied business and professional The Position Description for the Chairman Directors backgrounds and bring with them a wealth of and for the Managing Director is prescribed experience that is brought to bear favourably in the Board Policy Manual. At the end of • 6 Independent Non-Executive Directors in board decisions and policy formulations. each financial year the Board will set Key Together, the Directors bring a wide range of Performance Indicators (“KPI”) that should be All six (6) of the Independent Non-Executive business and fi nancial experience relevant to achieved by the management for the next Directors are independent as defi ned under the direction of the expanding Group. fi nancial year. the Listing Requirements. The Independent Non-Executive Directors are: The independence of each Independent Non- Principal Duties and Responsibilities Executive Directors is safeguarded as none is 1. Tan Sri Dato’ Seri Arshad Ayub involved in the day-to-day management of The Board assumes six principal stewardship’s the Group and they do not engage in any responsibilities: 2. Kua Hwee Sim business dealings or other relationships with the Group. The presence of 6 Independent 1. Reviewing and adopting a strategic 3. Datuk Haron Siraj Non-Executive Directors, representing more plan for the Company. The Board will than a third of the total members with review and approve the annual budget 4. Dr. Radzuan A. Rahman necessary calibre, ensures that the Board and strategic plan for the Group. is well-balanced and could carry sufficient weight on Board’s decisions. Although all 5. Natasha Kamaluddin The Group’s strategic and business plan the Directors have equal responsibilities for for the period 2012-2016 were tabled, the Group’s operations, the role of these 6. Leung Kok Keong discussed and approved by the Board Independent Non-Executive Directors is at its meeting on 22 March 2012. particularly important in ensuring that all A statutory declaration is made to Bursa business strategies proposed by the executive Malaysia Securities Berhad (“Bursa Malaysia”) Additionally, on an ongoing basis management are fully and independently as need arises, the Board will assess by all Independent Non-Executive Directors discussed and assessed, and take into whether projects, purchases and sale in their individual capacity to the effect that account the long term interest, not only of of equity as well as other strategic they are independent in compliance with the shareholders, but also employees, customers, consideration being proposed at Board Listing Requirements. suppliers, and the many communities in meetings during the year are in line which the Group operates. The Board is with the objectives and broad outline satisfied that the size and composition of the Independent Non-Executive Directors has of the adopted strategic plans. fulfi lled its requirement adequately. Kulim (Malaysia) Berhad (23370-V) 144 | annual report 2011
CORPORATE GOVERNANCE REPORT (continued)
2. Overseeing the conduct of the are well-informed about the Group decision making process by the Board. In Company’s business to evaluate whether affairs and developments. Information this regard, the Board is provided with not the business is being properly managed. on our shareholders’ communication just quantitative information but also those At Board meetings, all operation matters activities is on pages 151 to 152 of this of qualitative nature that is pertinent and of will be discussed and expert advice will Annual Report. the quality necessary to allow the Board to be sought if necessary. effectively deal with matters that are tabled 6. Reviewing the adequacy and the in the meeting. All Directors have unrestricted The performances of the various integrity of the Company’s internal access to all information within the Company companies and operating units within controls and management information in furtherance of their duties. In addition, all the Group represent the major element systems, including compliance with Directors have access to the advice of the of Board agenda. Where and when applicable laws, regulations, rules, Company Secretary and where necessary, in available, data are compared against directives and guidelines. furtherance of their duties, take independent national trends and performance of professional advice at the Group’s expense. The Board’s function as regard to similar companies. fulfilling the above responsibility is In conjunction with the scheduled meetings supported and reinforced through the or on separate occasions, the Directors also The Group uses KPI system as the various Committees established at both visit locations of operating units, sites of new primary driver and anchor to its the Board and managing agent’s level. projects and other operation sites to allow performance management system, Aided by an independent function them to have better assessments of the of which is continually refined and of the Internal Audit Department, the operational progress, status of development enhanced to reflect the changing active functioning of these Committees and any important issues to be addressed business circumstances. through their regular meetings and on new proposals. In between meetings, the discussions would provide a strong Managing Director meets regularly with the 3. Identifying principal risks and ensure the check and balance as well as reasonable Chairman and other Board members to keep implementation of appropriate systems assurance on the adequacy of the them abreast of current development. Circular to manage these risks. The Group has Company’s internal controls. Details Resolutions are used for determination of set up a Risk & Issues Management on the Internal Audit functions are matters arising in between meetings. Committee for this purpose to assist further discussed in the Internal Control the Board. Statement and Audit Committee Report In addition to matters relating to the six in this Annual Report. principal stewardship’s responsibilities The Risk & Issues Management discussed above, other specifi c topics tabled Committee met 4 times in 2011 to Board Meetings and for Board’s deliberation and decisions include: review the Group’s risks. Details on Risk Supply of Information & Issues Management Committee are All Board meetings for the ensuing year are • updates of relevant factors within the on pages 153 to 154 of this Annual scheduled by December in the year before Group external business environment Report. so as to allow Directors to plan ahead. Board such as economic development and meetings are held at least 4 times a year. policies, customers and markets and 4. Succession planning, including Apart from the regular scheduled meetings, competitors; appointing, training, fixing the additional meetings are convened as and compensation of and where appropriate, when necessary to deliberate and approve • current updates of key financial replacing senior management. ad-hoc, urgent and important issues. and operational results as well as performances of the Group, Company The Board responsibility in this aspect is The Chairman, assisted by the Company and its subsidiaries; being closely supported by the Human Secretary takes responsibility in ensuring Resource Department. More importantly, that the directors receive all notices, agendas • strategic and corporate initiatives such after several years of continuous efforts and minutes of the previous meetings and as approval of corporate plans and in emphasising and communicating the is supplied with pertinent information well budgets, acquisitions and disposal of importance of succession planning, the in advance of each meeting. The Managing material assets and major investments; subject has now become an ongoing Director in consultation with the Chairman agenda being reviewed at various high- would decide on the agenda and accordingly • changes to management and control level management and operational structure and prioritise the respective matters structure of the Group, including key meetings of the Group. based on their relevance and importance policies, procedures and authority so as to enable quality and in-depth limits; 5. Developing and implementing an discussion of the matters. All decisions and investor relations programme or conclusions of the Board meetings are to be • approval of any interim and special shareholder communications policy for duly recorded and minutes are kept by the dividend as well as the Company’s the Company. Company Secretary. dividend policy; and
Various strategies and approaches The Board recognises the importance • approval of all circulars, resolutions and are employed by the Group so as to of providing timely, relevant and up-to- corresponding documentation sent to ensure that investors and shareholders date information in ensuring an effective shareholders. annual report 2011 | 145 Kulim (Malaysia) Berhad (23370-V)
The Board met 8 times during the fi nancial year 2011 and all Directors have complied with the minimum 50% attendance as required by Para 15.05 of the Listing Requirements. The members of the Board of Directors and their attendances at Board meetings in 2011 are set out below:
Special Special Special Special BOD 265th BOD 266th BOD 267th BOD BOD BOD BOD 268th BOD 12.1.2011 10.2.2011 23.6.2011 5.8.2011 16.8.2011 4.11.2011 15.12.2011 22.12.2011 % Kamaruzzaman Abu Kassim ✔✔✔✔✔✔✔✔100 Ahamad Mohamad ✔✔✔✔✔✔✔✔100 Tan Sri Dato’ Seri Arshad Ayub ✔✔✔✔✔✔✔✔100 Kua Hwee Sim ✔✔✔✔✔✔✔✔100 Wong Seng Lee ✔✔✔✔✔✔✔✔100 Datin Paduka Siti Sa’diah Sh Bakir ✔✔✔✔✔✔✔✔100 Zulkifl i Ibrahim –––✔✔✔✔✔100 Datuk Ahmad Zaki Zahid ––––––✔✔100 Datuk Haron Siraj ✔✔✔✔✔✔✔✔100 Dr. Radzuan A. Rahman ✔✔✔✔✔✔✔✔100 Rozan Mohd Sa’at ✔✔✔✔✔✔✔✔100 Leung Kok Keong ––––––✔✔100 Natasha Kamaluddin ––––––✔✔100 Wan Mohd Firdaus Wan Mohd Fuaad ––––––✔✘50
Notes:- • Zulkifl i Ibrahim – appointed as Executive Director on 1.7.2011 • Datuk Ahmad Zaki Zahid – appointed as Executive Director on 8.11.2011 • Leung Kok Keong – appointed as Independent Non-Executive Director on 9.11.2011 • Natasha Kamaluddin – appointed as Independent Non-Executive Director on 9.11.2011 • Wan Mohd Firdaus Wan Mohd Fuaad – appointed as Non-Independent Non-Executive Director on 9.11.2011
The Directors, in the event that they have competency to effectively discharge his/ In accordance with Article 103 of the interest in proposals considered by the Board, her role as a Director of the Company. The Company’s Article of Association, Zulkifli will be required to make declaration to that NRC will then recommend their fi ndings for Ibrahim, Datuk Ahmad Zaki Zahid, Leung effect. The interested Directors will thereupon consideration and approval by the Board. The Kok Keong, Natasha Kamaluddin and Wan abstain from deliberations and decisions of power to appoint the director(s) nominated Mohd Firdaus Wan Mohd Fuaad, who were the Board on the said proposals. is vested wholly on the Board. appointed during the year, retire at the forthcoming AGM and being eligible, offer Appointment and Re-election of The Board is responsible to the shareholders. themselves for re-election. Directors All Directors appointed during the fi nancial year resign at the Annual General Meeting The number and composition of Board Tan Sri Dato’ Seri Arshad Ayub being above membership are reviewed on a regular basis (“AGM”) of the Company in the period of appointment and are eligible for re-election. 70 years of age retires in accordance with appropriate to the prevailing size, nature In compliance with the Para 7.26(2) of the Section 129(2) of the Companies Act 1965 and complexity of the Group’s business Listing Requirements, all directors shall retire and has offered himself for re-appointment operations so as to ensure the relevance and once at least in every 3 years. in accordance with Section 129(6) of the said effectiveness of the Board. In the event of a Act to hold offi ce until the conclusion of the need to appoint new member(s) of the Board, In accordance with Article 97 of the Company’s next AGM of the Company. nominations will be tabled and deliberated in Article of Association, Datin Paduka Siti Sa’diah the Company’s Nomination and Remuneration Sh Bakir and Datuk Haron Siraj retire by Committee (“NRC”) meeting to assess the rotation at the forthcoming AGM and being qualified candidate with the required core eligible, offer themselves for re-election. Kulim (Malaysia) Berhad (23370-V) 146 | annual report 2011
CORPORATE GOVERNANCE REPORT (continued)
Directors’ Remuneration The Board believes that the levels of remuneration offered by the Group are suffi cient to attract Directors of calibre and with suffi cient experience and talents to contribute to the performance of the Group. Comparison with similar position within the industry and other major public listed companies is made in order to arrive at a fair rate of remuneration. The details of the remuneration of each Director paid by the Company during the year are as follows:
Fees / Allowances / Other Basic Salary emoluments Bonuses Benefi t in-kind Total RM'000 RM'000 RM’000 RM’000 RM’000 Kamaruzzaman Abu Kassim – 107 – – 107 Ahamad Mohamad 593 309 395 79 1,376 Tan Sri Dato’ Seri Arshad Ayub – 81 – – 81 Kua Hwee Sim – 70 – – 70 Wong Seng Lee 309 144 206 11 670 Datin Paduka Siti Sa’diah Sh Bakir – 62 – – 62 Zulkifl i Ibrahim 360 129 210 26 725 Datuk Ahmad Zaki Zahid 120 20 – – 140 Datuk Haron Siraj – 62 – – 62 Dr. Radzuan A. Rahman – 70 – – 70 Rozan Mohd Sa’at – 62 – – 62 Leung Kok Keong – 10 – – 10 Natasha Kamaluddin – 10 – – 10 Wan Mohd Firdaus Wan Mohd Fuaad – 9 – – 9 Jamaludin Md Ali (1) – 25 – – 25 1,382 1,170 811 116 3,479
(1) Resigned on 1.7.2011
Board Performance Evaluation be considered. The process also includes a Directors’ Training peer review in which directors assess their The effectiveness of the Board is vital to The Company complies with the fellow directors’ performance against set the success of the Group. For that reason, requirements set out in the amendments to criteria, including the skills they bring to the a large portion of the Board Policy Manual the Listing Requirements in that it regularly Group and the contribution they make. The is devoted to explaining and outlining the assess the training needs of its directors Company Secretary reported the outcome format and procedure for evaluating Board to ensure that they are equipped with the of the evaluation exercise to the Nomination Members performance. The availability of requisite knowledge and competencies to Committee and then to the Board for the structured format for Board Members review. make effective contribution to the board’s evaluation assists the members in discharging functioning. All Directors have successfully their duties effectively and effi ciently. Following the performance evaluation completed the Mandatory Accreditation process for 2011, which was conducted in Programme (“MAP”) prescribed by Bursa The Board, through its Nomination Committee, February 2012, the directors have concluded Malaysia. The Continuous Education undertakes a rigorous evaluation each year that the Board and its committees operate Programme (“CEP”) was repealed by Bursa in order to assess how well the Board, its effectively. Additionally, the Chairman has Malaysia with effect from 1 January 2005 committees, the directors and the Chairman concluded that each director continues to and Directors who were required to fulfil are performing. The evaluation covers the make an effective contribution to the work this programme complied with the deadline Board’s composition, skills mix, experience, of the Board, is well prepared and informed before due date. Nevertheless, Directors are communication, roles and responsibilities, concerning items to be considered by the encouraged to continue attending various effectiveness as well as conduct. All directors Board, has a good understanding of the training programmes that are relevant to the complete a questionnaire regarding the Group’s business and has remained strongly Board and committees’ processes, their discharge of their responsibilities. committed to their roles. effectiveness and where improvements may annual report 2011 | 147 Kulim (Malaysia) Berhad (23370-V)
Training programmes, seminars and briefi ngs Apart from this requirement, all new As such, a Fraud Policy was established and attended by the Directors during the year directors who are appointed from among approved by the Board of Directors in 2007 were, among others: the Group’s senior executives must attend to refl ect the Group’s commitment to manage an internally-administered directors’ course control and promote ethical and honest • Mandatory Accreditation Programme and pass the examination set prior to being behaviour in the workplace. The policy is for Directors of Public Listed Companies eligible for appointment to the Board. All intended to provide guidance to employees pursuant to Paragraph 15.09 of Bursa new directors will be given comprehensive on how to report and deal with fraud. It also briefing of the Group’s history, operations Securities Listing Requirements outlines the notifi cation process, investigation and financial control systems in order to procedures and type of outcomes which are provide them with first-hand knowledge • Johor Corporation Directors’ Conference likely to be considered. of the Group’s operations. In the light of 2011 increasing complexities in global markets The Group also ensures the sustenance as well as within the industry, in financial of a dynamic and robust corporate • Invest Malaysia 2011 reporting and in shareholders’ expectations, climate focused on strong ethical values. training is an ongoing process in the effort This emphasises active participation and • Women In Leadership Forum Asia to help Directors stay abreast of relevant new dialogues on a structured basis involving developments. key people at all levels, as well as ensuring • MSWG & ICGN Dialogue Session accessibility to information and transparency Directors’ Code of Ethics on all executive action. The Group’s annual nd • 22 Palm & Lauric Oils Conference The Directors adhere to the Code of Ethics employees’ gathering; Pedoman is one of which is contained in the Board Policy the platforms employed in allowing and • Dialogue Session with Securities Manual, the important aspects of which are encouraging employees to engage in an Commission as follows: open dialogue with the senior management.
• International Conference on Language, • Members must represent non confl icted The Group has also long established a formal Culture & Literacy: Engaging Diversity in loyalty to the interests of the Group; avenue for all employees to report directly Challenging Times to the Managing Director of any misconduct • Members must avoid conflict of or unethical behaviour conducted by • NAM Institute for the Empowerment of interest with respect to their fi duciary any employees of the Group through a responsibility; Women declaration in the Ethic Declaration Form. Further to that, Kulim has established a • Members may not attempt to exercise • 7 th World Islamic Economic Forum Grievance Policy and Procedure as well as individual authority over the Group Women OnWards to ensure that throughout except as explicitly set forth in Board the Group, there is a transparent process • APHM Conference Policy; and for ensuring stakeholders’ grievances and complaints are dealt with fairly, consistently • Corporate Governance Program • Members will respect the confi dentiality – Assessing the Risk and Control appropriate to issues of a sensitive and promptly. The corporate climate is also Environment nature. continuously nourished by value-centred programmes for team-building and active • International Forum on Women in Fraud Risk and Whistle-Blowing subscription to core values. Science and Technology The Group is strongly committed to an environment of sound governance, sound BOARD COMMITTEE • The New Corporate Governance internal controls and a culture that will Blueprint and Regulatory Updates safeguard shareholders’ investments, The Group has formed several committees Seminar 2011 organised by MICG & stakeholders’ interests and the Group’s assets. to facilitate the operations of the Group. Federation of Public Listed Companies The safeguarding against loss by fraud or Each committee has written terms of Berhad negligence and establishing an environment reference defining their scope, powers which effectively minimises fraud risk is a key and responsibilities. Apart from the Board • Updates on FRS 2010/2011 - New responsibility of management. All employees Committees, there are internal/management & Revised FRSs, Amendments, have an obligation to support the effort. committees established at Kulim Corporate Interpretations and the New Bursa Offi ce level and within the Group’s signifi cant/ Listing Requirements The Group also upholds the principles of strategic subsidiaries which facilitate integrity, respect and accountability which the function of Board of Kulim as well as includes the maintenance of a workplace that their respective company. These internal/ • Budget 2012 Proposals & Recent is free from fraud. This involves embedding management committees and their primary Development fraud control into the organisation’s decision functions are set out on pages 155 to 157 of making culture and practices. this Annual Report. Kulim (Malaysia) Berhad (23370-V) 148 | annual report 2011
CORPORATE GOVERNANCE REPORT (continued)
The list of Board committees includes: In performing its duties, the NRC shall have Membership direct access to the resources of the Company The Nomination Committee shall have 1. Audit Committee as it may reasonably require and shall seek to at least 3 members, all of whom shall maintain effective working relationships with Pursuant to paragraph 15.15 of the Listing be non-executive directors with the Requirements, the Audit Committee the management. majority being independent directors. Report for the fi nancial year which sets The quorum for the Committee shall be out the composition, terms of reference The compositions of the NRC of the Company 2 members, of which one should be an and a summary of activities of the Audit are as follows: independent director. The Nomination Committee, is contained on pages 160 to 163 of this Annual Report. Committee members and Chairperson Nomination Committee shall be appointed by the Board. The 2. Nomination and Remuneration 1. Kamaruzzaman Abu Kassim – Chairman appointment of a Committee member Committee terminates when the member ceases to 2. Tan Sri Dato’ Seri Arshad Ayub On 1 June 2011, the Board of Directors be a director, or as determined by the of the Company established its 3. Kua Hwee Sim Board. own Nomination and Remuneration Committee (“NRC”) in order to Remuneration Committee In the event of equality of votes, the exercise Best Practices of Corporate Chairperson of the Committee shall have Governance. The previous functions 1. Kamaruzzaman Abu Kassim – Chairman a casting vote (except where 2 directors and responsibilities of the NRC of the form the quorum). In the absence of 2. Tan Sri Dato’ Seri Arshad Ayub Company was centralised and vested the Chairperson of the Committee, with Johor Corporation (“JCorp”) 3. Dr. Radzuan A. Rahman the members present shall elect one Group NRC in line with its Group wide member to chair the meeting. corporate practice. Terms of Reference The Nomination Committee shall have The NRC is accountable to the Board of The terms of reference of the NRC are as no executive powers. the Company and not to the executive follows: management of the Company. Subject to the Corporate Governance Principles, Meetings The NRC is established primarily for: the primary functions of the NRC are The Committee shall meet at least to: A. Nomination once a year. Additional meetings shall be scheduled as considered necessary 1. Assess the necessary and desirable Purpose competencies of Board members; by the Committee or Chairperson. The The Nomination Committee, a Committee may establish procedures 2. Review Board succession plans; Committee of the Board of Directors from time to time to govern its (“Board”), is established primarily to: meetings, keeping of minutes and its 3. Evaluate the Board’s performance; administration. 1. Identify and recommend to 4. Make recommendations to the the Board, candidates for board The Committee shall have access to Board on the following: directorships of Kulim (Malaysia) such information and advice, both Berhad (“the Company”); from within the Group and externally, i. Executive remuneration and as it deems necessary or appropriate incentive policies; 2. Recommend to the Board, in accordance with the procedures ii. Remuneration packages of directors to fi ll the seats on Board determined by the Board and at the senior management; Committees; cost of the Group. The Committee may request other directors, members of iii. The Company’s recruitment, 3. Evaluate the effectiveness of the management, counsels, and consultants retention and termination Board and Board Committees as applicable to participate in Committee policies for senior (including its size and composition) management; meetings, as necessary, to carry out and contributions of each the Committee’s responsibilities. Non- iv. Incentive Schemes; individual director; and committee directors and members of management in attendance may be v. Superannuation 4. Ensure an appropriate framework required by the Chairperson to leave arrangements; and and plan for Board succession for the meetings of the Committee when vi. The remuneration framework the Company. so requested. for directors. annual report 2011 | 149 Kulim (Malaysia) Berhad (23370-V)
The Secretary of the Committee shall be 1. To determine the criteria for Board 5. To evaluate and recommend the appointed by the Committee from time membership, including qualities, appointment of senior executive to time. Committee meeting agendas experience, skills, education and positions, including that of the shall be the responsibility of the other factors that will best qualify Managing Director or Chief Executive and their duties and Committee Chairperson with input from a nominee to serve on the Board. the continuation (or not) of their Committee members. The Chairperson service. may also request management to 2. To review annually and recommend participate in this process. The agenda to the Board with regards to 6. To establish and implement process for each meeting including supporting the structure, size, balance and for assessing the effectiveness information shall be circulated at least composition of the Board and of the Board as a whole, the seven days before each meeting to the Committees including the required Committee of the Board and for Committee members and all those who mix of skills and experiences, assessing the contribution of each are required to attend the meeting. core competencies which non- director. executive directors should bring 7. To evaluate on an annual basis: The Committee shall cause minutes to to the Board and other qualities to be duly entered in the books provided function effectively and effi ciently. • the effectiveness of each for the purpose of all resolutions director’s ability to contribute and proceedings of all meetings of 3. To consider, evaluate and propose to the effectiveness the the Committee. Such minutes shall to the Board any new board Board and the relevant Board be signed by the Chairperson of the appointments, whether of executive Committees and to provide meeting at which the proceedings were or non-executive position. In the necessary feedback to held or by the Chairperson of the next making a recommendation to the directors in respect of their performances; succeeding meeting and if so signed, the Board on the candidate for shall be conclusive evidence without directorship, the Committee shall • the effectiveness of the any further proof of the facts thereon have regard to: Committees of the Board; and stated. The minutes of the Committee meeting shall be available to all Board • Size, composition, mix of skills, • the effectiveness of the members. experience, competencies Board as a whole. and other qualities of the The Committee, through its Chairperson, existing Board, level of 8. To recommend to the Board: shall report to the Board at the next commitment, resources and • whether directors who are Board of Directors’ meeting after each time that the recommended retiring by rotation should be Committee meeting. When presenting candidate can contribute to put forward for re-election; any recommendation to the Board, the the existing Board; and and Committee will provide such background and supporting information as may • Best Practices of the • termination of membership be necessary for the Board to make Malaysian Code on Corporate of individual directors in an informed decision. The Committee Governance Part 2 AAIII accordance with policy, for shall provide such information to the which stipulates that non- cause or other appropriate Board as necessary to assist the Board executive directors should be reasons. in making a disclosure in the Annual persons of calibre, credibility 9. To establish appropriate plans for Report in accordance with the Best and have necessary skill succession at Board level, and if Practices of the Malaysian Code on and experience to bring an appropriate, at senior management Corporate Governance Part 2 AAIX. independent judgement to level. bear on issues considered The Chairperson of the Committee shall by the Board and that 10. To provide for adequate training be available to answer questions about independent non-executive and orientation of new directors the Committee’s work at the AGM of directors should make up with respect to the business, the Company. at least one-third of the structure and management of the Group as well as the expectations membership of the Board. of the Board with regards to their Scope of Activities contribution to the Board and The duties of the Nomination Committee 4. To propose to the Board the Company. shall include the following: responsibilities of non-executive directors, including membership 11. To consider other matters as and Chairperson of Board referred to the Committee by the Committees. Board.
Kulim (Malaysia) Berhad (23370-V) 150 | annual report 2011
CORPORATE GOVERNANCE REPORT (continued)
B. Remuneration In the event of equality of votes, the Committee may, if it thinks fit, secure the attendance of external advisers Purpose Chairperson of the Committee shall have a casting vote (except where 2 directors with relevant experience and expertise, The Remuneration Committee, a form the quorum). In the absence of and shall have the discretion to decide Committee of the Board, is established the Chairperson of the Committee, who else other than its own members, primarily to: the members present shall elect one shall attend its meetings. No director or member to chair the meeting executive shall take part in decisions on 1. Provide assistance to the Board his/her own remuneration. in determining the remuneration The Committee members shall: of executive directors and, if The Secretary of the Committee shall applicable, senior management be appointed by the Committee from and in particular the Chief • have a good knowledge of the Company and its executive time to time. Committee meeting Executive Officer where the agendas shall be the responsibility directors, and a full understanding person is not a member of the of the Committee Chairperson with of shareholders’ concern; and boards of directors. In fulfi lling this input from Committee members. The responsibility, the Committee is to Chairperson may also ask management • have a good understanding, ensure that executive directors and to participate in this process. applicable senior management of enhanced as necessary by the Company: appropriate training or access to The agenda for each meeting shall be professional advice, on/of areas of circulated at least 7 days before each • are fairly rewarded for their remuneration. meeting to the Committee members individual contributions to and all those who are required to overall performance; Meetings attend the meeting. Written materials The Committee shall meet at least including information requested by • that the compensation is once a year. Additional meetings shall the Committee from management or reasonable in light of the external consultants shall be received Company’s objectives; and be scheduled as considered necessary by the Committee or Chairperson. The together with the agenda for the meetings. • that the compensation Committee may establish procedures is comparable to other from time to time to govern its The Committee shall cause minutes to companies. meetings, keeping of minutes and its administration. be duly entered in the books provided for the purpose of all resolutions and 2. Establish the Managing Director/ proceedings of all meetings of the Chief Executive Offi cer’s goals and The Committee may consult the Committee. Such minutes shall be signed objectives; Chairperson of the Board regarding by the Chairperson of the meeting at proposals relating to the remuneration of which the proceedings were held or by 3. Review the Managing Director/Chief executive directors. The Committee may the Chairperson of the next succeeding Executive Officer’s performance consult other non-executive directors in meeting and if so signed, shall be against the goals and objectives its evaluation of the Managing Director/ conclusive evidence without any further set. Chief Executive Offi cer. The Committee proof of the facts thereon stated. The may request other directors and key minutes of the Committee meeting shall Membership executives to participate in Committee be available to all Board members. The Remuneration Committee shall meetings, as necessary, to carry out the consist entirely of non-executive Committee’s responsibilities. The Committee, through its Chairperson, directors. It shall have at least 3 members shall report to the Board at the next and the quorum for the Committee The Committee shall have access to Board of Directors’ meeting after each shall be 2 members. Remuneration such information and advice, both Committee meeting. When presenting Committee members and the from within the Group and externally, any recommendation to the Board, the Chairperson shall be appointed by the as it deems necessary or appropriate Committee will provide such background Board based on the recommendations in accordance with the procedures and supporting information as may be of the Nomination Committee. The determined by the Board and at the necessary for the Board to make an appointment of a committee member cost of the Company. The Committee informed decision. The Committee shall terminates when the member ceases to is authorised by the Board to obtain provide such information to the Board as be a director, or as determined by the external legal or other professional necessary to assist the Board in making Board. advice, as well as information about a disclosure in the Annual Report in remuneration practices elsewhere. The accordance with the Principles of the Malaysian Code on Corporate Governance annual report 2011 | 151 Kulim (Malaysia) Berhad (23370-V)
BIII and the Bursa Malaysia Listing 6. To consider and approve compensation Investor Relations Activities No. Requirements Appendix 9C Part A. commitments/severance payments for 2011 of times executive directors and key executives, IR meetings 6 The Chairperson of the Committee shall where appropriate, in the event of early Conference calls 2 be available to answer questions about termination of the employment/service the Committee’s work at the AGM of Company visits 5 contract. the Company. Roadshows 4
Scope of Activities 7. To consider other matters as referred to Senior Management members involved in The duties of the Remuneration the Committee by the Board. Investor Relations activities are: Committee shall include the following: • Ahamad Mohamad, Managing Director 1. To establish and recommend the SHAREHOLDERS • Wong Seng Lee, Executive Director remuneration structure and policy Communication and Investor Relations for executive directors and key • Azli Mohamed, Chief Financial Offi cer executives, if applicable, and to In line with the Group’s commitment to review for changes to the policy, observe the highest level of accountability • Md Faizal Abdullah, Senior Manager, as necessary. and transparency to its stakeholders, the Corporate Affairs Department Group continually ensures that it maintains a 2. To ensure that a strong link is high level of disclosure and communication Other than that, the Board believes that the maintained between the level with its shareholders and stakeholders Company’s Annual Report also serves as of remuneration and individual an important communication tool to the performance against agreed through various practicable and legitimate shareholders, investors and all stakeholders targets, the performance-related channels. The Group is duty-bound to keep in general. As such, each year, the Company elements of remuneration setting the shareholders and investors informed strives to produce a value-added and forming a significant proportion of any major developments and changes transparent reporting to its readers. of the total remuneration package affecting the Group. of executive directors. Annual General Meeting Communications are primarily effected 3. To review and recommend the The AGM is a vital platform for dialogue through announcements via Bursa Malaysia entire individual remuneration and interaction with the shareholders of the Link, meetings, briefi ngs, press releases and packages for each of the executive Company. The shareholders are given the directors and, as appropriate, conference calls. In addition, the Group has opportunity to vote on the regular businesses other senior executives, including: established its offi cial website at www.kulim. of the meeting by show of hands. Each item of special business included in the notice the terms of employment or com.my which investors and shareholders can of the meeting will be accompanied by contract of employment/service; access for information. The website had been detailed explanations. Separate resolutions any benefi t, pension or incentive redesigned and enhanced further in 2008 are proposed for substantially different issues scheme entitlement; any other and will be continuously improved to include at the meeting and the Chairman declares bonuses, fees and expenses; and more relevant information to investors and the number of proxy votes received both for any compensation payable on the to better facilitate its navigation. and against each resolutions. The resolutions termination of the service contract passed at the meeting are released to Bursa by the Company. Meetings and briefings are held regularly Malaysia in a timely manner. 4. To review with the Managing with shareholders, investors, research analysts, Besides the usual agenda, the Board also Director/Chief Executive Director, bankers and the press to explain and expand presents the progress and performance of the his/her goals and objectives and on Group’s latest performance results, current Group at each AGM. Shareholders, including to assess his/her performance developments and future directions. During the minority shareholders, are encouraged against these objectives as well meetings, participants are encouraged to to participate and raise questions during the as contribution to the corporate pose any question to the Board members or question and answer session with the Directors. strategy. the senior management team of the Group All Board members, senior management and the external auditors are present to respond to seek any clarification or explanation on 5. To review the performance to questions from the shareholders during any issues raised. Whilst these forms of standards for key executives to be AGM. Where appropriate, the Chairman will used in implementing the Group’s communications are important, the Group undertake to provide a written answer to any compensation programmes where takes full cognisance of its responsibilities to significant question that cannot be readily appropriate. not disclose any price-sensitive information. answered at the meeting.
Kulim (Malaysia) Berhad (23370-V) 152 | annual report 2011
CORPORATE GOVERNANCE REPORT (continued)
Other than the Board Chairman and the In preparing the financial statements, the by the internal auditors and a report on the Managing Director, the shareholders or any Directors have: reviews conducted is submitted to the Audit stakeholders may convey any concerns that Committee for their monitoring. they may have to Tan Sri Dato’ Seri Arshad • adopted suitable accounting policies Ayub, an Independent Non-Executive Director and applied them consistently; Details of the transactions entered into by and Chairman of the Audit Committee. the Group during the fi nancial year ended 31 • made judgment and estimates that are December 2011 are set out on pages 257 to reasonable and prudent; 260 of this Annual Report. ACCOUNTABILITY AND AUDIT • ensured that all applicable Financial Financial Reporting Internal Control Statement Reporting Standards in Malaysia have In presenting the annual fi nancial statement been followed; and The Group’s Internal Control Statement is set and quarterly announcements to shareholders, out on pages 153 to 159. the Directors aim to present a balanced and • prepared financial statements on the candid assessment of the Group’s position going concern basis as the Directors Relationship with the External Auditors and prospects. This also applies to other have a reasonable expectation, having The Board through the Audit Committee has price-sensitive public reports and reports to made enquiries that the Group and maintained a formal procedure of carrying regulators. Timely release of announcements Company have resources to continue in out an independent review of all quarterly refl ects the Board’s commitment to provide operational existence for the foreseeable reports, annual audited fi nancial statements, up-to-date and transparent information on future. External Auditor’s audit plan, report, internal the Group’s performance. control issues and procedures. The Committee The Directors have responsibility for ensuring meets with the External Auditors without the In the preparation of the fi nancial statements, that the Group and the Company keeps presence of the Executive Board and Senior the Directors will consider compliance with accounting records which disclose with Management at least once a year. During all applicable Financial Reporting Standards, reasonable accuracy the financial position the year, 2 meetings have been conducted provisions of the Companies Act 1965 and of the Group and the Company and which without the presence of the management. relevant provision of laws and regulations enable them to ensure that the financial in Malaysia and the respective countries in Representatives from the External Auditors statements comply with Companies Act 1965. which the subsidiaries operate. The Board are also invited to attend every Annual is assisted by the Audit Committee who General Meeting. The Directors have overall responsibilities for reviews both annual financial statements taking such steps as are reasonably open to and the quarterly announcements to ensure The role of the Audit Committee in relation reports reflect a true and fair view of the them to safeguard the assets of the Group to the External Auditors is described on state of affairs of the Group and Company. to prevent and detect fraud and other page 162. irregularities. Statement of Directors’ Responsibility in Preparing Audited Financial Statements Related Party Transactions This Statement is made in accordance The Directors are required by Companies Act All related party transactions entered into with the Resolution made in the Board of 1965 to prepare fi nancial statements for each by the Group were made in the ordinary Directors’ meeting held on 22 March 2012. fi nancial year which have been made out in course of business and on substantially accordance with the applicable approved the same terms as those prevailing at the accounting standards and give a true and time for comparable transactions with fair view of the state of affairs of the Group other persons or charged on the basis of and the Company at the end of the fi nancial equitable rates agreed between the parties. year and of the results and cash fl ows of the All related party transactions are reviewed KAMARUZZAMAN ABU KASSIM Group and Company for the fi nancial year. Chairman annual report 2011 | 153 Kulim (Malaysia) Berhad (23370-V) INTERNAL CONTROL STATEMENT
INTRODUCTION The Malaysian Code on Corporate Governance requires listed companies to maintain a sound system of internal control to safeguard shareholders’ investment and the Group’s assets. Para 15.26(b) of Main Market Listing Requirements requires Directors of listed companies to include a statement in their annual reports on the state of their internal control. Set out below is the Board’s Internal Control Statement, which has been prepared in accordance with the Statement on Internal Control: Guidance for Directors of Public Listed Companies (“the Guidance”).
The Board wishes to highlight that certain of of failure to achieve business objectives. It must the Group’s subsidiaries which are listed on be recognised that it can only provide reasonable Bursa Securities, namely QSR Brands Bhd and and not absolute assurance against misstatement KFC Holdings (Malaysia) Bhd are also subject to or loss. In addition, the management needs to similar disclosure requirements as the Group in consider the expected cost and benefits to be preparing this statement. Hence, a more detailed derived from the implementation of the internal disclosure of the state of internal controls of these control system. subsidiaries is available for references vide their respective Internal Control Statements included in their Annual Reports. Towards fulfi lling the Group’s CONTROL FRAMEWORK AND oversight and monitoring responsibilities to ensure ENVIRONMENT the said subsidiaries fully comply with the relevant Key to the Group’s Internal Control and Risk requirements and legislations with regard to internal Management framework is its Control Self- controls implementation and disclosure, the Group Assessment (“CSA”) process. The process is a has adequate representation in the Board of these recognised and flexible management tool for listed subsidiaries through several common directors acquiring information about business process and senior management members. risks, while empowering the risk owners to undertake responsibility and mitigate those risks. Each business unit is required to document the BOARD’S RESPONSIBILITIES management and mitigating action plan for each The Board of Directors recognises the importance significant risk. Risk assessment and evaluation of sound internal control and risk management form an integral part of the annual strategic cycle. practices to good corporate governance with The Board, as part of the annual strategic review, the objective of safeguarding the shareholders’ considers and approves the Group’s risk structure. investment and the Company’s assets. The Board affirms its overall responsibility for the Group’s Risk Management system of internal controls and for reviewing the Having regard to the fact that managing risk adequacy and integrity of those systems including is an inherent part of the Group’s activities, risk financial and operational controls, compliance management and the ongoing improvement in with relevant laws and regulations and risk corresponding control structures remain a key management. focus of management in building a successful and sustainable business. For this endeavour, the Group The Group has in place an ongoing process has established a Risk Management Committee in for managing the significant risks affecting the December 2003. The Risk Management Committee achievement of its business objectives throughout was renamed as Risk & Issues Management the period, which includes identifying, evaluating, Committee in 2011. The Committee is chaired by responding to and monitoring these risks. This the Executive Director/Vice President of the Group; process is regularly reviewed by the Board, which and represented by senior management members dedicates separate time for discussion of this from all functions of the Group. The Committee subject. The Group’s system of internal control is met 4 times in 2011. designed to manage, rather than eliminate the risk Kulim (Malaysia) Berhad (23370-V) 154 | annual report 2011
INTERNAL CONTROL STATEMENT (continued)
Apart from complying with the governance requirement, this Committee, which is cross-functional in nature, was formed to assist the Board of Directors in establishing and maintaining effective policies and guidelines to ensure proper management of risks to which the Group is exposed and to take appropriate and timely action to manage such risks.
In Kulim, the structure of the Group promotes the active participation of executive management in all of the operational and strategic decisions affecting their business units. This creates a strong culture of ownership and accountability. The risk management structure implemented in Kulim Group is as follows:
BOARD OF DIRECTORS
Audit Report AUDIT COMMITTEE
EXTERNAL INTERNAL AUDIT RISK & ISSUES MANAGEMENT COMMITTEE AUDITORS DEPARTMENT
CORPORATE OFFICE & INTRAPRENEUR VENTURES Audit Financial Risk Strategic Risk Business Risk Operational & Hazard Risk Compliance & Systems Risk
Advisory and monitoring role
Group risks are being managed on an will be promptly updated with special risk & Issue Management Committee within integrated basis and its evaluation is reports pertaining to any signifi cant ad-hoc the respective companies to assess and incorporated into the Group decision-making risk issues that may arise from time to time evaluate the risk management process of the process such as the strategic planning and during the year. respective companies on a periodic basis. project feasibility studies. The management of risks of the Group is facilitated by the use During its meetings, all risks facing each In essence, the management of risk is treated of risk management software. operation and department are discussed as an iterative process. The benefi ts arising in detail within the context of the business from the setting up of this committee creates A risk management report is to be tabled for objectives and strategy. Status of corrective awareness among employees of different Audit Committee and Board discussion once actions is tabled for comments by the relevant departments to take cognisance of risk every 6 months. The report identifi es principal staff. Various ideas and suggestions are tabled on a Group-wide basis. This enhances the risks affecting or likely to affect the Group and for improvement of areas of concern. Risk Ownership factor across the Group ensures the implementation of appropriate signifi cantly. and adequate systems to manage the risk. A separate risk management function also Notwithstanding the half-yearly reporting exists within the Group’s significant listed requirement, the Audit Committee and Board subsidiaries with the establishment of Risk annual report 2011 | 155 Kulim (Malaysia) Berhad (23370-V)
KEY INTERNAL CONTROL PROCESSES The key elements of the Group’s system of internal control are stated below:
Internal Committees There are internal committees established by EPA Management Sdn Bhd, the managing agent and also a wholly-owned subsidiary of Kulim (Malaysia) Berhad, which facilitate the operations and thus the management of risks of the Group, particularly for plantation operations and Intrapreneur businesses in Malaysia. These committees were established with formal terms of references clearly outlining their functions and duties and are appropriately empowered to ensure effective management and supervision of the business operations.
MAIN COMMITTEE STRUCTURE
BOARD OF AUDIT DIRECTORS COMMITTEE
MANAGEMENT COMMITTEE
MCM- BUDGET TENDER PLANTATION EXCO & ADDITIONAL OPERATION FUND
RISK & ISSUES APPRAISAL, PALM OIL MANAGEMENT KPI & BONUS MARKETING
Strategic Direction Direction Monitoring & Risk Control Performance Monitoring
Strategic & Business Direction Financial Operation & Business Risk Kulim (Malaysia) Berhad (23370-V) 156 | annual report 2011
INTERNAL CONTROL STATEMENT (continued)
The full list of the Internal Committees are as follow:
NAME OF COMMITTEE PRIMARY FUNCTION
Management Committee To review and evaluate the performance progress including the key policy and strategy implementations of the various divisions, subsidiaries and operating units of the Group. Where authorised, to formulate and approve matters relating to Group policy, objectives and business strategy and projects, and to evaluate and recommend for Board’s approval.
Executive Committee (“EXCO”) To coordinate departmental roles and administrative matters in relation to the various divisional operations and review, recommend and seek approval of the management on any related proposals.
Management Committee – Budget, To recommend to the Management Committee the awarding of contracts for purchases and projects Tender and Additional Capital to suppliers/contractors in accordance with the Contract Administration Guidelines & Procedures & Revenue Expenditure (“MCM- of the Company. Budget, Tender & Additional Fund”) To review budgets and all requests pertaining to capital and revenue spending and to recommend them for the ratifi cation of the Management Committee.
Risk & Issues Management To conduct risk identifi cation, evaluation and review of risk treatment process on a periodic basis to Committee ensure the Group’s risk management effectiveness. Further details on the Committee are set out on pages 153 to 154.
Plantation Operation CommitteeTo ensure that estates and mills owned by the Group are managed in accordance with requirements and at the best possible standards.
Palm Oil Marketing Committee To review and decide on the appropriate selling arrangement, quantity and prices of the Group palm products.
Board of Survey To review all requests pertaining to write-off/back of fi xed assets, debtors, stocks and creditors and recommend them for the ratifi cation of the Management Committee.
Sustainability and Quality Council To oversee and monitor the development, implementation, maintenance, compliance and effectiveness of all matters relevant to sustainability and quality movement of the Group as well as ensuring compliance with the Roundtable on Sustainable Palm Oil (“RSPO”) principles and criteria.
Appraisal, KPI and Bonus To deliberate performance, KPIs, behavioural competencies and recommend appropriate increments, Committee promotions and merits for all executives and corporate offi ce staff.
Training Committee To formulate training plan in meeting the objective of enhancing knowledge, skill and competencies of Kulim’s employees.
Plantation Budget Review To ensure the Plantation Operation budget is prepared to achieve the objective of maximising the long term profi tability of oil palm plantation, and at the same time, maintaining its sustainability.
OSH Committee To foster cooperation and consultation between management and workers in identifying, evaluating and controlling hazards at workplaces. annual report 2011 | 157 Kulim (Malaysia) Berhad (23370-V)
Internal Committees for Intrapreneur Ventures The Company has also established internal committees which act as the strategic direction monitoring agent and risk control to ensure the effective management and supervision of the IVs.
NAME OF COMMITTEE PRIMARY FUNCTION
IV Monitoring & Executive To monitor progress and development of all the IV companies as well as strengthening the business Committee (“IV EXCO”) and management capabilities. Providing necessary business guidance and referral.
To evaluate viability of projects, proposals, funding, CAPEX or capital adequacy of the IV companies.
Credit Control Committee To appraise the fi nancial health, performance and compliance to FRS, Income Tax Act and internal controls by the IVs.
Project Risk Evaluation Committee To ensure that IVs/projects of the Group are being run, coordinated and managed at the best possible standards to meet the Group’s requirements and to ensure the Group risk management effectiveness.
Audit Review Committee To monitor the Internal Control System and recommend improvement of the Internal Control System and practices to achieve the company’s objectives.
To ensure that the company is in compliance with laws and regulations and the Code of Conduct and Business Ethics and the company is being managed in line with the aspiration and the expectation of Kulim.
Agreement Committee To ensure that material agreements are forwarded for Committee discussion and/or approval. This is to ensure and safeguard the company’s interest.
In addition, there are also internal committees set up at the level of respective signifi cant subsidiaries to assist the respective subsidiaries’ Board of Directors in discharging their duties.
Organisational Structure The Group’s Internal Audit has maintained External Auditors a quality assurance and improvement The Board has established a formal The External Auditors issue Management programme and continuously monitors organisational structure for the Group with Letter highlighting issues and weaknesses, its overall effectiveness. The assessment delineated lines of authority, responsibility which came to their attention during the of the programme conducted via a self- and accountability. It has put in place suitably conduct of their normal audit procedures. assessment with independent validation by qualified and experienced management The Group’s Internal Audit subsequently a qualified, independent external reviewer personnel to head the Group’s diverse performs follow-up reviews to determine the demonstrates that the internal audit activities operating units into delivering results and extent to which the recommendations have are in conformance with the International their performance are measured against the been implemented. Standards for the Professional Practice of Key Performance Indicators that are approved Internal Auditing. by the Board. The External Auditors are appointed by the Board to review this Statement on Internal The Group’s listed subsidiaries in Malaysia Control and to report thereon. Internal Audit also have separate Internal Audit functions within their organisations which carry out The Board recognises that the internal audit This Statement on Internal Control has been the approved audit plan, risk evaluations, function is an integral component of the reviewed by the External Auditors for the and review the adequacy and effectiveness governance process. The Internal Audit inclusion in the annual report of Kulim of the internal control system. Similarly, the Department of EPA Management Sdn Bhd (Malaysia) Berhad for the year ended 31 Internal Auditors report directly to the Audit being the Managing Agent operates within December 2011. The External Auditors have Committee of these companies. the Audit Charter approved by the Audit reported to the Board that nothing has come Committee and performs internal audits in to their attention that causes them to believe diverse areas and environment in the review that the statement is inconsistent with their of any management, accounting, financial understanding of the process adopted by the and operational activities including internal Board in reviewing the adequacy and integrity control within the organisation. of the system of the internal controls. Kulim (Malaysia) Berhad (23370-V) 158 | annual report 2011
INTERNAL CONTROL STATEMENT (continued)
OTHER ELEMENTS Eligible bidders for contract works will have financial policies and procedures. These OF INTERNAL CONTROL to attend a contract interview with the assist and guide employees on purchasing Contract Interview Committee that is made and contract awards, preparing of fi nancial Apart from the committees and parties up of representatives of several departments statements, observing the various internal mentioned in the Corporate Governance at the divisional head-quarter including control policies and procedures, as well as Statement, the Audit Committee Report and the acquiring unit’s Manager. The Contract maintaining good management practices to mentioned above, the other elements of the Interview Committee will then forward the ensure cost effi ciencies, integrity of fi nancial Group’s Internal Controls are as follows: recommendations to the Management records and to safeguard the Group’s assets. Committee - Budget, Tender and Additional The Board believes that all the control Financial Authority Limit Capital & Revenue Expenditure for further measures will significantly enhance the internal control of the Group. The Financial Authority Limit defi nes revenue review and approval. and capital expenditure spending limits for The major Policy and Procedure Manuals each level of management within the Group. Plantation Operational Control These limits cover authority for cheque include: Through Plantation Operation Committee signatories, major capital and revenue Meetings, which are held once every 2 1. Agricultural Manual expenditure spending limits, works contract months, the progress of Group’s estates procedures and approvals and mechanism and mills are monitored. During the 2. Financial Procedure for budget approvals. meetings, reports and matters including monthly management reports, agronomists’ 3. Executive and Staff Scheme of Service Budget Approval reports, planting advisors’ reports, internal Budgets are an important control mechanism audit reports and manpower requirement 4. Standard Operation Procedure used by the Group to ensure an efficient assessments are tabled for discussion. Any allocation of Group resources and that the major issues will be highlighted for corrective 5. RSPO-MY NIWG 5 operational managers are suffi ciently guided actions to be taken. in making business decisions. Budgets are 6. Risk Framework generated annually at each subsidiary and The executives from the management offi ce operating unit. visit the Groups’ estates/mills regularly. 7. Internal Audit Manual Discussion is also frequently done via phone, For the plantation units, budgets will be fax and e-mail. Regional Head and Regional Forward Sales Policy reviewed by the Regional Head followed by Controllers, planting advisors and agronomists The Group has in place a forward sales their presentation to a Plantation Budget separately visit the operating units. A detailed policy for its palm oil and biodiesel products Review Committee for further deliberation. report on the state of affairs of the units is which has been approved by the Board. For produced after each visit. Security teams visit Malaysian palm oil products, the Group adopts Signifi cant subsidiaries will have their budgets the operating units on unscheduled basis to the maximum of 6-month forward policy and reviewed by their own budget committee. review the integrity of the security system. the maximum of 90% of the Group’s own All budgets will then be presented for The visits also cover physical security on fruits, whereas Malaysian biodiesel products deliberation at the Management Committee inventories, post harvest crops and fi nished are allowed to be sold forward up to the products security up to point of delivery. - Budget, Tender and Additional Capital & maximum of 12 months ahead. Revenue Expenditure, and subsequently IVs Operational Control will be tabled to MCM for approval and Regulatory Compliance endorsement. Finally the budgets will be Through the internal committee meeting, The Group adheres strictly to health, safety presented to the Board of Directors for fi nal the operational and fi nancial performances and environmental regulations and is subject review and approval. as well as progress of projects undertaken by the respective IVs are monitored. The to regular inspections by the relevant government authorities. Procurement reports on the fi nancial performance of the IVs are also submitted on monthly basis to A centralised and coordinated procurement the Group. Any major issue highlighted will For the Group’s Plantations division in Malaysia, function is established at each of the Group’s be tabled to the Management Committee the Sustainability and Quality Department at key business divisions which enable the Meeting. its management agent level is responsible Group to leverage on economies of scale for ensuring that the plantation operations and ensures adherence to authority limits, Operating and Procedural Manuals are conducted within the constraints of policies and procedures. Major contract and The Group has reference manuals covering the applicable laws, regulations and quality supply works of both capital and revenue agricultural practices, purchasing and contract standards. nature exceeding the threshold defined in procedures, fi nancial operating system and the relevant contract procedure are required to be tendered out. annual report 2011 | 159 Kulim (Malaysia) Berhad (23370-V)
Fraud Policy • site follow-up visits and inspections are CONCLUSION conducted on a periodic basis to review This policy was established to facilitate the The Board is of the view that the system of the status of compliance, weaknesses development of controls which will aid in the internal controls instituted throughout the and gaps in the implementations of detection and prevention of fraud against Group is sound and effective and provides various programmes, which is also in Kulim. The policy details responsibility, a level of confidence on which the Board line with the requirement of Principle 8 reporting and disclosure of fraud occurrences, relies for assurance. In the year under review, of RSPO on Continuous Improvement; and investigations relating to fraud. The there is no significant control failure or policy applies to any fraud, or suspected weakness that would result in any material • Key Performance Indicators (“KPIs”) fraud, involving employees as well as vendors, losses, contingencies or uncertainties that affecting key aspects of the certifi cation customers and partners who have a business would require separate disclosure in the requirements are developed to relationship with the Group. The Group has Annual Report. The Board will ensure that complement the economic indicators, also established a Grievance Policy and the review of the internal control system which are subject to regular monitoring Procedure as well as Women OnWards so as of the Group is carried out continuously to on their achievement progress; to allow an employee or employees to bring ensure ongoing adequacy and effectiveness to the attention of management of Kulim any of the system of internal controls and risk • RSPO trainings and briefings are dissatisfaction or feeling of injustice which management practices to meet the changing conducted regularly to ensure changes may exist in respect of the workplace. The and challenging operating environment. and updates on the RSPO requirement management will attempt to resolve the are communicated to all affected grievance in a manner, which is acceptable to The Board is therefore pleased to disclose that employees; the employee(s) concerned and the Group. the state of internal controls of the Group is adequate, appropriate and effective and in • operating in accordance with the Code of Ethics line with the Malaysian Code of Corporate requirements of laws and regulations Governance and the Statement of Internal This code of ethics defines the standards in the areas of safety and health, Kulim Control – Guidance. of conduct that are expected of employees regularly collaborates with suppliers to help them make the right decision in and contractors towards ensuring both the course of performing their jobs. All parties’ responsibilities in complying employees are required to adhere to the with the relevant legislations as well Group’s code of ethics and to submit the as engages third party OSH auditing Ethics Declaration form annually. Employees expertise to conduct independent are also encouraged to engage in an open verifi cation on the Group’s compliance dialogue with the senior management status; through the Group’s annual employees’ gathering; Pedoman. • proper documentations and reference systems are established such as the Maintaining Compliance to the Kulim Sustainability Handbook that sets Roundtable on Sustainable Palm Oil out all the relevant policies to guide (“RSPO”) Certifi cation Requirements employees. All system’s documentations Sustainability is a core value to the Group. are monitored and controlled through Kulim has established its sustainability the Document Annual Review and all credentials by attaining RSPO certification. changes affecting the documents are Safeguarding this reputation is critical to traced through the Document Change the organisation and the Group has put in Note System; and place the control measures in the form of appropriate policies, monitoring systems • on the social aspects, internal social and procedures so as to minimise, if not impact assessment guided by the prevent the risks of non-compliance to the SA8000 Standard are conducted in all certifi cation stringent requirements. Among Operating Units and affecting various the key measures are: levels of stakeholders to identify shortcomings, which are monitored through the Social Register. Kulim (Malaysia) Berhad (23370-V) 160 | annual report 2011 AUDIT COMMITTEE REPORT
COMPOSITION AND ATTENDANCE For the fi nancial year ended 31 December 2011, the Audit Committee comprised of three Directors, all of whom are also members of the Board of Kulim (Malaysia) Berhad.
The composition of the Audit Committee was as follows:
1. TAN SRI DATO’ SERI ARSHAD AYUB Chairman / Independent Non-Executive Director
2. KUA HWEE SIM Member / Independent Non-Executive Director
3. DR. RADZUAN A. RAHMAN Member / Independent Non-Executive Director
The attendance record of the members of the Audit Committee during the fi nancial year 2011 was as follows:
Director 15.2.2011 23.5.2011 22.8.2011 17.11.2011 Tan Sri Dato’ Seri Arshad Ayub ✔ ✔ ✔ ✔ Kua Hwee Sim ✔ ✔ ✔ ✔ Dr. Radzuan A. Rahman ✔ ✔ ✔ ✔ annual report 2011 | 161 Kulim (Malaysia) Berhad (23370-V)
TERMS OF REFERENCE • he must be a member of 6. To be able to engage independent Primary Purpose one of the associations of professional advisors or other advisors accountants specifi ed in Part and to secure attendance of outsiders The primary purposes of the Audit Committee II of the 1st Schedule in the with relevant experience and expertise are: Accountants Act, 1967; or if it considers this necessary. 1. To ensure openness, integrity and accountability in the Group’s activities • fulfi ls such other requirement Functions and Duties so as to safeguard the rights and as prescribed or approved The Committee shall carry out the following interests of the shareholders; by the Exchange. responsibilities:
2. To provide assistance to the Board in 4. The Committee Members shall Financial Statements fulfilling its fiduciary responsibilities collectively have: relating to corporate accounting and 1. Review and recommend acceptance or reporting practices; otherwise of major accounting policies, i. knowledge of the industries in principles and practices. 3. To improve the Group’s business which the Group operates; efficiency, the quality of accounting 2. Review the Group’s quarterly results and audit function and strengthening ii. the ability to read and understand and annual financial statements of of public’s confidence in the Group’s fundamental fi nancial statements, reported results; the Company and the Group before including a company’s balance submission to the Board. The review sheet, income statement of 4. To maintain a direct line of should focus primarily on: communication between the Board and cash flow and key performance the External and Internal Auditors; indicators; and i. any changes in or implementation of major accounting policy 5. To enhance the independence of the iii. the ability to understand key changes external and internal audit functions; business and financial risks and and related controls and control ii. major judgmental areas, signifi cant processes. and unusual events 6. To create a climate of discipline and control, this will reduce the opportunity for fraud. Authority iii. significant adjustments resulting from audit The Committee for the performance of Membership its duties shall in accordance to the same iv. the going concern assumptions 1. The members of the Committee shall procedures adopted by the Board and at the be appointed by the Board of Directors cost of the Group: of Kulim and shall consist of not less v. compliance with accounting than 3 members, all of whom must be standards 1. Have the authority to investigate any non-executive directors, with a majority of them being independent directors. If activity within its Terms of Reference; vi. compliance with stock exchange membership for any reason falls below and legal requirements 3 members, the Board of Directors shall, 2. Have the resources which are required within 3 months of that event, appoint to perform its duties; 3. Review with management and the such number of new members as may external auditors, the results of the audit, be required to fulfil the minimum 3. Have full and unrestricted access to any including any diffi culties encountered. requirement. employee and information pertaining to the Group. All documents of the 2. No alternate directors shall be appointed 4. Review, with the Group’s Counsel, to the Committee. Group shall be made accessible to the any legal matter that could have a Committee; signifi cant impact on the organisation’s 3. At least 1 member of the Audit fi nancial statements. Committee: 4. Have direct communication channels with the External Auditors and person(s) Internal Control i. must be a member of the carrying out the internal audit function 1. Assess the quality and effectiveness Malaysian Institute of Accountants or activity for the Group; (“MIA”); or of the systems of internal control and the effi ciency of the Group’s operations, ii. if he is not a member of MIA, 5. Have the authority to direct the Internal particularly those relating to areas of he must have at least 3 years of Audit Department (both corporate, signifi cant risks. To evaluate the process working experience and: subsidiaries, associates, joint ventures, the Group has in place a system for where applicable) in its activities, assessing and continuously improving • he must have passed the including approval of appointments of internal controls. examinations specified in senior executives and budget in these Part I of the 1st Schedule in functions; and the Accountants Act, 1967; or Kulim (Malaysia) Berhad (23370-V) 162 | annual report 2011
AUDIT COMMITTEE REPORT (continued)
2. Assess the internal processes for External Audit 3. Perform other duties as directed by the determining and managing key risks Board. 1. Review External Audit plans and scope other than those that are dealt with by of work before the audit commences. other specifi c Board committees. Meetings
2. Discuss problems and reservations 1. Meetings of the Committee shall be 3. Review the scope of Internal and External held not less than 4 times during the Auditors’ review of internal control over arising out of external audits, including assistance given by the employees and fi nancial year of the Company. the Group. any matters the auditors may wish to discuss, in the absence of Management 2. Upon the request of any member of the 4. Review Internal Audit reports or Executive Directors where necessary. Committee, the Head of Internal Audit (including those of the Group) and the or the External Auditor, the Chairman of management’s response and ensure that 3. Nominate the External Auditors together the Committee shall convene a special appropriate action is taken in respect with such other functions as may be meeting of the Committee to consider of these reports and the Committee’s agreed to by the Committee and the any matter brought up by them. resolutions. Where actions are not Board, and recommend for approval of taken within adequate time frame by the Board the external audit fees, and 3. The quorum for the meeting of the management, the Committee will report consider any questions of resignation Committee shall be 2 members and to the Board for its decision. or dismissal, experience, resources and the majority of the members present capability. shall be independent directors. In the 5. Review External Auditors reports and the absence of the Chairman, the members management’s response and ensure that Compliance present shall elect a chairman for the appropriate action is taken in respect 1. Review the effectiveness of the system meeting from amongst the members of these reports and the Committee’s for monitoring compliance with laws present. resolutions. and regulations and the results of the management’s investigation and follow- 4. The meetings of the Committee shall be Internal Audit up of any instances of non-compliance. governed by the provisions contained in the Memorandum and Articles 1. Approve the Corporate Audit Charter and of Association of the Company for charters of the Internal Audit functions 2. Review the fi ndings of any examinations regulating the meetings and proceedings in the Group and ensure that the by regulatory authorities. of Directors unless otherwise provided Internal Audit functions are adequately 3. Obtain regular updates from the in this Terms of Reference. resourced and have appropriate management and Group’s legal counsel standing in the Group. This includes a regarding compliance matters. 5. The Non-Executive Directors of the review of the organisational structure, Board who are not members of the resource budgets and qualifi cations of 4. Review any related party transactions Committee may also attend the meeting the internal audit functions. and confl ict of interest situation that may of the Committee, but they shall not arise within the Company or the Group have any voting rights. 2. Review the adequacy of the Internal including any transaction, procedure or Audit plans and the scope of audits and course of conduct that raises questions 6. The meetings of the Committee shall that the Internal Audit Department has of the management integrity. normally be attended by the Head of the necessary authority, competency Internal Audit and the Management of and resources to carry out its work. 5. Where the Committee is of the view that the Company shall be represented by a matter reported by it to the Board has the Managing Director and the Head of 3. Approve the appointment of Head of not been satisfactorily resolved, resulting Finance, or their nominated person(s), Internal Audit. in a breach to the Main Market Listing at the invitation of the Committee Requirements, the Committee must and shall excuse themselves from 4. Review appraisals or assessments promptly report such matters to the the meeting when so directed by the Bursa Malaysia. of members of the Internal Audit Committee. functions. Other Responsibilities 7. The Committee may request other 5. Inform itself of resignations of Internal 1. Review and reassess, with the assistance directors, members of management, Audit staff members and provide the of the management, the External Auditors counsels, internal auditors (including resigning staff member an opportunity and legal counsel, the adequacy of the subsidiaries) and external auditors, to submit his/her reasons for resigning. Terms of Reference of the Committee at applicable to participate in the least annually. Committee meetings, as necessary 6. Direct any special investigations to be and when so invited, to carry out the carried out by the Internal Audit. 2. Confi rm annually that all responsibilities Committee’s responsibilities. outlined in the Terms of Reference have been carried out. annual report 2011 | 163 Kulim (Malaysia) Berhad (23370-V)
8. The Committee shall meet the External 1. Review and approval of the annual Internal Audit Function Auditors, the internal auditors or both, internal audit plan for the year The Group’s Internal Audit function is carried excluding the attendance of other 2011/2012; out by the Internal Audit Department (“IAD”) directors and employees, whenever and led by a Certifi ed Internal Auditor (“CIA”). deemed necessary. 2. Review of the External Auditors’ audit IAD is established separately at the Group observations, the audit report and Corporate Offi ce and its listed subsidiaries in 9. A Committee member shall excuse recommendations in respect of control Malaysia, QSR Brands Bhd and KFC Holdings himself/herself from the meeting weaknesses noted in the course of (Malaysia) Bhd. The IAD reports directly to the during discussions or deliberation their audit; of any matter which gives rise to an Audit Committee and is guided by its Internal Audit Charter. The IAD assists the Board in actual or perceived confl ict of interest 3. Review of the audited fi nancial statements situation for the member. Where this fulfi lling its fi duciary responsibilities over the for the fi nancial year ended 31 December cause insuffi cient directors to make up areas of financial, operational, information 2011 before recommending the same to a quorum, the Committee has the right systems, investigations, risk management and to appoint another director(s) which the Board of Directors for approval; governance process in accordance with the meets the membership criteria. approved Risk Based Annual Audit Plan. 4. Review of the Company’s compliance, 10. The Secretary of the Committee shall in particular the quarterly and year- On quarterly basis, the IAD provides the Audit be the Company Secretary or his/her end fi nancial statements with the Main Committee with independent and objective appointed nominee with the appropriate Market Listing Requirements of Bursa reports on the state of internal control, qualifi cations and experience. Malaysia and the applicable approved highlighting any areas for improvement accounting standard issued by the and updates on the extent to which the 11. The agenda for the Committee meeting Malaysian Accounting Standard Board; recommendations have been implemented. shall be the responsibility of the The management is responsible to ensure that Committee Chairman with input from 5. Review of the quarterly unaudited corrective actions on reported weaknesses as the Committee members. The Chairman recommended are taken within the required may also ask the management and fi nancial results announcements before recommending them for the Board of time frame to ensure that all potential others to participate in this process. weaknesses in system and risks under Directors’ approval; reviewed area are mitigated or remain within 12. The notice and agenda of each meeting manageable levels. shall be circulated at least 7 working 6. Review of the Internal Audit activities days before each meeting to the related to management and operations, Other IAD activities carried during the year Committee members and all those who capacity, internal audit framework and are summarised as below: are required to attend the meeting. of the analytical process and reporting Written materials including information procedures; requested by the Committee, from the 1. Conducted roadshows/workshops management, internal auditors and with the estates/mill management 7. Review of the audit reports presented by external auditors shall be received deliberating on audit related matters. together with the agenda for the the Internal Auditors and management’s meetings. responses thereto and reviewing 2. Worked together with the estates and management’s assurance that signifi cant mills in specifi c risk and control review 13. Reports of the Committee meeting shall fi nding are adequately addressed; through Control Self Assessment (“CSA”) be tabled at the meeting of the Board programmes. Directors of the Company. 8. Review of related party transactions entered into by the Group; 3. Participated in Corporate Social 14. The Committee, through its Chairman, Responsibility (“CSR”) programmes shall report to the Board after each 9. Review of the extent of the Group’s organised by management. meeting. compliance with the relevant provisions 4. Performed internal self-assessment on set out under the Malaysian Code on 15. The Chairman of the Committee shall conformance with the International Corporate Governance for the purpose be available to answer questions about Standards for the professional Practise of preparing the Corporate Governance the Committee’s work at the AGM of of Internal Auditor. the Company. Statement and Statement on Internal Control pursuant to the Main Market 5. Conducted special review based on Summary of Activities Listing Requirements; and requests from the Audit Committee During the period, the Audit Committee and/or management. carried out its duties and responsibilities in 10. Review of the risk management accordance with its terms of reference: development presented by Head of The total cost incurred for the internal audit Risk and System Management. function at the Group Corporate Offi ce level The main activities undertaken by the Audit for the financial year ended 31 December Committee were as follows: 2011 was approximately RM793,000. Kulim (Malaysia) Berhad (23370-V) 164 | annual report 2011 ADDITIONAL COMPLIANCE INFORMATION
The following information is provided in compliance with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”) for the fi nancial year ended 31 December 2011:
Utilisation of Proceeds from Corporate Non-Audit Fees Proposals During the fi nancial year under review, non-audit There was no corporate proposal specifically fees paid to the external auditors of the Group intended to raise funds undertaken during amounted to RM1,831,000 (please refer to page the financial period ended 31 December 2011 206 of the audited fi nancial statements). which has resulted in the receipt of proceeds for utilisation. Variation in Results There is no material variance between the results Share Buy-Backs for the financial year and the unaudited results The Company had, on 20 June 2005, obtained the previously announced by the Group. shareholders’ approval to purchase its own shares up to 10% of its issued and paid up share capital. Profi t Guarantee The Company did not issue any profit forecast During the fi nancial year, the Company has acquired or profit guarantee for the financial year ended 14,840,000 units of its own shares pursuant to 31 December 2011. the renewed mandate for the share buy-back as approved by the shareholders of the Company at Material Contracts the 36th AGM held on 23 June 2011. Other than those disclosed in the financial As at 31 December 2011, a total of 27,482,200 statements from page 257 to page 260, there ordinary shares were held as treasury shares. The was no material contract including contracts details of the buy-backs are set out in page 30. relating to any loans entered into by the Group and its subsidiaries involving Directors and major Options, Warrants or Convertible Securities shareholders’ interest. Exercised Revaluation Policy In 2011, a total of 156,174,319 free warrants were issued by the Company in conjunction with the The Group has not adopted a regular revaluation share split and bonus issue on 28 February 2011. policy on landed properties as disclosed in the The warrants have an exercise period of 5 years fi nancial statements on page 192. commencing 28 February 2011 and expiring on 27 February 2016. Recurrent Related Party Transactions of Revenue or Trading Nature As at 31 December 2011, 500 warrants have been At the AGM held on 23 June 2011, the Company exercised and converted into new ordinary shares. obtained a shareholders’ mandate to allow the Group to enter into recurrent related party The Company has not issued any other convertible transactions of revenue and/or trading nature from securities in respect of the financial year ended the even date up to the next forthcoming AGM. 31 December 2011. The list of significant recurrent related party American Depository Receipt (“ADR”) of transactions entered into by the Group during Global Depository Receipt (“GDR”) the financial year ended 31 December 2011 is The Company has not sponsored any ADR or described on page 165 of the Annual Report. GDR programme for the financial year ended 31 December 2011.
Sanctions and/or Penalties There were no sanctions and/or penalties imposed on the Company and its subsidiary companies, directors or management arising from any signifi cant breach of rules/guidelines/legislations by the relevant regulatory bodies during the fi nancial year. annual report 2011 | 165 Kulim (Malaysia) Berhad (23370-V) ADDITIONAL DISCLOSURE Pursuant to the Listing Requirements
RECURRENT RELATED PARTY TRANSACTIONS (“RRPT”) OF REVENUE AND/OR TRADING NATURE Pursuant to the Shareholders’ Mandate, the aggregate value of the recurrent transactions of revenue and/or trading nature conducted during the fi nancial year ended 31 December 2011 between the Company and/or its subsidiary companies with related parties are set out below:
Related Parties Involved with the Nature of Aggregate Company and/ Relationship Value of or Subsidiary Interested Director and/or with Kulim Transaction Companies Major Shareholder Group Type of Transaction (RM)
1. Johor Kamaruzzaman Abu Kassim Kulim is Purchasing and sales commission on palm 2,335,000 Corporation Ahamad Mohamad a 57.18% products (“JCorp”) Datin Paduka Siti Sa’diah Sh Bakir owned Rozan Mohd Sa’at subsidiary of Provision of data and document processing, 107,000 Zulkifli Ibrahim JCorp bulk mailing and related services Datuk Ahmad Zaki Zahid Management of car parks, rental payment 510,000 Wan Mohd Firdaus Wan Mohd Fuaad for car park facilities and related services Provision of insurance broking services on business, assets and properties of JCorp 382,000
2. Johor Foods Kamaruzzaman Abu Kassim JFSB is a Sale of FFB 23,570,000 Sdn Bhd (“JFSB”) Ahamad Mohamad wholly-owned Datin Paduka Siti Sa’diah Sh Bakir subsidiary of Purchasing and sales commission on palm 2,059,000 Rozan Mohd Sa’at JCorp products Zulkifl i Ibrahim Datuk Ahmad Zaki Zahid Wan Mohd Firdaus Wan Mohd Fuaad JCorp
3. Johor Land Kamaruzzaman Abu Kassim JLand is Purchase of FFB 4,777,000 Berhad (“JLand”) Ahamad Mohamad a 99.99% Datin Paduka Siti Sa’diah Sh Bakir owned Rozan Mohd Sa’at subsidiary of Zulkifl i Ibrahim JCorp Datuk Ahmad Zaki Zahid Wan Mohd Firdaus Wan Mohd Fuaad JCorp
4. Pro Corporate Kamaruzzaman Abu Kassim PCMS is a Secretarial and share registry services 1,266,000 Management Ahamad Mohamad wholly-owned Services Sdn Datin Paduka Siti Sa’diah Sh Bakir subsidiary of Bhd (“PCMS”) Rozan Mohd Sa’at JCorp Hotels Zulkifl i Ibrahim & Resorts Sdn Datuk Ahmad Zaki Zahid Bhd Wan Mohd Firdaus Wan Mohd Fuaad JCorp
5. Damansara Kamaruzzaman Abu Kassim DASB is a Rental commission 617,000 Assets Sdn Bhd Ahamad Mohamad wholly-owned (“DASB”) Datin Paduka Siti Sa’diah Sh Bakir subsidiary of Rozan Mohd Sa’at JCorp Zulkifl i Ibrahim Datuk Ahmad Zaki Zahid Wan Mohd Firdaus Wan Mohd Fuaad JCorp
SECTION 7: FINANCIAL STATEMENTS 168 DIRECTORS’ REPORT 173 STATEMENT BY DIRECTORS 174 STATUTORY DECLARATION 175 INDEPENDENT AUDITORS' REPORT 177 STATEMENTS OF COMPREHENSIVE INCOME 179 STATEMENTS OF FINANCIAL POSITION 181 STATEMENTS OF CHANGES IN EQUITY 184 STATEMENTS OF CASH FLOWS 186 NOTES TO THE FINANCIAL STATEMENTS 278 SUPPLEMENTARY INFORMATION Kulim (Malaysia) Berhad (23370-V) 168 | annual report 2011 DIRECTORS’ REPORT
The directors have pleasure in presenting their report together with the audited fi nancial statements of the Group and of the Company for the fi nancial year ended 31 December 2011.
PRINCIPAL ACTIVITIES The Company is principally engaged in oil palm plantation, investment holding and property investment in Malaysia whilst the principal activities of the subsidiaries are as stated in Note 16 to the fi nancial statements.
There have been no signifi cant changes in the nature of the principal activities during the fi nancial year.
RESULTS
Group Company RM’000 RM’000
Profi t net of tax 1,007,866 129,084
Profi t attributable to : Owners of the Company 565,013 129,084 Non-controlling interests 442,853 –-
1,007,866 129,084
There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements.
DIVIDEND The amounts of dividends paid by the Company since 31 December 2010 were as follows:
RM’000
In respect of the fi nancial year ended 31 December 2010 as reported and taken up in the directors’ report and fi nancial statements of that year:
An interim dividend of 7.50 sen per share, less tax at 25%, totalling approximately RM17,570,000 17,570 (5.62 sen net per share) in respect of the fi nancial year ended 31 December 2010, paid on 27 January 2011
A special dividend of 42.50 sen per share, less tax at 25%, totalling approximately RM99,560,000 99,560 (31.88 sen net per share) in respect of the fi nancial year ended 31 December 2010, paid on 27 January 2011
117,130
An interim dividend of 5 sen per share tax exempt (single tier), totalling approximately RM61,728,000 61,728 (5 sen net per share) in respect of the fi nancial year ended 31 December 2011, paid on 23 December 2011
Total dividends paid by the Company since 31 December 2010 178,858 annual report 2011 | 169 Kulim (Malaysia) Berhad (23370-V)
DIRECTORS The names of the directors of the Company in offi ce since the date of the last report and at the date of this report are:
Kamaruzzaman Abu Kassim Tan Sri Datuk Arshad Ayub Ahamad Mohamad Wong Seng Lee Datin Paduka Siti Sa’diah Sh Bakir Kua Hwee Sim Datuk Haron Siraj Dr Radzuan A. Rahman Rozan Mohd Sa’at Zulkifl i Ibrahim (Appointed on 1 July 2011) Datuk Ahmad Zaki Zahid (Appointed on 8 November 2011) Wan Mohd Firdaus Wan Mohd Fuaad (Appointed on 9 November 2011) Natasha Kamaluddin (Appointed on 9 November 2011) Leung Kok Keong (Appointed on 9 November 2011) Jamaludin Md Ali (Resigned on 1 July 2011)
DIRECTORS’ BENEFITS Neither at the end of the fi nancial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefi ts by means of the acquisition of shares in or debentures of the Company or any other body corporate.
Since the end of the previous fi nancial year, no director has received or become entitled to receive a benefi t (other than benefi ts included in the aggregate amount of emoluments received or due and receivable by the directors or the fi xed salary of a full-time employee of the Company as shown in Note 9 to the fi nancial statements) by reason of a contract made by the Company or a related corporation with any director or with a fi rm of which he is a member, or with a company in which he has a substantial fi nancial interest, except as disclosed in Note 30 to the fi nancial statements.
DIRECTORS’ INTERESTS According to the register of directors’ shareholdings, the interests of directors in offi ce at the end of the fi nancial year in shares in the Company and its related corporations during the fi nancial year were as follows:
Number of ordinary shares of RM0.25 each As at Share Bonus As at 1.1.2011 split* issue Acquired Disposed 31.12.2011 Company Direct interest Tan Sri Datuk Arshad Ayub 410,950 410,950 821,900 - - 1,643,800 Ahamad Mohamad 229,600 229,600 459,200 45,000 - 963,400 Wong Seng Lee 112,800 112,800 225,600 - (200,000) 251,200 Datin Paduka Siti Sa’diah Sh Bakir 69,500 69,500 139,000 - - 278,000 Rozan Mohd Sa’at 200 200 400 8,000 - 8,800 Deemed interest Tan Sri Datuk Arshad Ayub 1,200,200 1,200,200 2,400,400 - - 4,800,800
* During the fi nancial year, the Company undertook a share split involving the subdivision of every one (1) existing ordinary share of RM0.50 each into two (2) ordinary shares of RM0.25 each. Further details are disclosed in Note 26 to the fi nancial statements. Kulim (Malaysia) Berhad (23370-V) 170 | annual report 2011
DIRECTORS’ REPORT (continued)
DIRECTORS’ INTERESTS (continued)
Number of ordinary shares of RM0.50 each 1.1.2011 Acquired Disposed 31.12.2011 In subsidiaries KFC Holdings (Malaysia) Bhd. Ahamad Mohamad 172,000 – (172,000) – Tan Sri Datuk Arshad Ayub 200,000 – – 200,000
Sindora Berhad
Direct interest Tan Sri Datuk Arshad Ayub 313,824 – (313,824) – Ahamad Mohamad 99,928 – (99,928) – Datin Paduka Siti Sa’diah Sh Bakir 99,500 – (99,500) – Rozan Mohd Sa’at 15,092 – (15,092) –
Deemed interest Tan Sri Datuk Arshad Ayub 1,016,666 – (1,016,666) – Ahamad Mohamad # 31,516 – (31,516) – Datin Paduka Siti Sa’diah Sh Bakir + 1,067 – (1,067) –
In related companies Damansara Realty Berhad
Direct interest Ahamad Mohamad 9,600 – – 9,600 Datin Paduka Siti Sa’diah Sh Bakir 320 – – 320
Deemed interest Ahamad Mohamad 3,200 – – 3,200
Number of ordinary shares of RM1.00 each 1.1.2011 Acquired Disposed 31.12.2011 In subsidiaries QSR Brands Bhd.
Direct interest Tan Sri Datuk Arshad Ayub 150,000 – – 150,000 Datuk Haron Siraj 4,000 – (4,000) – Datin Paduka Siti Sa’diah Sh Bakir 1,000 – – 1,000
Deemed interest Tan Sri Datuk Arshad Ayub 100,000 – – 100,000 annual report 2011 | 171 Kulim (Malaysia) Berhad (23370-V)
DIRECTORS’ INTERESTS (continued) # In accordance with Section 134(12)(c) of the Companies Act, 1965, the interests and deemed interests of the spouse of Ahamad Mohamad in the shares of the subsidiaries (other than wholly-owned subsidiaries) shall be treated as the interests of Ahamad Mohamad also.
+ In accordance with Section 134(12)(c) of the Companies Act, 1965, the interests and deemed interests of a child of Datin Paduka Siti Sa’diah Sh Bakir in the shares of the subsidiaries (other than wholly-owned subsidiaries) shall be treated as the interests of Datin Paduka Siti Sa’diah Sh Bakir also.
None of the other directors in offi ce at the end of the fi nancial year had any interest in shares in the Company or its related corporations during the fi nancial year.
ISSUE OF SHARES During the fi nancial year, the Company increased its authorised share capital from RM200,000,000 comprising 400,000,000 shares of RM0.50 each to RM500,000,000 comprising 2,000,000,000 shares of RM0.25 each;
During the fi nancial year, the Company also increased its issued and paid-up ordinary share capital from RM159,336,000 to RM315,509,000 by way of:
(i) Share split involving the subdivision of every one (1) existing ordinary share of RM0.50 each held in the Company into two (2) ordinary shares of RM0.25 each (“sub-divided share(s)”) (Share Split); and
(ii) Bonus issue of new sub-divided shares on the basis of one (1) bonus share for every one (1) sub-divided share held after the share split (“Bonus Issue”).
The Share Split and Bonus Issue were completed on 28 February 2011.
The above new shares issued during the fi nancial year ranked pari passu in all respects with the existing ordinary shares of the Company.
ISSUE OF FREE WARRANTS During the fi nancial year, the Company issued 156,174,319 free warrants on the basis of one (1) warrant for every eight (8) sub-divided shares held after the Share Split and Bonus Issue. Each warrant entitles the holder to subscribe for one (1) new sub-divided share at the exercise price of RM3.85 per share at any time during the exercise period. The warrants have an exercise period of fi ve (5) years commencing 28 February 2011 and expiring on 27 February 2016.
TREASURY SHARES During the fi nancial year, the Company repurchased 14,840,000 of its issued ordinary shares from the open market at an average price of RM3.40 per share. The total consideration paid for the repurchase including transaction costs was RM50,496,000. The shares repurchased are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.
At 31 December 2011, the Company held as treasury shares a total of 27,482,200 of its 1,262,037,000 issued ordinary shares. Such treasury shares are held at a carrying amount of RM96,186,000 and further relevant details are disclosed in Note 27(h) to the fi nancial statements. Kulim (Malaysia) Berhad (23370-V) 172 | annual report 2011
DIRECTORS’ REPORT (continued)
OTHER STATUTORY INFORMATION (a) Before the statements of comprehensive income and statements of fi nancial position of the Group and of the Company were made out, the directors took reasonable steps:
(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfi ed themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and
(ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.
(b) At the date of this report, the directors are not aware of any circumstances which would render:
(i) the amount written off for bad debts or the amount of allowance for doubtful debts in the fi nancial statements of the Group and of the Company inadequate to any substantial extent; and
(ii) the values attributed to the current assets in the fi nancial statements of the Group and of the Company misleading.
(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.
(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or fi nancial statements of the Group and of the Company which would render any amount stated in the fi nancial statements misleading.
(e) As at the date of this report, there does not exist:
(i) any charge on the assets of the Group or of the Company which has arisen since the end of the fi nancial year which secures the liabilities of any other person; or
(ii) any contingent liability of the Group or of the Company which has arisen since the end of the fi nancial year.
(f) In the opinion of the directors:
(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the fi nancial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and
(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the fi nancial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the fi nancial year in which this report is made.
SIGNIFICANT EVENTS Details of signifi cant events are disclosed in Note 33 to the fi nancial statements.
SUBSEQUENT EVENT Details of the subsequent event is disclosed in Note 34 to the fi nancial statements.
AUDITORS The auditors, Ernst & Young, have expressed their willingness to continue in offi ce.
Signed on behalf of the Board in accordance with a resolution of the directors dated 30 March 2012
Kamaruzzaman Abu Kassim Ahamad Mohamad annual report 2011 | 173 Kulim (Malaysia) Berhad (23370-V) STATEMENT BY DIRECTORS PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965
We, Kamaruzzaman Abu Kassim and Ahamad Mohamad, being two of the directors of Kulim (Malaysia) Berhad, do hereby state that, in the opinion of the directors, the accompanying fi nancial statements set out on pages 177 to 277 are drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the fi nancial position of the Group and of the Company as at 31 December 2011 and of their fi nancial performance and cash fl ows for the year then ended.
The information set out in Note 40 to the fi nancial statements have been prepared in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profi ts or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.
Signed on behalf of the Board in accordance with a resolution of the directors dated 30 March 2012
Kamaruzzaman Abu Kassim Ahamad Mohamad Kulim (Malaysia) Berhad (23370-V) 174 | annual report 2011 STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965
I, Azli bin Mohamed, being the offi cer primarily responsible for the fi nancial management of Kulim (Malaysia) Berhad, do solemnly and sincerely declare that the accompanying fi nancial statements set out on pages 177 to 278 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.
Subscribed and solemnly declared by the ) abovenamed Azli bin Mohamed at Johor ) Bahru in the State of Johor on 30 March 2012 ) ) ) Azli bin Mohamed
Before me, annual report 2011 | 175 Kulim (Malaysia) Berhad (23370-V) INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF KULIM (MALAYSIA) BERHAD (INCORPORATED IN MALAYSIA)
REPORT ON THE FINANCIAL STATEMENTS We have audited the fi nancial statements of Kulim (Malaysia) Berhad, which comprise the statements of fi nancial position as at 31 December 2011 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash fl ows of the Group and of the Company for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes, as set out on pages 177 to 277.
Directors’ responsibility for the fi nancial statements The directors of the Company are responsible for the preparation of fi nancial statements that give a true and fair view in accordance with Financial Reporting Standards and the Companies Act 1965 in Malaysia, and for such internal control as the directors determine are necessary to enable the preparation of fi nancial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ responsibility Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of fi nancial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the fi nancial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the fi nancial position of the Group and of the Company as at 31 December 2011 and of their fi nancial performance and cash fl ows for the year then ended.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:
(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
(b) We have considered the fi nancial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 16 to the fi nancial statements, being fi nancial statements that have been included in the consolidated fi nancial statements.
(c) We are satisfi ed that the fi nancial statements of the subsidiaries that have been consolidated with the fi nancial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated fi nancial statements and we have received satisfactory information and explanations required by us for those purposes.
(d) The auditors’ reports on the fi nancial statements of the subsidiaries were not subject to any qualifi cation material to the consolidated fi nancial statements and did not include any comment required to be made under Section 174(3) of the Act. Kulim (Malaysia) Berhad (23370-V) 176 | annual report 2011
INDEPENDENT AUDITORS’ REPORT (continued) TO THE MEMBERS OF KULIM (MALAYSIA) BERHAD (INCORPORATED IN MALAYSIA)
OTHER MATTERS The supplementary information set out in Note 40 to the fi nancial statements on page 278 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1 Determination of Realised and Unrealised Profi ts or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.
This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
Ernst & Young Abraham Verghese A/L T.V. Abraham AF 0039 1664/10/12(J) Chartered Accountants Chartered Accountant
Johor Bahru, Malaysia Date: 30 March 2012 annual report 2011 | 177 Kulim (Malaysia) Berhad (23370-V) STATEMENTS OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
Group Company Note 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Continuing operations Revenue 4 7,041,771 5,488,939 262,765 186,742 Cost of sales (3,491,726) (2,730,194) (89,916) (76,310)
Gross profi t 5 3,550,045 2,758,745 172,849 110,432 Other income 308,699 178,957 78,736 43,623 Distribution expenses (1,738,085) (1,537,502) (2,358) (865) Administrative expenses (632,185) (484,046) (26,854) (21,122) Other expenses (51,786) (65,362) (58,710) (115,255)
Profi t from operating activities 1,436,688 850,792 163,663 16,813 Interest income 6 12,591 6,370 8,379 6,414 Finance costs 7 (91,475) (81,440) (20,062) (30,945) Share of net results in associates 6,992 2,174 – –
Profi t/(Loss) before tax 8 1,364,796 777,896 151,980 (7,718) Income tax expense 10 (356,930) (233,681) (22,896) (21,153)
Profi t from continuing operations 1,007,866 544,215 129,084 (28,871)
Discontinued operation Loss from discontinued operation, net of tax 11 – (1,806) – – Gain on disposal of discontinued operation 11 – 153,417 – 240,149
Profi t for the year 1,007,866 695,826 129,084 211,278
Other comprehensive income, net of tax Foreign currency translation differences for foreign operations 486,229 3,052 – – Transfer (from)/to: – reserve (22,930) (675) – – – retained profi ts 22,930 675 – – Cash fl ow hedges 120,801 (98,372) – – Fair value changes on available-for-sale fi nancial assets (2,213) 56,294 (3,025) 54,526
Other comprehensive income for the year, net of tax 604,817 (39,026) (3,025) 54,526 Kulim (Malaysia) Berhad (23370-V) 178 | annual report 2011
STATEMENTS OF COMPREHENSIVE INCOME (continued) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
Group Company Note 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Total comprehensive income for the year 1,612,683 656,800 126,059 265,804
Profi t attributable to: Owners of the Company 565,013 385,592 129,084 211,278 Non-controlling interests 442,853 310,234 – –
Profi t for the year 1,007,866 695,826 129,084 211,278
Total comprehensive income attributable to: Owners of the Company 871,728 340,522 126,059 265,804 Non-controlling interests 740,955 316,278 – –
Total comprehensive income for the year 1,612,683 656,800 126,059 265,804
Basic earnings per ordinary share (sen): – from continuing operations 12 45.90 18.73 – from discontinued operations – 12.13
45.90 30.86
Diluted earnings per ordinary share (sen): – from continuing operations 12 45.90 18.73 – from discontinued operations – 12.13
45.90 30.86
The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements. annual report 2011 | 179 Kulim (Malaysia) Berhad (23370-V) STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2011
Group Company Note 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Assets Non-current assets Property, plant and equipment 13 7,667,603 5,876,948 1,072,403 1,072,039 Investment properties 14 98,296 97,863 94,602 94,503 Intangible assets 15 1,097,799 1,046,895 – – Investments in subsidiaries 16 – – 1,316,634 1,220,685 Investments in associates 17 24,334 56,610 – – Other investments 18 52,479 214,061 5,778 175,312 Deferred tax assets 19 – 917 – – Deferred farm expenditure 9,501 7,890 4,208 3,613
8,950,012 7,301,184 2,493,625 2,566,152
Current assets Other investments 18 97,369 145,517 95,204 139,613 Inventories 20 934,732 700,690 1,892 1,905 Trade and other receivables 21 808,357 590,645 308,550 269,795 Prepayments 65,532 16,885 234 34 Current tax assets 6,502 25,125 3,822 3,420 Cash and bank balances 22 644,702 452,146 79,664 74,826
2,557,194 1,931,008 489,366 489,593 Assets of disposal group classifi ed as held for sale 11 13,032 13,500 – –
2,570,226 1,944,508 489,366 489,593
Total assets 11,520,238 9,245,692 2,982,991 3,055,745
Equity and liabilities Current liabilities Trade and other payables 25 797,120 677,291 207,676 76,988 Derivative fi nancial instruments 24 2,104 149,476 – – Current tax liabilities 135,946 112,089 – – Loans and borrowings 23 571,843 995,410 – 100,000 Employee benefi ts 29 301 644 – – Dividend payable – 117,130 – 117,130
1,507,314 2,052,040 207,676 294,118
Net current assets/(liabilities) 1,062,912 (107,532) 281,690 195,475
Kulim (Malaysia) Berhad (23370-V) 180 | annual report 2011
STATEMENTS OF FINANCIAL POSITION (continued) AS AT 31 DECEMBER 2011
Group Company Note 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Non-current liabilities Loans and borrowings 23 2,049,101 931,020 273,171 273,171 Derivative fi nancial instruments 24 – 25,201 – – Deferred tax liabilities 19 1,040,424 691,776 83,655 83,803 Employee benefi ts 29 2,700 2,913 – –
3,092,225 1,650,910 356,826 356,974
Total liabilities 4,599,539 3,702,950 564,502 651,092
Net assets 6,920,699 5,542,742 2,418,489 2,404,653
Equity attributable to owners of the Company Share capital 26 315,509 159,336 315,509 159,336 Reserves 27 1,540,087 1,433,182 1,035,201 1,182,764 Retained profi ts 28 2,436,500 1,972,850 1,067,779 1,062,553
4,292,096 3,565,368 2,418,489 2,404,653 Non-controlling interests 2,628,603 1,977,374 – –
Total equity 6,920,699 5,542,742 2,418,489 2,404,653
Total equity and liabilities 11,520,238 9,245,692 2,982,991 3,055,745
The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.
STATEMENTS OF CHANGES IN EQUITY annual report 2011 | FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
Attributable to shareholders of the Company
Non-distributable Distributable
Fair Equity Non- Share Share Warrant Translation Hedge value Revaluation Other Treasury transaction Retained controlling Total capital premium reserve reserve reserve reserve reserve reserve shares reserve profi ts Total interests equity
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 181
Group Opening balance at 1 January 2011 159,336 272,184 – (123,896) (67,782) 55,617 1,337,816 4,933 (45,690) – 1,972,850 3,565,368 1,977,374 5,542,742 Foreign exchange translation differences – – – 242,191 – – – – – – – 242,191 244,038 486,229 Transfer from reserves to retained profi t – – – (22,581) – – (313) – – – 22,930 36 (36) – Cash flow hedges – – – – 67,034 – – – – – – 67,034 53,767 120,801 Fair value changes on available-for- sale financial assets – – – – – (54,361) – – – – 51,815 (2,546) 333 (2,213)
Total other comprehensive income for the year – – – 219,610 67,034 (54,361) (313) – – – 74,745 306,715 298,102 604,817 Profi t for the year – – – – – – – – – – 565,013 565,013 442,853 1,007,866 Total comprehensive income for the year – – – 219,610 67,034 (54,361) (313) – – – 639,758 871,728 740,955 1,612,683 Transactions with owners Bonus issue 156,173 (156,173) – – – – – – – – – – – – Issue of free warrants – – 113,945 – – – – – – – (113,945) – – – Exercise of warrants – 2 – – – – – – – – – 2 – 2 Reversal of deferred tax – – – – – – 254 – – – – 254 – 254 Acquisition of non-controlling interest in subsidiary – – – – – – – – – (32,597) – (32,597) (54,232) (86,829) Acquisition of subsidiary – – – – – – – – – – (435) (435) – (435) Treasury shares acquired – – – – – – – – (50,496) – – (50,496) – (50,496)
Increase in non-controlling Kulim (Malaysia) Berhad interest – – – – – – – – – – – – 15,032 15,032 Dividends to shareholders – – – – – – – – – – (61,728) (61,728) – (61,728) Dividends to non-controlling interests of subsidiaries – – – – – – – – – – – – (45,873) (45,873) Share buy-back by subsidiaries – – – – – – – – – – – – (4,653) (4,653)
At 31 December 2011 315,509 116,013 113,945 95,714 (748) 1,256 1,337,757 4,933 (96,186) (32,597) 2,436,500 4,292,096 2,628,603 6,920,699
(23370-V) Kulim (Malaysia) Berhad
STATEMENTS OF CHANGES IN EQUITY (continued) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
Attributable to shareholders of the Company
Non-distributable Distributable
Fair Equity Non- Share Share Warrant Translation Hedge value Revaluation Other Treasury transaction Retained controlling Total capital premium reserve reserve reserve reserve reserve reserve shares reserve profi ts Total interests equity RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group (23370-V) Opening balance at 1 January 2010 159,336 272,184 – (78,877) – – 1,338,491 4,933 (45,690) – 1,720,988 3,371,365 1,699,037 5,070,402 Effect of adopting FRS 139 – – – – (12,114) – – – – – 295 (11,819) (11,762) (23,581) Foreign exchange translation differences – – – (45,019) – – – – – – – (45,019) 48,071 3,052 Transfer from reserves to retained profi t – – – – – – (675) – – – 675 – – – Cash flow hedges – – – – (55,668) – – – – – – (55,668) (42,704) (98,372) Fair value changes on available-for-sale fi nancial assets – – – – – 55,617 – – – – – 55,617 677 56,294 T otal other comprehensive income for the year – – – (45,019) (55,668) 55,617 (675) – – – 675 (45,070) 6,044 (39,026) Profi t for the year – – – – – – – – – – 385,592 385,592 310,234 695,826 Total comprehensive income for the year – – – (45,019) (55,668) 55,617 (675) – – – 386,267 340,522 316,278 656,800 Transactions with owners Increase in non-controlling interest – – – – – – – – – – – – 33,150 33,150 Arising from acquisition of non-controlling interest – – – – – – – – – – – – (5,009) (5,009) Disposal of a subsidiary – – – – – – – – – – – – (34,150) (34,150) Dividends to shareholders – – – – – – – – – – (134,700) (134,700) – (134,700) Dividends to non-controlling interests of subsidiaries – – – – – – – – – – – – (14,994) (14,994) Share buy-back by subsidiaries – – – – – – – – – – – – (5,176) 182 (5,176)
At 31 December 2010 159,336 272,184 – (123,896) (67,782) 55,617 1,337,816 4,933 (45,690) – 1,972,850 3,565,368 1,977,374 | annual report5,542,742 2011 annual report 2011 |
Attributable to shareholders of the Company
Non-distributable Distributable Fair Share Share Warrant Revaluation value Treasury Retained capital premium reserve reserve reserve Other reserve shares profi ts Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 183 Company At 1 January 2010 159,336 272,184 – 897,579 – 4,165 (45,690) 985,975 2,273,549 Fair value changes on available-for- sale financial assets, representing total other comprehensive income – – – – 54,526 – – – 54,526 Profi t for the year – – – – – – – 211,278 211,278 Total comprehensive income for the year – – – – 54,526 – – 211,278 265,804 Dividendsto shareholders – – – – – – – (134,700) (134,700)
At 31 December 2010 159,336 272,184 – 897,579 54,526 4,165 (45,690) 1,062,553 2,404,653 Fair value changes on available-for- sale financial assets, representing total other comprehensive income – – – – (54,839) – – 51,814 (3,025) Profi t for the year – – – – – – – 129,084 129,084 Total comprehensive income for the year – – – – (54,839) – – 180,898 126,059 Bonusissue 156,173 (156,173) – – – – – – – Issueof free warrants – – 113,944 – – – – (113,944) – Exerciseof warrants – 2 – – – – – – 2 Treasuryshares acquired – – – – – – (50,497) – (50,497) Dividendsto shareholders – – – – – – – (61,728) (61,728)
At 31 December 2011 315,509 116,013 113,944 897,579 (313) 4,165 (96,187) 1,067,779 2,418,489 Kulim (Malaysia) Berhad
(23370-V)
The accompanying accounting policies and explanatory notes form an integral part nancial of the statements.fi Kulim (Malaysia) Berhad (23370-V) 184 | annual report 2011 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Operating activities Profi t/(Loss) before tax – continuing operations 1,364,796 777,896 151,980 (7,718) – discontinued operation – 1,476 – 240,149 Adjustments for: Additional impairment on: – assets held for sale 1,500 – – – – investment in subsidiaries – – 455 1,801 – property, plant and equipment 4,811 46,440 – – Fair value changes on other investments (18,572) (679) (18,572) – Allowance for slow moving inventories 103 68 – – Allowances for impairment losses on receivables: – third parties 5,540 2,526 – 4,045 – subsidiaries – – – 104,400 Amortisation and depreciation of: – deferred farm expenditure 767 3,461 – – – intangible assets 9,372 10,482 – – – prepaid lease payments – 78 – – – property, plant and equipment 415,555 321,189 10,636 11,127 Change in fair value of investment properties 7,717 – 8,051 – Dividend income (1,930) (2,591) (61,498) (33,182) (Gain)/Loss on: – discontinued operation – (153,417) – (240,149) – disposal of other investments (18,630) (62) (18,351) (14,116) – disposal of property, plant and equipment 8,395 4,347 (9) (86) – partial disposal of subsidiaries – (31,507) (49) (24,820) Group share of net results in associates (6,992) (2,174) – – Interest expense on: – continuing operations 91,475 81,440 20,062 30,945 – discontinued operation – 7,004 – – Interest income (12,591) (6,370) (8,379) (6,414) Provision for employee benefi ts 86 270 – – Unrealised foreign exchange (gain)/loss, net (151,322) 669 – 53 Write off of: – Deferred farm expenditure 939 547 939 547 – Inventories – 844 – – – Property, plant and equipment 1,144 6,214 145 74 Write down of inventories 223 821 – –
Operating profi t before changes in working capital 1,702,386 1,068,972 85,410 66,656 Changes in working capital: Inventories (234,042) (198,264) 14 (117) Payables (267,252) 40,091 130,689 20,803 Receivables 321,823 44,351 (38,955) (51,330)
Cash generated from operations 1,522,915 955,150 177,158 36,012 Employee benefi ts paid (642) (213) – – Tax paid (82,091) (150,159) (22,952) (6,099) Tax refunded 963 – – –
Net cash generated from operating activities 1,441,145 804,778 154,206 29,913 annual report 2011 | 185 Kulim (Malaysia) Berhad (23370-V)
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Cash fl ows from investing activities Acquisition of subsidiaries, net of cash acquired (16,681) (629,676) – – Dividends received 1,930 2,591 61,498 33,182 Interest received 12,591 6,370 8,379 6,414 Payment of deferred farm expenditure (1,611) (5,436) (1,534) (2,036) Purchase of: – equity interest in: – subsidiaries (104,648) (5,009) (96,516) (14,644) – associates – (5,980) – – – other investments – (195) – (75,258) – other investments (214,761) (227,072) (203,207) (105,944) – property, plant and equipment (1,592,643) (726,053) (11,161) (10,317) – intangible assets (8,431) (14,310) – – – investment properties (8,150) – (8,150) – Proceeds from: – disposal of other investment 454,889 – 450,551 – – disposal of a subsidiary – 439,882 – 450,000 – disposal of property, plant and equipment 4,023 17,364 25 348 – partial disposal of subsidiaries 185 70,051 161 55,130
Net cash fl ows (used in)/generated from investing activities (1,473,307) (1,077,473) 200,046 336,875
Cash fl ows from fi nancing activities Dividends paid to: – shareholders of the Company (178,858) (40,996) (178,858) (40,996) – minority shareholders of subsidiaries (25,920) (14,994) – – Proceeds from term loans 1,482,532 797,232 – – Repayment of term loans (869,224) (272,555) – (205,000) Repayment of short-term borrowings (100,091) (47,769) (100,000) (48,592) Proceeds from the issue of shares – Warrants 107 – 2 – Purchase of treasury shares by subsidiary (75,092) (5,176) (50,496) – Issue of shares to minority shareholders of subsidiaries 38,365 – – – Withdrawal/(Addition) of fi xed deposits pledged 14 (11,182) 16 (16) Interest paid – continuing (91,475) (81,440) (20,062) (30,945) – discontinued – (7,004) – –
Net cash fl ows generated from/(used in) fi nancing activities 180,358 316,116 (349,398) (325,549)
Net increase in cash and cash equivalents 148,196 43,421 4,854 41,239 Effect of exchange rate fl uctuations on cash held 2,088 (2,370) – (57) Cash and cash equivalents at 1 January 406,434 365,383 74,460 33,278
Cash and cash equivalents at 31 December (Note 22) 556,718 406,434 79,314 74,460
The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements. Kulim (Malaysia) Berhad (23370-V) 186 | annual report 2011 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2011
1. CORPORATE INFORMATION The Company is a public limited liability company incorporated and domiciled in Malaysia and is listed on the Main Board of Bursa Malaysia Securities Berhad. The addresses of the principal place of business and registered offi ce of the Company are as follows:
Principal place of business Ulu Tiram Estate 81800 Ulu Tiram Johor
Registered offi ce Suite 12B, Level 12, Menara Ansar 65 Jalan Trus, 80000 Johor Bahru, Johor.
The Company’s ultimate holding corporation is Johor Corporation (“JCorp”), a body corporate established under the Johor Corporation Enactment (No. 4, of 1968) (As amended by Enactment No.5, 1995).
The principal activities of the Company consist of oil palm plantation, investment holding and property investment in Malaysia. The principal activities of the subsidiaries are described in Note 16 to the fi nancial statements. There have been no signifi cant changes in the nature of the principal activities during the fi nancial year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation The fi nancial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. At the beginning of the current fi nancial year, the Group and the Company adopted new and revised FRS which are mandatory for fi nancial periods beginning on or after 1 January 2011 as described fully in Note 2.2.
The fi nancial statements have been prepared on the historical basis, except as disclosed in the accounting policies below.
The fi nancial statements are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest thousand (RM’000) except when otherwise indicated.
2.2 Changes in accounting policies The accounting policies adopted are consistent with those of the previous fi nancial year except as follows:
On 1 January 2011, the Group and the Company adopted the following new and amended FRS and IC Interpretations:
FRSs, Interpretations and Amendments effective for annual periods beginning on or after 1 March 2010 Amendments to FRS 132: Classifi cation of Rights Issues
FRSs, Interpretations and Amendments effective for annual periods beginning on or after 1 July 2010 FRS 1: First-time Adoption of Financial Reporting Standards FRS 3: Business Combinations (Revised) Amendments to FRS 2: Share-based Payment Amendments to FRS 5: Non-current Assets Held for Sale and Discontinued Operations Amendments to FRS 127: Consolidated and Separate Financial Statements Amendments to FRS 138: Intangible Assets IC Interpretation 12: Service Concession Arrangements IC Interpretation 16: Hedges of a Net Investment in a Foreign Operation IC Interpretation 17: Distributions of Non-cash Assets to Owners Amendments to IC Interpretation 9: Reassessment of Embedded Derivatives annual report 2011 | 187 Kulim (Malaysia) Berhad (23370-V)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Changes in accounting policies (continued) FRSs, Interpretations and Amendments effective for annual periods beginning on or after 1 January 2011 Amendments to FRS 1: First-time Adoption of Financial Reporting Standards – Additional Exemptions for First-time Adopters Amendments to FRS 2: Group Cash-settled Share Based Payment Improvements to FRSs issued in 2010 IC Interpretation 4: Determining whether an Arrangement contains a Lease IC Interpretation 18: Transfers of Assets from Customers
The adoption of the above new and amended standards and interpretations did not have any effect on the fi nancial performance or position of the Group and the Company except for those discussed below:
FRS 127 Consolidated and Separate Financial Statements (revised)
– A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for as an equity transaction. Therefore, such a change will have no impact on goodwill, nor will it give rise to a gain or loss.
– Losses incurred by a subsidiary are allocated to the non-controlling interest even if the losses exceed the non-controlling interest in the subsidiary’s equity, and
– When control over a subsidiary is lost, any interest retained is measured at fair value with the corresponding gain or loss recognised in profi t or loss.
According to its transitional provisions, the revised FRS 127 has been applied prospectively, and does not impact the Group’s consolidated fi nancial statements in respect of transactions with non-controlling interest, attribution of losses to non-controlling interest, and disposal of subsidiaries before 1 January 2011. The changes will affect future transactions with non-controlling interest.
The effects of the adoption of revised FRS 127 on the Group’s consolidated fi nancial statements, relating to the acquisition of the remaining equity interest of 24% in Sindora Berhad from its non-controlling interest during the fi nancial year were as follows:
Group Group 2011 2010 2011 2011 RM’000 RM’000 RM’000 RM’000 Consolidated statement of fi nancial position Decrease in intangible asset – goodwill 32,597 Decrease in reserves – equity transaction reserves 32,597
Kulim (Malaysia) Berhad (23370-V) 188 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.3 Standards issued but not yet effective The Group has not adopted the following standards and interpretations that have been issued but are not yet effective:
2011 2010 Effective for annual periods RM’000 RM’000 beginning on or after
Description IC Interpretation 19: Extinguishing Financial Liabilities with Equity Instruments 1 July 2011 Amendments to IC Interpretation 14: Prepayments of a Minimum Funding Requirement 1 July 2011 FRS 124: Related Party Disclosures 1 January 2012 Amendments to FRS 1: Severe Hyperinfl ation and Removal of Fixed Dates for First-time Adopters 1 January 2012 Amendments to FRS 7: Transfers of Financial Assets 1 January 2012 Amendments to FRS 112: Deferred Tax: Recovery of Underlying Assets 1 January 2012 Amendments to FRS 101: Presentation of Items of Other Comprehensive Income 1 July 2012 FRS 9: Financial Instruments 1 January 2013 FRS 10: Consolidated Financial Statements 1 January 2013 FRS 11: Joint Arrangements 1 January 2013 FRS 12: Disclosure of Interests in Other Entities 1 January 2013 FRS 13: Fair Value Measurement 1 January 2013 FRS 119: Employee Benefi ts 1 January 2013 FRS 127: Separate Financial Statements 1 January 2013 FRS 128: Investment in Associate and Joint Venture 1 January 2013 IC Interpretation 20: Stripping Costs in the Production Phase of a Surface Mine 1 January 2013
Except as disclosed below, the directors do not expect any material impact on the fi nancial statements in the period of initial application:
Amendments to FRS 112: Deferred Tax: Recovery of Underlying Assets The amendments clarifi ed the determination of deferred tax on investment property measured at fair value. The amendment introduces a rebuttable presumption that deferred tax on investment property measured using the fair value model in FRS 140 should be determined on the basis that its carrying amount will be recovered through sale. Furthermore, it introduces the requirement that deferred tax on non-depreciable assets that are measured using the revaluation model in FRS 116 to be always measured on a sale basis of that asset.
Amendments to FRS 101: Presentation of Items of Other Comprehensive Income The amendments to FRS 101 change the grouping of items presented in Other Comprehensive Income. Items that could be reclassifi ed (or “recycled”) to profi t or loss at a future point in time (for example, upon derecognition or settlement) would be presented separately from items that will never be reclassifi ed. The amendment affects presentation only and has no impact on the Group’s fi nancial position or performance.
FRS 9: Financial Instruments FRS 9 refl ects the fi rst phase of work on the replacement of FRS 139 and applies to classifi cation and measurement of fi nancial assets and fi nancial liabilities as defi ned in FRS 139. The adoption of this fi rst phase of FRS 9 will have an effect on the classifi cation and measurement of the Group’s fi nancial assets but will potentially have no impact on classifi cation and measurements of fi nancial liabilities. The Group is in the process of making an assessment of the impact of adoption of FRS 9. annual report 2011 | 189 Kulim (Malaysia) Berhad (23370-V)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.3 Standards issued but not yet effective (continued) FRS 10: Consolidated Financial Statements FRS 10 replaces the portion of FRS 127 Consolidated and Separate Financial Statements that addresses the accounting for consolidated fi nancial statements. FRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by FRS 10 will require management to exercise signifi cant judgement to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in FRS 127.
FRS 12: Disclosure of Interests in Other Entities FRS 12 includes all disclosure requirements for interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are required. This standard affects disclosures only and has no impact on the Group’s fi nancial position or performance.
FRS 13: Fair Value Measurement FRS 13 establishes a single source of guidance under FRS for all fair value measurements. FRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under FRS when fair value is required or permitted. The Group is currently assessing the impact of adoption of FRS 13.
FRS 127: Separate Financial Statements As a consequence of the new FRS 10 and FRS 12, FRS 127 is limited to accounting for subsidiaries, jointly controlled entities and associates in separate fi nancial statements.
Malaysian Financial Reporting Standards (MFRS Framework) On 19 November 2011, the Malaysian Accounting Standards Board (MASB) issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards (MFRS Framework).
The MFRS Framework is to be applied by all Entities Other Than Private Entities for annual periods beginning on or after 1 January 2012, with the exception of entities that are within the scope of MFRS 141 Agriculture (MFRS 141) and IC Interpretation 15 Agreements for Construction of Real Estate (IC 15), including its parent, signifi cant investor and venturer (herein called ’Transitioning Entities’).
Transitioning Entities will be allowed to defer adoption of the new MFRS Framework for an additional one year. Consequently, adoption of the MFRS Framework by Transitioning Entities will be mandatory for annual periods beginning on or after 1 January 2013.
The Group falls within the scope defi nition of Transitioning Entities and has opted to defer adoption of the new MFRS Framework. Accordingly, the Group will be required to prepare fi nancial statements using the MFRS Framework in its fi rst MFRS fi nancial statements for the year ending 31 December 2013. In presenting its fi rst MFRS fi nancial statements, the Group will be required to restate the comparative fi nancial statements to amounts refl ecting the application of MFRS Framework. The majority of the adjustments required on transition will be made, retrospectively, against opening retained profi ts.
The Group has not completed its assessment of the fi nancial effects of the differences between Financial Reporting Standards and accounting standards under the MFRS Framework. Accordingly, the fi nancial performance and fi nancial position as disclosed in these fi nancial statements for the year ended 31 December 2011 could be different if prepared under the MFRS Framework. Kulim (Malaysia) Berhad (23370-V) 190 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.4 Basis of consolidation The consolidated fi nancial statements comprise the fi nancial statements of the Company and its subsidiaries as at the reporting date. The fi nancial statements of the subsidiaries used in the preparation of the consolidated fi nancial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.
All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.
Acquisitions of subsidiaries are accounted for by applying the acquisition method. Identifi able assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received.
In business combinations achieved in stages, previously held equity interests in the acquiree are re-measured to fair value at the acquisition date and any corresponding gain or loss is recognised in profi t or loss.
The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree net identifi able assets.
Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifi able assets and liabilities is recorded as goodwill in the statement of fi nancial position. The accounting policy for goodwill is set out in Note 2.9(a). In instances where the latter amount exceeds the former, the excess is recognised as a gain on bargain purchase in profi t or loss on the acquisition date.
Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.
2.5 Transactions with non-controlling interest Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company, and is presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of fi nancial position, separately from equity attributable to owners of the Company.
Changes in the Company owners’ ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to refl ect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the parent. annual report 2011 | 191 Kulim (Malaysia) Berhad (23370-V)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.6 Foreign currency (a) Functional and presentation currency The individual fi nancial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated fi nancial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency.
(b) Foreign currency transactions Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profi t or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassifi ed from equity to profi t or loss of the Group on disposal of the foreign operation.
Exchange differences arising on the translation of non-monetary items carried at fair value are included in profi t or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.
(c) Foreign operations The assets and liabilities of foreign operations are translated into RM at the rate of exchange ruling at the reporting date and income and expenses are translated at exchange rates at the dates of the transactions. The exchange differences arising on the translation are taken directly to other comprehensive income. On disposal of a foreign operation, the cumulative amount recognised in other comprehensive income and accumulated in equity under foreign currency translation reserve relating to that particular foreign operation is recognised in the profi t or loss.
Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the reporting date. Kulim (Malaysia) Berhad (23370-V) 192 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.7 Property, plant and equipment All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefi ts associated with the item will fl ow to the Group and the cost of the item can be measured reliably.
Freehold and leasehold plantation lands of the Group have not been revalued since they were last revalued in 1997. The directors have not adopted a policy of regular revaluations of such assets and no later valuation has been recorded. As permitted under the transitional provisions of IAS 16 (Revised) Property, Plant and Equipment, these assets continue to be stated at their 1997 valuation less accumulated depreciation.
All expenditure relating to the development of oil palm fi eld (immature fi eld) is classifi ed under estate development expenditure. This cost will be amortised over the useful life when the fi eld reaches maturity. The maturity date for estate development expenditure is the point in time when such new planting areas achieve yields of at least 8.60 tonnes of fresh fruit bunches per hectare per annum or 48 months from the date of initial planting, whichever is earlier. Estate overhead expenditure is apportioned to profi t or loss and estate development expenditure on the basis of proportion of mature to immature areas.
Subsequent to recognition, property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. When signifi cant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specifi c useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfi ed. All other repair and maintenance costs are recognised in profi t or loss as incurred.
Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, as follows:
Leasehold land 33 – 904 years Leasehold improvements and renovations 10 years Estate development expenditure 17 – 22 years from year of maturity Buildings 4 – 50 years Other assets, comprising: – Vessels, plant and machinery 3 – 25 years – Restaurants and offi ce equipment 5 – 15 years – Furniture and fi ttings 2 – 15 years – Motor vehicles 3 – 5 years
Assets under construction included in plant and equipment are not depreciated as these assets are not yet available for use.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
The residual value, useful life and depreciation method are reviewed at each fi nancial year-end, and adjusted prospectively, if appropriate.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profi t or loss in the year the asset is derecognised. annual report 2011 | 193 Kulim (Malaysia) Berhad (23370-V)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.8 Investment properties Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at fair value which refl ects market conditions at the reporting date. Fair value is arrived at by reference to market evidence of transaction prices for similar properties and is performed by registered independent valuers having an appropriate recognised professional qualifi cation and recent experience in the location and category of the properties being valued. Gains or losses arising from changes in the fair values of investment properties are included in profi t or loss in the year in which they arise.
Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefi t is expected from its disposal. Any gain or loss on the retirement or disposal of an investment property is recognised in profi t or loss in the year of retirement or disposal.
Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment set out in Note 2.7 up to the date of change in use.
2.9 Intangible assets (a) Goodwill Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group’s cash- generating units that are expected to benefi t from the synergies of the combination.
The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the profi t or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods.
(b) Other intangible assets Intangible assets acquired separately are measured initially at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial acquisition, intangible assets are measured at cost less any accumulated amortisation and accumulated impairment losses.
Intangible assets with fi nite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each fi nancial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefi ts embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with fi nite lives is recognised in profi t or loss.
Intangible assets with indefi nite useful lives or not yet available for use are tested for impairment annually, or more frequently if the events and circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefi nite useful life is reviewed annually to determine whether the useful life assessment continues to be supportable. If not, the change in useful life from indefi nite to fi nite is made on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profi t or loss when the asset is derecognised. Kulim (Malaysia) Berhad (23370-V) 194 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.10 Impairment of non-fi nancial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifi able cash fl ows (cash-generating units (“CGU”)).
In assessing value in use, the estimated future cash fl ows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated fi rst to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.
Impairment losses are recognised in profi t or loss.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profi t or loss. Impairment loss on goodwill is not reversed in a subsequent period.
2.11 Subsidiaries A subsidiary is an entity over which the Group has the power to govern the fi nancial and operating policies so as to obtain benefi ts from its activities.
In the Company’s separate fi nancial statements, investments in subsidiaries are accounted for at cost less impairment losses.
2.12 Associates An associate is an entity, not being a subsidiary or a joint venture, in which the Group has signifi cant infl uence. An associate is equity accounted for from the date the Group obtains signifi cant infl uence until the date the Group ceases to have signifi cant infl uence over the associate.
The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment in associates is measured in the statement of fi nancial position at cost plus post-acquisition changes in the Group’s share of net assets of the associates. Goodwill relating to associates is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the associate’s identifi able assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associate’s profi t or loss for the period in which the investment is acquired.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in its associates. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in profi t or loss.
The fi nancial statements of the associates are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.
In the Company’s separate fi nancial statements, investments in associates are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profi t or loss. annual report 2011 | 195 Kulim (Malaysia) Berhad (23370-V)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.13 Financial assets Financial assets are recognised in the statements of fi nancial position when, and only when, the Group and the Company become a party to the contractual provisions of the fi nancial instrument.
When fi nancial assets are recognised initially, they are measured at fair value, plus, in the case of fi nancial assets not at fair value through profi t or loss, directly attributable transaction costs.
The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include fi nancial assets at fair value through profi t or loss, loans and receivables, held-to-maturity investments and available-for-sale fi nancial assets.
(a) Financial assets at fair value through profi t or loss Financial assets are classifi ed as fi nancial assets at fair value through profi t or loss if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or fi nancial assets acquired principally for the purpose of selling in the near term.
Subsequent to initial recognition, fi nancial assets at fair value through profi t or loss are measured at fair value. Any gains or losses (other than those relating to derivatives which qualify for hedge accounting, as explained in Note 2.30) arising from changes in fair value are recognised in profi t or loss. Net gains or net losses on fi nancial assets at fair value through profi t or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on fi nancial assets at fair value through profi t or loss are recognised separately in profi t or loss as part of other losses or other income.
Financial assets at fair value through profi t or loss could be presented as current or non-current. Financial assets that is held primarily for trading purposes are presented as current whereas fi nancial assets that is not held primarily for trading purposes are presented as current or non-current based on the settlement date.
(b) Loans and receivabless Financial assets with fi xed or determinable payments that are not quoted in an active market are classifi ed as loans and receivables.
Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profi t or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.
Loans and receivables are classifi ed as current assets, except for those having maturity dates later than 12 months after the reporting date which are classifi ed as non-current.
(c) Held-to-maturity investments Financial assets with fi xed or determinable payments and fi xed maturity are classifi ed as held-to-maturity when the Group has the positive intention and ability to hold the investment to maturity.
Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profi t or loss when the held-to-maturity investments are derecognised or impaired, and through the amortisation process.
Held-to-maturity investments are classifi ed as non-current assets, except for those having maturity within 12 months after the reporting date which are classifi ed as current. Kulim (Malaysia) Berhad (23370-V) 196 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.13 Financial assets (d) Available-for-sale fi nancial assets Available-for-sale fi nancial assets are fi nancial assets that are designated as available for sale or are not classifi ed in any of the three preceding categories.
After initial recognition, available-for-sale fi nancial assets are measured at fair value. Any gains or losses from changes in fair value of the fi nancial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profi t or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassifi ed from equity to profi t or loss as a reclassifi cation adjustment when the fi nancial asset is derecognised. Interest income calculated using the effective interest method is recognised in profi t or loss. Dividends on an available-for-sale equity instrument are recognised in profi t or loss when the Group and the Company’s right to receive payment is established.
Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.
Available-for-sale fi nancial assets are classifi ed as non-current assets unless they are expected to be realised within 12 months after the reporting date.
A fi nancial asset is derecognised when the contractual right to receive cash fl ows from the asset has expired. On derecognition of a fi nancial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profi t or loss.
Regular way purchases or sales are purchases or sales of fi nancial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of fi nancial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commit to purchase or sell the asset.
2.14 Impairment of fi nancial assets The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired.
(a) Trade and other receivables and other fi nancial assets carried at amortised cost To determine whether there is objective evidence that an impairment loss on fi nancial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments.
If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the fi nancial asset’s original effective interest rate. The impairment loss is recognised in profi t or loss.
The carrying amount of the fi nancial asset is reduced through the use of an allowance account. When the asset becomes uncollectible, it is written off against the allowance account.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profi t or loss.
(b) Unquoted equity securities carried at cost If there is objective evidence (such as signifi cant adverse changes in the business environment where the issuer operates, probability of insolvency or signifi cant fi nancial diffi culties of the issuer) that an impairment loss on fi nancial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the current market rate of return for a similar fi nancial asset. Such impairment losses are not reversed in subsequent periods. annual report 2011 | 197 Kulim (Malaysia) Berhad (23370-V)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.14 Impairment of fi nancial assets (continued) (c) Available-for-sale fi nancial assets Signifi cant or prolonged decline in fair value below cost, signifi cant fi nancial diffi culties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classifi ed as available-for-sale fi nancial assets are impaired.
If an available-for-sale fi nancial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profi t or loss, is transferred from equity to profi t or loss.
Impairment losses on available-for-sale equity investments are not reversed in profi t or loss in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income.
2.15 Cash and cash equivalents Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignifi cant risk of changes in value. For the purpose of the statements of cash fl ows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.
2.16 Inventories Inventories are measured at the lower of cost and net realisable value. Cost is determined using the weighted average cost method other than inventories relating to the Group’s quick service restaurant business segment. These inventories, comprising raw materials, groceries, poultry and consumables, equipment and spares and fi nished goods, are determined on the fi rst-in, fi rst out method.
The cost of agricultural produce is based on the weighted average method and includes the cost of direct materials and an appropriate proportion of estate revenue expenditure, manufacturing costs and overhead costs based on normal operating capacity.
Agricultural produce consist mainly of palm oil products and sugar stocks. Inventories of palm oil products comprises processed and refi ned palm oil products in tanks awaiting shipment at the end of the reporting period. The cost of palm oil produce includes direct materials and labour and an appropriate proportion of overheads relating to the milling and refi ning process. Cost of sugar stocks include all direct expenses and an appropriate proportion of manufacturing overheads based on normal operating capacity.
The cost of materials, consumables and livestocks is based on the weighted average method and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.
In the case of nursery seed stocks and manufactured fi nished goods, cost includes direct materials and labour and an appropriate share of fi xed and variable overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
2.17 Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outfl ow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.
Provisions are reviewed at each reporting date and adjusted to refl ect the current best estimate. If it is no longer probable that an outfl ow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that refl ects, where appropriate, the risks specifi c to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a fi nance cost. Kulim (Malaysia) Berhad (23370-V) 198 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.18 Financial liabilities Financial liabilities are classifi ed according to the substance of the contractual arrangements entered into and the defi nitions of a fi nancial liability.
Financial liabilities, within the scope of FRS 139, are recognised in the statement of fi nancial position when, and only when, the Group and the Company become a party to the contractual provisions of the fi nancial instrument. Financial liabilities are classifi ed as either fi nancial liabilities at fair value through profi t or loss or other fi nancial liabilities.
(a) Financial liabilities at fair value through profi t or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profi t or loss.
Financial liabilities held for trading include derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in profi t or loss. Net gains or losses on derivatives include exchange differences.
The Group and the Company have not designated any fi nancial liabilities as at fair value through profi t or loss.
(b) Other fi nancial liabilities The Group’s and the Company’s other fi nancial liabilities include trade payables, other payables and loans and borrowings.
Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.
Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classifi ed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
For other fi nancial liabilities, gains and losses are recognised in profi t or loss when the liabilities are derecognised, and through the amortisation process.
A fi nancial liability is derecognised when the obligation under the liability is extinguished. When an existing fi nancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modifi ed, such an exchange or modifi cation is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profi t or loss.
2.19 Financial guarantee contracts A fi nancial guarantee contract is a contract that requires the issuer to make specifi ed payments to reimburse the holder for a loss it incurs because a specifi ed debtor fails to make payment when due.
Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs. Subsequent to initial recognition, fi nancial guarantee contracts are recognised as income in profi t or loss over the period of the guarantee. If the debtor fails to make payment relating to fi nancial guarantee contract when it is due and the Group, as the issuer, is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation. annual report 2011 | 199 Kulim (Malaysia) Berhad (23370-V)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.20 Borrowing costs Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.
All other borrowing costs are recognised in profi t or loss in the period they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds.
2.21 Employee benefi ts (a) Defi ned contribution plans The Group participates in the national pension schemes as defi ned by the laws of the countries in which it has operations. The Malaysian companies in the Group make contributions to the Employee Provident Fund in Malaysia, a defi ned contribution pension scheme. Contributions to defi ned contribution pension schemes are recognised as an expense in the period in which the related service is performed.
(b) Defi ned benefi t plans The Group’s net obligation in respect of defi ned benefi t retirement plans is calculated separately for each plan by estimating the amount of future benefi t that employees have earned in return for their service in the current and prior periods; that benefi t is discounted to determine the present value. Any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting period on 7 year high quality corporate bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefi ts are expected to be paid. The calculation is performed by a qualifi ed actuary conducted every 2 years with the last actuarial report dated 13 January 2012 using the projected unit credit method. When the calculation results in a benefi t to the Group, the recognised asset is limited to the net total of any unrecognised past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.
In order to calculate the present value of economic benefi ts, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefi t is available to the Group if it is realisable during the life of the plan, or any settlement of the plan liabilities.
When the benefi ts of a plan are improved, the portion of the increased benefi t relating to past service by employees is recognised in the profi t or loss on a straight-line basis over the average period until the benefi ts become vested. To the extent that the benefi ts vest immediately, the expense is recognised immediately in profi t or loss.
The Group recognises all actuarial gains and losses arising from defi ned benefi t plans in other comprehensive income and all expenses related to defi ned benefi t plans in personnel expenses in profi t or loss.
The Group recognises gains and losses on the curtailment or settlement of a defi ned benefi t plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, change in the present value of defi ned benefi t obligation and any related actuarial gains and losses and past service cost that had not previously been recognised. Kulim (Malaysia) Berhad (23370-V) 200 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.22 Leases (a) As lessee Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the fi nance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profi t or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.
Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term.
Operating lease payments are recognised as an expense in profi t or loss on a straight-line basis over the lease term. The aggregate benefi t of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.
(b) As lessor Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classifi ed as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in Note 2.24(e).
2.23 Discontinued operation A component of the Group is classifi ed as a “discontinued operation” when the criteria to be classifi ed as held for sale have been met or it has been disposed of and such a component represents a separate major line of business or geographical area of operations or is part of a single coordinated major line of business or geographical area of operations. A component is deemed to be held for sale if its carrying amounts will be recovered principally through a sale transaction rather than through continuing use.
Upon classifi cation as held for sale, non-current assets and disposal groups are not depreciated and are measured at the lower of carrying amount and fair value less costs to sell. Any differences are recognised in profi t or loss. annual report 2011 | 201 Kulim (Malaysia) Berhad (23370-V)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.24 Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable. The following specifi c recognition criteria must also be met before revenue is recognised:
(a) Sale of palm-based products Sale revenue represents revenues earned from sales of the Group’s products, net of trade allowance and duties and taxes paid. Revenue is recognised when there has been a passing of the title and risk to the customer, and:
• The produce is in a form suitable for delivery and sale and no further processing is required;
• The quantity and quality of the product can be determined with reasonable accuracy;
• The product has been despatched to the customer and is no longer under the physical control of the Group; and
• The selling price can be determined with reasonable accuracy.
(b) Sale of restaurant food and beverages Sales revenue represents retail sales at the Group’s restaurants and is recognised at the point of sales. The Group presents sales revenue net of sales tax.
(c) Freight and time charter hire income Freight income is recognised when the goods are delivered and services rendered and accepted by customers. The results of ships employed and voyages chartered and that of other services rendered are recognised when goods are delivered and services rendered.
(d) Services Revenue from parking management, bulk mailing and printing and plantation management services, are recognised as and when the services are rendered.
(e) Rental income Rental income from investment properties is recognised in the profi t or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.
(f) Dividend income Dividend income is recognised when the right to receive payment is established. Kulim (Malaysia) Berhad (23370-V) 202 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.25 Income taxes (a) Current tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.
Current taxes are recognised in profi t or loss except to the extent that the tax relates to items recognised outside profi t or loss, either in other comprehensive income or directly in equity.
(b) Deferred tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for fi nancial reporting purposes.
Deferred tax liabilities are recognised for all temporary differences, where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profi t will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profi t will allow the deferred tax assets to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profi t or loss is recognised outside profi t or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
2.26 Segment reporting For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report to the Group Managing Director who regularly reviews the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 38, including the factors used to identify the reportable segments and the measurement basis of segment information. annual report 2011 | 203 Kulim (Malaysia) Berhad (23370-V)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.27 Share capital and share issuance expenses An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments.
Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classifi ed as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.
2.28 Treasury shares When shares of the Company, that have not been cancelled, recognised as equity are reacquired, the amount of consideration paid is recognised directly in equity. Reacquired shares are classifi ed as treasury shares and presented as a deduction from total equity. No gain or loss is recognised in profi t or loss on the purchase, sale, issue or cancellation of treasury shares. When treasury shares are reissued by resale, the difference between the sales consideration and the carrying amount is recognised in equity.
2.29 Contingencies A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confi rmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group.
Contingent liabilities and assets are not recognised in the statements of fi nancial position of the Group.
2.30 Hedge accounting The Group uses derivatives to manage its exposure to commodity price risk (specifi cally fl uctuations in palm oil prices). The Group applies hedge accounting for certain hedging relationships which qualify for hedge accounting.
For the purpose of hedge accounting, hedging relationship are classifi ed as cash fl ow hedges. Cash fl ow hedging is applied when the Group hedges exposure to variability in cash fl ows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised fi rm commitment.
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identifi cation of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash fl ows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash fl ows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the fi nancial reporting periods for which they were designated.
Hedges which meet the strict criteria for hedge accounting are accounted for as follows: Kulim (Malaysia) Berhad (23370-V) 204 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.30 Hedge accounting (continued) (a) Cash fl ow hedges The effective portion of the gain or loss on the hedging instrument is recognised directly in other comprehensive income into cash fl ow hedge reserve, while any ineffective portion is recognised immediately in profi t or loss as other operating expenses.
Amounts recognised in other comprehensive income previously are reclassifi ed from equity to profi t or loss when the hedged transaction affects profi t or loss, such as when the hedged interest income or interest expense is recognised or when a forecast sale occurs. Where the hedged item is a non-fi nancial asset or a non-fi nancial liability, the amounts recognised previously in other comprehensive income are removed and included in the initial carrying amount of the non-fi nancial asset or liability.
If the forecast transaction or fi rm commitment is no longer expected to occur, the cumulative gain or loss previously recognised in other comprehensive income is reclassifi ed from equity to profi t or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in other comprehensive income remain in equity until the forecast transaction or fi rm commitment affects profi t or loss.
The Group uses forward commodity contracts for its exposure to volatility in the commodity prices. Refer to Note 24 for more details.
(b) Derivatives that are not designated or do not qualify for hedge accounting Any gains or losses arising from changes in fair value on derivatives during the year that do not qualify for hedge accounting are directly recognised in profi t or loss.
3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of the Group’s fi nancial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.
In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most signifi cant effect on the amounts recognised in the fi nancial statements:
(a) Impairment of goodwill, brandname and franchise rights Goodwill, brands and other indefi nite life intangibles are tested for impairment annually and at other times when such indicators exist. This requires an estimation of the value in use of the cash-generating units to which goodwill and brands are allocated.
When value in use calculations are undertaken, management must estimate the expected future cash fl ows from the asset or cash- generating unit and choose a suitable discount rate in order to calculate the present value of those cash fl ows. Further details of the carrying value, the key assumptions applied in the impairment assessment of goodwill, brands and franchise rights are given in Note 15.
(b) Impairment of loans and receivables The Group assesses at each reporting date whether there is any objective evidence that a fi nancial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments.
Where there is objective evidence of impairment, the amount and timing of future cash fl ows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount and details of the Group’s receivables at the reporting date are disclosed in Note 21. annual report 2011 | 205 Kulim (Malaysia) Berhad (23370-V)
4. REVENUE
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Continuing operations Sales of goods: Palm-based products 3,072,306 1,942,091 186,696 140,146 Biodiesel – 22,908 – – Restaurant food and beverages 3,349,914 3,035,827 – – Sugar 163,411 163,739 – – Livestocks and meats 21,226 15,285 – – Rubber-based manufactured products 8,304 4,988 – 299 Banana products 8,533 6,066 6,368 5,524 Others 57,656 11,032 3 4 Intrapreneur ventures: Freight time-charter hire and related services 169,935 87,153 – – Parking collection and related services 115,665 111,888 – – Sales of wood-based products 6,488 8,962 – – Bulk mailing and printing services 30,416 33,625 – – Plantation management services and sales of related goods 27,787 35,232 – – Rental income from investment properties 8,200 7,587 8,200 7,587 Dividend income 1,930 2,556 61,498 33,182
7,041,771 5,488,939 262,765 186,742
Discontinued operations Oleochemical products – 881,511 – –
5. GROSS PROFIT
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Continuing operations Sales of goods: Palm-based products 1,401,767 871,008 106,038 71,965 Biodiesel (4,108) (8,904) – – Restaurant food and beverages 1,942,725 1,769,268 – – Sugar 88,424 71,551 – – Rubber-based products 2,533 (1,608) – 198 Banana products 7,608 4,870 1,626 1,574 Livestocks and meats 2,799 (1,162) – – Others 19,061 (3,592) – – Intrapreneur ventures: Freight time-charter hire and related services 54,039 22,168 – – Parking collection and related services 17,530 18,161 – – Sales of wood-based products 1,476 1,822 – – Bulk mailing and printing services 4,818 7,862 – – Plantation management services 5,756 1,232 – – Rental income from investment properties 3,687 3,513 3,687 3,513 Dividend income 1,930 2,556 61,498 33,182
3,550,045 2,758,745 172,849 110,432
Discontinued operations Oleochemical products – 3,256 – – Kulim (Malaysia) Berhad (23370-V) 206 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
6. INTEREST INCOME
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Interest income on: Deposits with licensed banks 10,561 3,447 3,564 1,110 Amount due from ultimate holding corporation 2,022 2,911 2,022 2,911 Amount due from subsidiaries – – 2,772 2,381 Others 8 12 21 12
12,591 6,370 8,379 6,414
7. FINANCE COSTS
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Interest expense on: Bank overdraft 110 80 26 60 Loans 88,770 78,881 16,924 25,179 Other borrowings 2,595 2,479 – 2,479 Amount due to subsidiaries – – 3,112 3,227
91,475 81,440 20,062 30,945
8. PROFIT/(LOSS) BEFORE TAX
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Profi t/(loss) before tax is arrived at after charging: Allowance for slow moving inventories 103 68 – – Allowance for impairment losses on: – Trade receivables 5,585 1,830 – – – Other receivables – 3,412 – 4,045 – Amount due from subsidiaries – – – 104,400 Amortisation and depreciation of: – Intangible assets 9,372 10,482 – – – Prepaid lease payments – 78 – – – Property, plant and equipment 415,555 321,189 10,636 11,127 – Deferred farm expenditure 767 3,461 – – Auditors’ remuneration: – Statutory audit – Ernst & Young 781 – 90 – – Other auditors 2,992 3,202 4 85 – Other services – Ernst & Young 259 222 – – – Other auditors 1,572 1,208 405 443 Fees paid/payable to ultimate holding corporation for services of directors 12 194 – – annual report 2011 | 207 Kulim (Malaysia) Berhad (23370-V)
8. PROFIT/(LOSS) BEFORE TAX (continued)
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Fees paid/payable to a related company for services of directors – 5 – – Fair value loss on investment properties 7,717 – 8,051 – Impairment loss on: – Investments in subsidiaries – – 455 1,801 – Property, plant and equipment 4,811 46,440 – – – Assets held for sale 1,500 – – – Loss on disposal of property, plant and equipment 8,409 4,503 – – Net foreign exchange loss: – Realised – 200 – – – Unrealised 41 719 – 53 Technology transfer fee payable to corporate shareholder of a subsidiary 200 200 – – Write down of inventories 223 821 – – Write off of: – Deferred farm expenditure 939 547 939 547 – Property, plant and equipment 1,144 6,214 145 74 – Inventories – 844 – – Provision for employee benefi ts 86 270 – – Rental of plant and machinery – 490 – – Rental of land and building paid to: – Ultimate holding corporation 629 629 629 629 – Others 278,203 256,872 – – Staff costs (excluding key management personnel): – Salaries, wages, allowances and bonuses 783,301 661,418 21,790 18,826 – Defi ned contribution plan 58,467 52,780 680 669 – Other employee benefi ts 170,374 165,243 – – and after crediting: Franchise fee income 297 282 – – Dividend income from: – Unquoted shares in Malaysia 491 2,456 491 2,456 – Shares quoted in Malaysia 1,439 135 26,823 30,186 – Shares quoted outside Malaysia – – 34,184 – – Subsidiaries (unquoted shares in Malaysia) – – – 540 Gain on: – Disposal of subsidiary – 153,417 – 240,149 – Disposal of property, plant and equipment 14 156 9 86 – Disposal of other investments 18,630 62 18,351 14,116 – Partial disposal of subsidiaries – 31,507 49 24,820 Management fee received – 282 – – Net foreign exchange gain: – Realised 466 3,803 466 – – Unrealised 151,363 50 – – Rental income 2,815 2,497 1,215 880 Reversal of allowance for impairment losses: – Trade receivables 45 2,716 – – Fair value changes on other investments 18,572 679 18,572 – Guaranteed return on car park concession 2,953 2,952 – – Kulim (Malaysia) Berhad (23370-V) 208 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
9. DIRECTORS’ REMUNERATION The details of remuneration receivable by directors of the Group and the Company during the year are as follows:
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Executive Directors – Fees 652 290 200 150 – Salaries, allowances and bonuses 2,652 2,253 2,193 1,261 – Estimated money value of benefi ts-in-kind 182 281 116 90 – Defi ned contribution plan 396 312 342 208 – Other emoluments 138 120 85 131
4,020 3,256 2,936 1,840
Non-executive Directors – Fees 639 701 195 250 – Salaries, allowances and bonuses 526 557 – – – Estimated money value of benefi ts-in-kind 54 115 – – – Defi ned contribution plan 71 79 – – – Other emoluments 268 94 45 32
1,558 1,546 240 282
Independent non-executive Directors – Fees 468 446 215 200 – Other emoluments 132 96 88 46
600 542 303 246
Total directors’ remuneration 6,178 5,344 3,479 2,368
10. INCOME TAX EXPENSE
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Statement of comprehensive income Current income tax – Malaysian income tax 134,035 96,671 25,305 14,288 – Foreign tax 143,071 80,589 – – – (Over)/Underprovided in prior years (18,216) (5,686) (2,758) 7,176
258,890 171,574 22,547 21,464
Deferred tax (Note 19): – Origination and reversal of temporary differences 80,297 63,440 321 (671) – Under/(Over)provided in prior years 17,743 (1,333) 28 360
98,040 62,107 349 (311)
Income tax expense recognised in profi t or loss 356,930 233,681 22,896 21,153 annual report 2011 | 209 Kulim (Malaysia) Berhad (23370-V)
10. INCOME TAX EXPENSE (continued) A reconciliation of income tax expense applicable to profi t/(loss) before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and the Company is as follows:
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Profi t/(loss) before tax 1,364,796 777,896 151,980 (7,718)
Taxation at Malaysian statutory tax rate of 25% (2010: 25%) 341,199 194,474 37,995 (1,930) Different tax rates in other countries 39,442 23,337 – – Effect of non-deductible expenses 49,400 15,558 14,488 23,842 Effect of income exempt from tax (79,960) (7,779) (26,857) (8,295) Utilisation of previously unrecognised deferred tax assets (580) – – – Deferred tax assets not recognised 7,902 15,110 – – (Over)/Underprovision of income tax in prior years (18,216) (5,686) (2,758) 7,176 Under/(Over)provision of deferred tax in prior years 17,743 (1,333) 28 360
356,930 233,681 22,896 21,153
11. DISCONTINUED OPERATION AND DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE
Group 2011 2010 RM’000 RM’000
Assets held for sale comprise: Investment in associate 13,500 13,500 Less: Allowance for impairment (1,500) –
12,000 13,500 Property, plant and equipment 1,032 –
13,032 13,500
The investment in associate relates to the proposed disposal of MM Vitaoils Sdn. Bhd, an associate of Sindora Berhad. The Group has received to date an amount of RM1,850,000 as partial payment from the buyer. The negotiation with the buyer on the completion of the sale is still in progress.
Discontinued operation and disposal group classifi ed as held for sale in the previous fi nancial year During the previous fi nancial year, the Group disposed of its interests in certain subsidiaries – Natural Oleochemicals Sdn. Bhd. and its subsidiaries (“NOSB Group”), which was previously reported in the oleochemical segment. This decision is consistent with the Group’s strategy to focus on its core plantation operations in Malaysia, Papua New Guinea and the Solomon Islands where the Group has extensive experience and strong presence.
The results of NOSB Group were presented separately on the statement of comprehensive income for the year ended 31 December 2010 as “Loss from discontinued operation, net of tax”. The disposal was completed on 30 September 2010. Kulim (Malaysia) Berhad (23370-V) 210 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
11. DISCONTINUED OPERATION AND DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE (continued) The disposal had the following effects on the fi nancial position of the Group as at 31 December 2010:
2010 RM’000 Property, plant and equipment 293,709 Prepaid lease payments 5,680 Deferred tax assets 3,242 Inventories 107,155 Receivables 215,907 Derivatives 19,438 Cash and cash equivalents 10,118 Deferred tax liabilities (1,621) Trade and other payables (67,490) Loans and borrowings (270,202) Taxation (719)
Net assets of NOSB Group 315,217 Non-controlling interests (34,150)
Net assets of NOSB Group attributable to the Group 281,067 Incidental costs 15,516 Total disposal proceeds (450,000)
Gain on disposal to the Group (153,417)
Cash infl ow arising on disposal: Cash consideration 450,000 Cash and cash equivalents of NOSB Group disposed (10,118)
Net cash infl ow on disposal 439,882
Statement of comprehensive income disclosures The results attributable to NOSB Group were as follows:
1 Jan 2010 to 30 Sep 2010 Group Company RM’000 RM’000 Revenue 881,511 – Expenses (873,031) –
Profi t from operations 8,480 – Finance costs (7,004) – Gain on disposal of discontinued operation 153,417 240,149 Taxation (3,282) –
Gain from discontinued operation, net of tax 151,611 240,149 annual report 2011 | 211 Kulim (Malaysia) Berhad (23370-V)
11. DISCONTINUED OPERATION AND DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE (continued) Statement of cash fl ow disclosures The cash fl ow attributable to NOSB Group were as follows: 1 Jan 2010 to 30 Sep 2010 Group RM’000 Operating (38,265) Investing 328 Financing (38,252)
Net cash outfl ows (76,189)
12. EARNINGS PER SHARE Basic earnings per share amounts are calculated by dividing profi t for the year, net of tax, attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the fi nancial year.
The following refl ect the profi t and share data used in the computation of basic earnings per share for the years ended 31 December:
Group 2011 2010 RM’000 RM’000 Profi t for the year attributable to shareholders – continuing operations 565,013 233,981 – discontinued operation – 151,611
565,013 385,592
Group 2011 2010 ’000 ’000 Weighted average number of ordinary shares 1,230,853 1,249,396
Group 2011 2010 Sen Sen Basic earnings per share – continuing operations 45.90 18.73 – discontinued operation – 12.13
45.90 30.86
The comparative amount for earnings per share has been adjusted to take into effect the results of the share split and bonus issue as disclosed in Note 26.
Diluted earnings per share is equal to the basic earnings per share as there are no dilutive effects from the potential exercise of the share warrants. Kulim (Malaysia) Berhad (23370-V) 212 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
12. EARNINGS PER SHARE (continued)
Group 2011 2010 RM’000 RM’000
Weighted average number of ordinary shares at 1 January/31 December 1,230,853 1,249,396
Group 2011 2010 RM’000 RM’000 Diluted earnings per share: – continuing operations 45.90 18.73 – discontinued operation – 12.13
45.90 30.86
13. PROPERTY, PLANT AND EQUIPMENT
Leasehold Long term improvement Estate Capital Freehold leasehold and development Other work in land land renovation expenditure Buildings assets progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group Cost At 1 January 2010 1,472,928 487,852 310,180 1,009,549 1,040,177 2,209,421 396,331 6,926,438 Acquisition of subsidiaries – – 178 464,499 147,727 163,461 21,147 797,012 Discontinued operation – (9,379) – – (107,846) (327,840) (87) (445,152) Additions 16,568 3,357 89,912 108,255 23,197 182,439 305,570 729,298 Disposals (768) – (18,106) (7,357) (9,662) (34,874) – (70,767) Write off (1,833) – – (2,987) (2,769) (9,397) – (16,986) Transfer from assets held for sale – – – – – 389 – 389 Reclassifi cation – – – – 75,501 303,706 (379,207) – Exchange differences – – (2,706) (57,807) (38,163) (61,628) (39,695) (199,999)
At 31 December 2010/ 1 January 2011 1,486,895 481,830 379,458 1,514,152 1,128,162 2,425,677 304,059 7,720,233
At 1 January 2011 1,486,895 481,830 379,458 1,514,152 1,128,162 2,425,677 304,059 7,720,233 Acquisition of subsidiaries – – – – – 171,285 – 171,285 Additions 26,571 209,951 103,869 512,543 43,331 374,572 329,435 1,600,272 Disposals (692) (695) (20,349) – (258) (33,943) – (55,937) Write off – – – – (1,152) (5,942) – (7,094) Reclassifi cation (271) 271 (3,778) – 75,493 151,529 (223,244) – Exchange differences – – 2,444 121,878 169,446 122,639 60,253 476,660
At 31 December 2011 1,512,503 691,357 461,644 2,148,573 1,415,022 3,205,817 470,503 9,905,419 annual report 2011 | 213 Kulim (Malaysia) Berhad (23370-V)
13. PROPERTY, PLANT AND EQUIPMENT (continued)
Leasehold Long term improvement Estate Capital Freehold leasehold and development Other work in land land renovation expenditure Buildings assets progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group Accumulated depreciation At 1 January 2010 – 38,678 128,005 243,479 217,296 1,004,978 – 1,632,436 Acquisition of subsidiaries – – 64 – 311 1,231 – 1,606 Discontinued operation – (1,210) – – (19,455) (130,778) – (151,443) Charge for the year – 355 34,035 44,421 21,816 220,562 – 321,189 Disposals – – (14,687) – (3,632) (30,737) – (49,056) Write off – – – (2,987) (1,649) (6,136) – (10,772) Transfer from assets held for sale – – – – – 290 – 290 Reclassifi cation – 357 – – (303) (54) – – Exchange differences – – (1,487) (10,097) (9,166) (32,783) – (53,533)
At 31 December 2010/ 1 January 2011 – 38,180 145,930 274,816 205,218 1,026,573 – 1,690,717
At 1 January 2011 – 38,180 145,930 274,816 205,218 1,026,573 – 1,690,717 Acquisition of subsidiaries – – – – – 4,065 – 4,065 Charge for the year – 4,329 40,429 48,715 35,290 286,792 – 415,555 Disposals – (695) (16,804) – (13) (25,993) – (43,505) Write off – – – – (773) (5,177) – (5,950) Reclassifi cation – 981 (732) – (265) 16 – – Exchange differences – – 1,726 3,393 2,289 12,147 – 19,555
At 31 December 2011 – 42,795 170,549 326,924 241,746 1,298,423 – 2,080,437
Accumulated impairment losses At 1 January 2010 58,733 – 1,276 12,177 22,931 10,308 703 106,128 Impairment loss for the year 2,560 540 – – 7,936 35,404 – 46,440
At 31 December 2010 61,293 540 1,276 12,177 30,867 45,712 703 152,568 Impairment loss for the year – – – – – 4,574 237 4,811
At 31 December 2011 61,293 540 1,276 12,177 30,867 50,286 940 157,379
Net carrying amount: At 31 December 2010 1,425,602 443,110 232,252 1,227,159 892,077 1,353,392 303,356 5,876,948
At 31 December 2011 1,451,210 648,022 289,819 1,809,472 1,142,409 1,857,108 469,563 7,667,603 Kulim (Malaysia) Berhad (23370-V) 214 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
13. PROPERTY, PLANT AND EQUIPMENT (continued)
Long term Estate Capital Freehold leasehold development Other work in land land expenditure Buildings assets progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Company Cost At 1 January 2010 774,737 207,768 127,976 48,113 30,450 698 1,189,742 Additions – – 5,168 174 1,301 3,674 10,317 Disposals – – – (22) (2,375) – (2,397) Write off – – (2,325) (631) (1,142) – (4,098) Transfer – – – 760 – (760) –
At 31 December 2010/1 January 2011 774,737 207,768 130,819 48,394 28,234 3,612 1,193,564 Additions – – 6,105 11 1,651 3,394 11,161 Disposals – – – – (66) – (66) Write off – – – (163) (1,236) (108) (1,507) Reclassifi cation – – – 2,574 – (2,574) –
At 31 December 2011 774,737 207,768 136,924 50,816 28,583 4,324 1,203,152
Accumulated depreciation At 1 January 2010 – 9,691 56,907 26,992 22,967 – 116,557 Charge for the year – 1,218 5,812 1,846 2,251 – 11,127 Disposals – – – (9) (2,126) – (2,135) Write off – – (2,325) (597) (1,102) – (4,024)
At 31 December 2010/1 January 2011 – 10,909 60,394 28,232 21,990 – 121,525 Charge for the year – 1,218 5,875 1,570 1,973 – 10,636 Disposals – – – – (50) – (50) Write off – – – (131) (1,231) – (1,362)
At 31 December 2011 – 12,127 66,269 29,671 22,682 – 130,749
Net carrying amount: At 31 December 2010 774,737 196,859 70,425 20,162 6,244 3,612 1,072,039
At 31 December 2011 774,737 195,641 70,655 21,145 5,901 4,324 1,072,403 annual report 2011 | 215 Kulim (Malaysia) Berhad (23370-V)
13. PROPERTY, PLANT AND EQUIPMENT (continued) Other assets can be further analysed as follows:
Vessels, Restaurant Furniture plant and and offi ce and Motor machinery equipment fi ttings vehicles Total RM’000 RM’000 RM’000 RM’000 RM’000 Group Cost At 1 January 2010 1,550,546 529,226 48,058 81,591 2,209,421 Acquisition of subsidiaries 161,107 2,018 218 118 163,461 Discontinued operation (318,243) – (9,597) – (327,840) Additions 48,282 119,712 4,436 10,009 182,439 Disposals (4,619) (24,183) (251) (5,821) (34,874) Write off (6,599) – (365) (2,433) (9,397) Transfer to assets held for sale 220 – 169 – 389 Reclassifi cation 303,999 – (293) – 303,706 Exchange differences (58,743) (2,652) (59) (174) (61,628)
At 31 December 2010 1,675,950 624,121 42,316 83,290 2,425,677
At 1 January 2011 1,675,950 624,121 42,316 83,290 2,425,677 Acquisition of subsidiaries 169,579 12 459 1,235 171,285 Additions 168,922 149,889 40,644 15,117 374,572 Disposals (1,077) (20,737) (1,165) (10,964) (33,943) Write off (2,947) – (396) (2,599) (5,942) Reclassifi cation 151,295 234 – – 151,529 Exchange differences 120,922 1,679 – 38 122,639
At 31 December 2011 2,282,644 755,198 81,858 86,117 3,205,817
Accumulated depreciation At 1 January 2010 696,192 220,646 31,652 56,488 1,004,978 Acquisition of subsidiaries 8 1,123 – 100 1,231 Discontinued operation (124,506) – (6,272) – (130,778) Charge for the year 149,320 56,589 5,526 9,127 220,562 Disposals (5,393) (19,866) (335) (5,143) (30,737) Write off (3,714) – (344) (2,078) (6,136) Transfer to assets held for sale 192 – 98 – 290 Reclassifi cation 1 – (97) 42 (54) Exchange differences (31,332) (1,313) (44) (94) (32,783)
At 31 December 2010 680,768 257,179 30,184 58,442 1,026,573
At 1 January 2011 680,768 257,179 30,184 58,442 1,026,573 Acquisition of subsidiaries 3,166 3 184 712 4,065 Charge for the year 208,372 65,320 4,669 8,431 286,792 Disposals (248) (14,947) (1,117) (9,681) (25,993) Write off (2,217) – (394) (2,566) (5,177) Reclassifi cation – 16 – – 16 Exchange differences 10,862 1,236 – 49 12,147
At 31 December 2011 900,703 308,807 33,526 55,387 1,298,423 Kulim (Malaysia) Berhad (23370-V) 216 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
13. PROPERTY, PLANT AND EQUIPMENT (continued)
Vessels, Restaurant Furniture plant and and offi ce and Motor machinery equipment fi ttings vehicles Total RM’000 RM’000 RM’000 RM’000 RM’000 Group Accumulated impairment losses At 1 January 2010 9,031 1,267 – 10 10,308 Impairment loss for the year 35,404 – – – 35,404
At 31 December 2010 44,435 1,267 – 10 45,712
At 1 January 2011 44,435 1,267 – 10 45,712 Impairment loss for the year 4,574 – – – 4,574
At 31 December 2011 49,009 1,267 – 10 50,286
Carrying amount At 31 December 2010 950,747 365,675 12,132 24,838 1,353,392
At 31 December 2011 1,332,932 445,124 48,332 30,720 1,857,108
Plant Furniture and and Motor machinery fi ttings vehicles Total RM’000 RM’000 RM’000 RM’000
Company Cost At 1 January 2010 14,597 7,033 8,820 30,450 Additions 211 315 775 1,301 Disposals (1,855) (61) (459) (2,375) Write off (445) (164) (533) (1,142)
At 31 December 2010 12,508 7,123 8,603 28,234
At 1 January 2011 12,508 7,123 8,603 28,234 Additions 325 438 888 1,651 Disposals (33) (33) – (66) Write off (281) (250) (705) (1,236)
At 31 December 2011 12,519 7,278 8,786 28,583 annual report 2011 | 217 Kulim (Malaysia) Berhad (23370-V)
13. PROPERTY, PLANT AND EQUIPMENT (continued)
Plant Furniture and and Motor machinery fi ttings vehicles Total RM’000 RM’000 RM’000 RM’000
Company Accumulated depreciation At 1 January 2010 11,837 5,034 6,096 22,967 Charge for the year 606 623 1,022 2,251 Disposals (1,664) (59) (403) (2,126) Write off (441) (163) (498) (1,102)
At 31 December 2010 10,338 5,435 6,217 21,990
At 1 January 2011 10,338 5,435 6,217 21,990 Charge for the year 527 616 830 1,973 Disposals (32) (18) – (50) Write off (276) (250) (705) (1,231)
At 31 December 2011 10,557 5,783 6,342 22,682
Carrying amount At 31 December 2010 2,170 1,688 2,386 6,244
At 31 December 2011 1,962 1,495 2,444 5,901
Assets held under fi nance lease During the year, the Group and the Company acquired property, plant and equipment with an aggregate cost of about RM1,600,272,000 (2010: RM729,298,000) and RM11,161,000 (2010: RM10,317,000) respectively, of which RM7,629,000 (2010: RM3,245,000) and Nil (2010: Nil) of the Group and of the Company respectively, were acquired by means of fi nance lease.
Included in property, plant and equipment of the Group are assets acquired under lease arrangements at net book value of RM7,629,000 (2010: RM5,643,000). The leased assets consist of equipments and motor vehicles which secure lease obligations (Note 23).
Assets pledged as security for borrowings
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Carrying amount of assets pledged as security for borrowings: – freehold lands 500,792 591,798 44,953 88,903 – long term leasehold lands 126,470 200,516 126,470 157,138 – estate development expenditure 633,329 550,915 1,251 30,460 – buildings 857,989 643,351 – – – other property, plant and equipment 1,094,076 773,011 – –
3,212,656 2,759,591 172,674 276,501 Kulim (Malaysia) Berhad (23370-V) 218 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
13. PROPERTY, PLANT AND EQUIPMENT (continued) Acquisition of oil palm plantations from ultimate holding corporation On 16 August 2011, the Company made an announcement to Bursa Malaysia in relation to the proposed acquisition through its wholly owned subsidiary, Mahamurni Plantations Sdn. Bhd, of six estates (together with all buildings and mills erected thereon) owned by the ultimate holding corporation, Johor Corporation for a cash consideration of RM700 million. As at 31 December 2011, the Group has fully acquired Sungai Papan Estate and part of Siang Estate. The net carrying amount of the acquired estates amounted to RM374,900,000. The balance of RM325,100,000 attributable to the other unacquired estates will be acquired in the fi nancial year ending 31 December 2012. As at the reporting date, the title to the acquired estates is in the midst of being transferred to the Group.
Impairment loss During the current fi nancial year, the Group recognised impairment losses of RM4,811,000. This was mainly in respect of its bio-diesel plant and machinery.
During the previous fi nancial year, the Group recognised impairment losses of RM11,036,000 in respect of certain assets associated with the Group’s foods and restaurants business segment and RM35,404,000 in respect of the Group’s bio-diesel plant and machinery.
14. INVESTMENT PROPERTIES
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 At 1 January 97,863 97,863 94,503 94,503 Additions from subsequent expenditure 5,248 – 5,248 – Acquired during the year 2,902 – 2,902 – Net loss from fair value adjustments recognised in profi t or loss (Note 8) (7,717) – (8,051) –
At 31 December 98,296 97,863 94,602 94,503
Investment properties comprise a number of commercial properties that are leased to third parties. Subsequent renewals are negotiated with the lessee and no contingent rents are charged.
The fair values of investment properties of the Group and of the Company are determined using the investment and comparison method.
Security At 31 December 2011, investment properties of the Group and of the Company with carrying amounts of RM93,570,000 (2010: RM97,863,000) and RM90,000,000 (2010: RM94,503,000) respectively are charged to licensed banks for term loan facilities granted to the Group. annual report 2011 | 219 Kulim (Malaysia) Berhad (23370-V)
15. INTANGIBLE ASSETS
Franchise Concession Franchise Supplier Brands rights Goodwill rights fees relationship Others Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group Cost At 1 January 2010 86,452 720,452 36,172 14,198 69,866 – 700 927,840 Acquisition of subsidiaries – – 11,075 – – 145,072 – 156,147 Additions – 5,400 330 – 8,019 – 561 14,310 Write off – – – – (3,110) – – (3,110) Exchange difference – – – – – (4,771) – (4,771)
At 31 December 2010/ 1 January 2011 86,452 725,852 47,577 14,198 74,775 140,301 1,261 1,090,416 Acquisition of subsidiaries – – 12,940 – – – 465 13,405 Reclassifi cation – – – – – – 2,062 2,062 Additions – – 633 – 7,798 – – 8,431 Write off – – – – (75) – – (75) Exchange difference – – – – – 37,134 – 37,134
At 31 December 2011 86,452 725,852 61,150 14,198 82,498 177,435 3,788 1,151,373
Accumulated amortisation and impairment At 1 January 2010 – – 2,704 2,000 31,270 – 175 36,149 Amortisation for the year – – – 1,000 9,412 – 70 10,482 Write off – – – – (3,110) – – (3,110)
At 31 December 2010/ 1 January 2011 – – 2,704 3,000 37,572 – 245 43,521 Reclassifi cation – – – – – – 756 756 Amortisation for the year – – 76 1,000 7,814 – 482 9,372 Write off – – – – (75) – – (75)
At 31 December 2011 – – 2,780 4,000 45,311 – 1,483 53,574
Net carrying amount At 31 December 2010 86,452 725,852 44,873 11,198 37,203 140,301 1,016 1,046,895
At 31 December 2011 86,452 725,852 58,370 10,198 37,187 177,435 2,305 1,097,799 Kulim (Malaysia) Berhad (23370-V) 220 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
15. INTANGIBLE ASSETS Brands and franchise rights The Group’s brands and franchise rights were acquired through business combinations. Brands relate to the Group’s Integrated Poultry and Ancillary segments whereas franchise rights relate to the Group’s Restaurant segment.
Concession rights The concession rights arose from a 15 year Concession Agreement with the ultimate holding corporation for a subsidiary to manage, operate and maintain a multi-storey car park together with other parking facilities at Persada Johor International Convention Centre. The Group anticipates that the cost will be recovered through future income derived from the car park operations. The income is guaranteed by the ultimate holding corporation pursuant to the Concession Agreement. The Concession Agreement has a remaining amortisation period of 5.8 years (2010: 6.8 years).
Franchise fees Franchise fees consists of the initial franchise fee paid for the set up of new restaurants and renewal franchise fees which are paid upon the expiry of the initial franchise period. Franchise fees are amortised on a straight-line basis over a period of 10 years.
Supplier relationship The supplier relationship arose from the acquisition of palm oil plantations in Papua New Guinea and refl ect the net present value of the future income stream from purchasing of fresh fruit bunches produced by neighbouring smallholders. These assets have an indefi nite useful life and are tested annually for impairment.
Amortisation expense The amortisation of concession rights and franchise fees are included in the “Administrative expenses” line item in the statements of comprehensive income. annual report 2011 | 15. INTANGIBLE ASSETS(continued) Impairment testing of intangible assets with indefinite useful lives For the purpose of impairment testing, intangible assets with indefi nite useful lives have been allocated to the following cash-generating units (“CGU”).
Supplier Intangible assets Brandname Franchise rights Goodwill relationship with finite useful lives Total 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 221 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group Restaurants – – 725,852 725,852 25,091 15,129 – – – – 750,943 740,981 Integrated poultry 75,595 75,595 – – 10,783 10,278 – – 37,187 37,203 123,565 123,076 Ancillary 10,857 10,857 – – 3,607 3,577 – – – – 14,464 14,434 Bulk-mailing and printing services – – – – 1,931 1,931 – – – – 1,931 1,931 Parking operator – – – – 2,347 2,347 – – 10,198 11,198 12,545 13,545 Shipping and forwarding agent – – – – 3,336 1,333 – – – – 3,336 1,333
Provision of sea transportation and related services – – – – 5,660 5,660 – – – – 5,660 5,660 Insurance broker – – – – 1,642 1,642 – – – – 1,642 1,642 Agricultural fertilizer trading and biotechnology research and development – – – – 3,584 2,587 – – – – 3,584 2,587 Palm oil milling – – – – – – 177,435 140,301 – – 177,435 140,301 Others – – – – 389 389 – – 2,305 1,016 2,694 1,405
86,452 86,452 725,852 725,852 58,370 44,873 177,435 140,301 49,690 49,417 1,097,799 1,046,895 Kulim (Malaysia) Berhad
(23370-V) Kulim (Malaysia) Berhad (23370-V) 222 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
15. INTANGIBLE ASSETS (continued) Key assumptions used in value-in-use calculations The recoverable amount of the CGUs have been determined based on value-in-use calculations using cash fl ow projections based on fi nancial budgets approved by management.
The key assumptions on which management has based its cash fl ow projections are as follows:
Restaurants, integrated poultry and ancillary segments • Cash fl ows were projected based on fi nancial budgets approved by management covering a ten year period.
• The growth rate used to extrapolate the cash fl ows of the Restaurants, Integrated Poultry and Ancillary segments beyond the 10 year period is 4% (2010: 4%) which does not exceed the average historical growth rate over the long term for the industry or the estimated GDP growth rate of the country.
• There will be no material changes in the structure and principal activities of the CGUs.
• Raw material price infl ation – there will not be any signifi cant increase in the prices and supply of raw materials, wages and other related costs, resulting from industrial disputes, adverse changes in economic conditions or other unusual factors.
• There will be no material changes in the present legislation or regulations, rates and bases of duties, levies and other taxes affecting the CGU’s activities.
• A pre-tax discount rate of 9.65% was applied in determining the recoverable amounts of the CGUs. The discount rate was estimated based on the weighted average cost of capital of the respective CGUs.
• There will be no signifi cant changes in the prevailing existing fi nancing facilities and interest rates.
• There will be no signifi cant fl uctuations in the foreign exchange rates.
Other segments • Cash fl ows were projected based on actual operating results covering a fi ve year period.
• Revenue was projected to grow at approximately 5% – 25% per annum.
• Budgeted gross profi t margins were projected at between of 4% – 44% per annum.
• A pre-tax discount rate of 10% was applied in determining the recoverable amount of theCGU. The discount rate was estimated based on the CGU’s existing rates of borrowing.
The values assigned to the key assumptions represent management’s assessment of future trends in the industry. annual report 2011 | 223 Kulim (Malaysia) Berhad (23370-V)
16. INVESTMENT IN SUBSIDIARIES
Company 2011 2010 RM’000 RM’000 At cost: Unquoted shares in Malaysia 576,921 371,966 Less: Impairment losses (21,705) (21,250)
555,216 350,716 Quoted shares in Malaysia 545,028 653,579 Quoted shares outside Malaysia 216,390 216,390
1,316,634 1,220,685
Market value: Quoted shares in Malaysia 1,087,065 985,775 Quoted shares outside Malaysia 2,559,965 3,111,398
The investments in quoted shares in subsidiaries are pledged to the bank for borrowings as further disclosed in Note 23 to the fi nancial statements.
Details of the subsidiaries are as follows:
Effective ownership interest Country of 2011 2010 Name of subsidiaries incorporation % % Principal activities Held by the Company:
Mahamurni Plantations Sdn. Bhd. Malaysia 100 100 Oil palm plantation
Selai Sdn. Bhd. Malaysia 100 100 Oil palm plantation
Ulu Tiram Manufacturing Company Malaysia 100 100 Oil palm plantation (Malaysia) Sdn. Bhd.
Kumpulan Bertam Plantations Berhad Malaysia 94.49 94.49 Oil palm plantation
EPA Management Sdn. Bhd. Malaysia 100 100 Investment holding, provision of management services and consultancy, and mechanical equipment assembler
Skellerup Industries (Malaysia) Sdn. Bhd. Malaysia 100 100 Manufacturer of rubber-based products
Kulim Topplant Sdn. Bhd. Malaysia 60 60 Production of oil palm clones
JTP Trading Sdn. Bhd. Malaysia 80 80 Trading/distribution of tropical fruits
Kulim Energy Sdn. Bhd. Malaysia 100 100 Investment holding
Pristine Bay Sdn. Bhd. Malaysia 51 51 Investment holding
Kulim Plantations (Malaysia) Sdn. Bhd. Malaysia 100 100 Oil palm plantation
+@ New Britain Palm Oil Limited Papua New 50.68 50.68 Oil palm plantation Guinea
+# QSR Brands Bhd. Malaysia 53.92 56.02 Investment holding
Sindora Berhad Malaysia 100 76.29 Investment holding, operations of oil palm million and rubber estates Kulim (Malaysia) Berhad (23370-V) 224 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
16. INVESTMENT IN SUBSIDIARIES (continued)
Effective ownership interest Country of 2011 2010 Name of subsidiaries incorporation % % Principal activities
Held by the Company: (continued)
Cita Tani Sdn. Bhd. Malaysia 90 90 Cultivation of sugar cane and other agriculture produce
Renown Value Sdn. Bhd. Malaysia 75 90 Cultivation of pineapples and other agricultural produce
Kulim Nursery Sdn. Bhd. Malaysia 90 90 Oil palm nursery and other related services
The Secret of Secret Garden Sdn. Bhd. Malaysia 100 100 Marketing of personal care products
Held through Mahamurni Plantations Sdn. Bhd.:
Pembangunan Mahamurni Sdn. Bhd. Malaysia 100 100 Investment holding
United Malayan Agricultural Corporation Malaysia 100 100 Oil palm plantation Berhad
Held through Ulu Tiram Manufacturing Company (Malaysia) Sdn. Bhd.:
EPA Futures Sdn. Bhd. Malaysia 100 100 Dormant
Held through EPA Management Sdn. Bhd.:
Akli Resources Sdn. Bhd. Malaysia 95 95 Provider of in-house and external training programmes
Edaran Badang Sdn. Bhd. Malaysia 75 75 Dealer in agricultural machinery and parts
Kulim Civilworks Sdn. Bhd. Malaysia 75 75 Facilities maintenance, project and construction works
Panquest Ventures Limited British Virgin 100 100 Dormant Island
Kulim Livestocks Sdn. Bhd. Malaysia 90 90 Breeding and sale of cattle
Special Appearance Sdn. Bhd. Malaysia 90 90 Production house and event management
Superior Harbour Sdn. Bhd. Malaysia 78 78 Aquaculture
Extreme Edge Sdn. Bhd. Malaysia 90 100 Computer equipment supplier and services
Pinnacle Platform Sdn. Bhd. Malaysia 100 100 Software maintenance and supplier
Palma Bumimas Sdn. Bhd. Malaysia 100 100 Dormant
+PT Kulim Agro Persada Indonesia 100 100 Management services
Held through Kulim Livestocks Sdn. Bhd.
Exquisite Livestock Sdn. Bhd. Malaysia 90 90 Commercial cattle farming
Held through Edaran Badang Sdn. Bhd.:
Perfect Synergy Trading Sdn. Bhd. Malaysia 100 100 Fertilizer supplier
Optimum Status Sdn. Bhd. Malaysia 100 100 Mill maintenance annual report 2011 | 225 Kulim (Malaysia) Berhad (23370-V)
16. INVESTMENT IN SUBSIDIARIES (continued)
Effective ownership interest Country of 2011 2010 Name of subsidiaries incorporation % % Principal activities Held through Kulim Civilworks Sdn. Bhd.:
KCW Hardware Sdn. Bhd. Malaysia 100 100 Hardware supplier
KCW Kulim Marine Services Sdn. Bhd. Malaysia 100 100 Port services
KCW Electrical Sdn. Bhd. Malaysia 100 100 Electrical installation services
Held through Skellerup Industries (Malaysia) Sdn. Bhd.:
Skellerup Foam Products (Malaysia) Sdn. Bhd. Malaysia 100 100 Dormant
Skellerup Latex Products (M) Sdn. Bhd. Malaysia 100 100 Dormant
SIM Manufacturing Sdn. Bhd. Malaysia 90 90 Investment holding and manufacturers and dealers in rubber and rubber products of all kinds
Held through Kulim Energy Sdn. Bhd.:
Nexsol (Malaysia) Sdn. Bhd. Malaysia 51 51 Dormant
Held through JTP Trading Sdn. Bhd.:
JTP Montel Sdn. Bhd. Malaysia 67.5 67.5 Trading and distribution of tropical fruits
Held through New Britain Palm Oil Limited:
+Dami Australia Pty. Limited Australia 50.68 50.68 Research and production of oil palm seeds
+New Britain Nominees Limited Papua New 50.68 50.68 Operate as legal entity for New Britain Guinea Palm Oil Limited Share Ownership Plan
+Guadalcanal Plains Oil Limited Solomon 40.54 40.54 Operate as legal entity for New Britain Islands Palm Oil
+New Britain Plantation Services Pte. Limited Singapore 50.68 50.68 Sale of germinated oil palm seeds
+Ramu Agri-Industries Limited Papua New 50.68 50.68 Oil palm, cultivation of sugar cane and Guinea other agriculture produce
+Dumpu Limited Papua New 50.68 50.68 Landholding Guinea
+New Britain Oils Limited United 50.68 50.68 Refi nery Kingdom
+Kula Palm Oil Limited Papua New 40.54 40.54 Oil palm cultivation and processing Guinea
+Plantation Contracting Services Limited Papua New 50.68 50.68 Contractual earthworks and roadworks Guinea projects
+Poliamba Limited Papua New 32.94 32.94 Oil palm cultivation Guinea Kulim (Malaysia) Berhad (23370-V) 226 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
16. INVESTMENT IN SUBSIDIARIES (continued)
Effective ownership interest Country of 2011 2010 Name of subsidiaries incorporation % % Principal activities Held through QSR Brands Bhd.:
+Pizza Hut Holdings (Malaysia) Sdn. Bhd. Malaysia 53.92 56.02 Investment holding
+QSR Ventures Sdn. Bhd. Malaysia 53.92 56.02 Investment holding
+# KFC Holdings (Malaysia) Bhd. (“KFCH”) Malaysia 27.55 28.35 Investment holding
+Kampuchea Food Corporation Cambodia 29.66 30.81 Restaurants
+Efi nite Value Sdn. Bhd. Malaysia 53.92 56.02 Customer service call centre
+Pizza Hut Delco Sdn. Bhd. Malaysia 53.92 56.02 Dormant
+SBC Coffee Holdings Sdn. Bhd. Malaysia 53.92 56.02 Dormant
+Sterling Distinction Sdn. Bhd. Malaysia 53.92 56.02 Dormant
+Yayasan Amal Bistari Sdn. Bhd. Malaysia 35.48 36.64 Dormant
+Pizza Hut Restaurants Sdn. Bhd. Malaysia 53.92 56.02 Restaurants
+PH Property Holdings Sdn. Bhd. Malaysia 53.92 56.02 Dormant
+Multibrand QSR Holdings Pte. Ltd. Singapore 53.92 56.02 Investment holding
+QSR Captive Insurance Limited Labuan 53.92 – Captive insurer
+Integrated Poultry Industry (Kampuchea) Cambodia 53.92 – Dormant Private Limited
Held through KFCH:
+PHD Delivery Sdn. Bhd. Malaysia 53.92 56.02 Dormant
+Cilik Bistari Sdn. Bhd. Malaysia 27.55 28.35 Sale of board games
+Gratings Solar Sdn. Bhd. Malaysia 27.55 28.35 Trading of solar equipment
+Integrated Poultry Industry Sdn. Bhd. Malaysia 27.55 28.35 Poultry processing plant
+KFC Events Sdn. Bhd. Malaysia 27.55 28.35 Sales of food product vouchers
+KFC India Holdings Sdn. Bhd. Malaysia 27.55 28.35 Investment holding
+Pizza Hut Singapore Pte. Ltd. Singapore 53.92 56.02 Restaurants
+Pizza (Kampuchea) Private Limited Cambodia 29.66 30.81 Restaurants
+Ayamas Food Corporation Sdn. Bhd. Malaysia 27.55 28.35 Poultry processing and investment holding
+Ayamas Integrated Poultry Industry Sdn. Bhd. Malaysia 27.55 28.35 Breeder, broiler farms, hatchery, feedmill and investment holding
+KFC Manufacturing Sdn. Bhd. Malaysia 27.55 28.35 Bakery, trading in consumables and investment holding
+KFC Restaurants Holdings Sdn. Bhd. Malaysia 27.55 28.35 Investment holding
+KFCH Education (M) Sdn. Bhd, Malaysia 27.55 28.35 College/learning institute (formerly known as Paramount Holdings (M) Sdn. Bhd.)
annual report 2011 | 227 Kulim (Malaysia) Berhad (23370-V)
16. INVESTMENT IN SUBSIDIARIES (continued)
Effective ownership interest Country of 2011 2010 Name of subsidiaries incorporation % % Principal activities Held through KFCH: (continued)
+KFCIC Assets Sdn. Bhd. Malaysia 27.55 28.35 Property holding (formerly known as Paramount Management Sdn. Bhd.)
+Region Food Industries Sdn. Bhd. Malaysia 27.55 28.35 Sauce manufacturing plant
+Roaster’s Chicken Sdn. Bhd. Malaysia 27.55 28.35 Investment holding
+WP Properties Holdings Sdn. Bhd. Malaysia 27.55 28.35 Investment holding
+Ayamas Shoppe Sdn. Bhd. Malaysia 27.55 28.35 Poultry retail, convenience food store chain and investment holding
+Ayamazz Sdn. Bhd. Malaysia 27.55 28.35 Push-cart selling food and refreshment
+Kentucky Fried Chicken (Malaysia) Sdn. Bhd. Malaysia 27.55 28.35 Restaurants
+KFC (East Malaysia) Sdn. Bhd. Malaysia 27.55 28.35 Investment holding
+KFC (Peninsular Malaysia) Sdn. Bhd. Malaysia 27.55 28.35 Restaurants, commissary and investment holding
+KFC (Sarawak) Sdn. Bhd. Malaysia 27.55 28.35 Restaurants
+KFC Marketing Sdn. Bhd. Malaysia 27.55 28.35 Sales and marketing of food products
+Ladang Ternakan Putihekar (N.S.) Sdn. Bhd. Malaysia 27.55 28.35 Breeder farm
+MH Integrated Farm Berhad Malaysia 27.55 28.35 Property holding
+Pintas Tiara Sdn. Bhd. Malaysia 27.55 28.35 Property holding
+Rasamas Holdings Sdn. Bhd. Malaysia 27.55 28.35 Restaurants
+Rasamas Bangi Sdn. Bhd. Malaysia 27.55 28.35 Restaurants
+SPM Restaurants Sdn. Bhd. Malaysia 27.55 28.35 Meals on wheels and property holding
+Usahawan Bistari Ayamas Sdn. Bhd. Malaysia 27.55 28.35 Operation of “Sudut Ayamas”
+Ayamas Farms & Hatchery Sdn. Bhd. Malaysia 24.80 25.55 Broiler farm
+KFC (Sabah) Sdn. Bhd. Malaysia 27.55 28.35 Restaurants
+Rasamas BC Sdn. Bhd. Malaysia 27.55 28.35 Restaurants
+Rasamas Bukti Tinggi Sdn. Bhd. Malaysia 24.80 25.55 Restaurants
+Rasamas Butterworth Sdn. Bhd. Malaysia 24.80 25.55 Restaurants
+Rasamas Kota Bharu Sdn. Bhd. Malaysia 24.80 25.55 Restaurants
+Rasamas Melaka Sdn. Bhd. Malaysia 24.80 25.55 Restaurants
+Rasamas Nilai Sdn. Bhd. Malaysia 24.80 25.55 Restaurants
+Rasamas Subang Sdn. Bhd. Malaysia 24.80 25.55 Restaurants
+Rasamas Wangsa Maju Sdn. Bhd. Malaysia 24.80 25.55 Restaurants
+Rasamas Tebrau Sdn. Bhd. Malaysia 24.59 25.32 Restaurants Kulim (Malaysia) Berhad (23370-V) 228 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
16. INVESTMENT IN SUBSIDIARIES (continued)
Effective ownership interest Country of 2011 2010 Name of subsidiaries incorporation % % Principal activities Held through KFCH: (continued)
+Rasamas Terminal Larkin Sdn. Bhd. Malaysia 24.59 25.32 Restaurants
+Rasamas Taman Universiti Sdn. Bhd. Malaysia 24.53 25.27 Restaurants
+Ayamas Feedmill Sdn. Bhd. Malaysia 23.40 24.09 Broiler farm
+Semangat Juara Sdn. Bhd. Malaysia 20.65 21.29 Broiler farm
+Tepak Marketing Sdn. Bhd. Malaysia 15.15 15.57 Contract packing
+Kentucky Fried Chicken Management Singapore 27.55 28.35 Restaurants Pte. Ltd.
+Kernel Foods Pvt. Ltd. India 27.55 28.35 Restaurants
+Mauritius Food Corporation Pvt. Ltd. Mauritius 27.55 28.35 Restaurants
+Mumbai Chicken Pvt. Ltd. India 27.55 28.35 Restaurants
+Pune Chicken Restaurants Pvt. Ltd. India 27.55 28.35 Restaurants
+WQSR Holdings (S) Pte. Ltd. Singapore 27.55 28.35 Investment holding
+KFC (B) Sdn. Bhd. Brunei 12.67 13.00 Restaurants Darussalam
+Rasamas Sdn. Bhd. Brunei 12.67 13.00 Restaurants Darussalam
+Asbury’s (Malaysia) Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Ayamas Contract Farming Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Ayamas Franchise Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Ayamas Marketing (M) Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Ayamas Selatan Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Bakers’ Street Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Cemerlang Sinergi Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Chippendales (M) Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Efi nite Revenue Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Rangeview Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Rasamas Batu Caves Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Rasamas Endah Parade Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Rasamas Larkin Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Rasamas Mergong Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Restoran Keluarga Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Restoran Sabang Sdn. Bhd. Malaysia 27.55 28.35 Dormant
+Seattle’s Best Coffee Sdn. Bhd. Malaysia 27.55 28.35 Dormant
annual report 2011 | 229 Kulim (Malaysia) Berhad (23370-V)
16. INVESTMENT IN SUBSIDIARIES (continued)
Effective ownership interest Country of 2011 2010 Name of subsidiaries incorporation % % Principal activities Held through KFCH: (continued)
+Signature Chef Dining Serviecs Sdn. Bhd. Malaysia 27.55 28.35 Dormant +Signature Chef Foodservices & Catering Malaysia 27.55 28.35 Dormant Sdn. Bhd. +Wangsa Progresi Sdn. Bhd. Malaysia 27.55 28.35 Dormant +Hiei Food Industries Sdn. Bhd. Malaysia 22.32 22.97 Dormant +Yes Gelato Sdn. Bhd. Malaysia 22.05 22.69 Dormant +Ayamas Food Corporation (S) Pte. Ltd. Singapore 27.55 28.35 Dormant +Ayamas Shoppe (S) Pte. Ltd. Singapore 27.55 28.35 Dormant +Helix Investments Limited Hong Kong 27.55 28.35 Dormant +Ayamas Shoppe (Brunei) Sdn. Bhd. Brunei 12.67 13.00 Dormant Darussalam +Southern Poultry Farming Sdn. Bhd Malaysia 24.80 – Broiler farm +Ventures Poultry Farm Sdn. Bhd Malaysia 24.80 – Broiler farm +Synergy Poultry Farming Sdn. Bhd Malaysia 23.35 – Broiler farm +Ayamas Shoppe Sabah Sdn. Bhd Malaysia 17.90 – Convenience food store +Agrotech Farm Solutions Sdn. Bhd Malaysia 27.55 – Dormant Held through Sindora Berhad:
Sindora Wood Products Sdn. Bhd. Malaysia 100.00 76.29 Property letting Sindora Timber Products Sdn. Bhd. Malaysia 100.00 76.29 Dormant Sindora Trading Sdn. Bhd. Malaysia 100.00 76.29 Dormant Sindora Development Sdn. Bhd. Malaysia 100.00 76.29 Dormant Sindora Timber Sdn. Bhd. Malaysia 90.00 68.66 Timber logging, processing and sale of sawn timber, timber doors, laminated timber scantling and trading of wood products Granulab (M) Sdn. Bhd. Malaysia 90.00 68.66 Trading of GranuMas, a granular synthetic bone graft Pro Offi ce Solutions Sdn. Bhd. Malaysia 90.00 68.66 Bulk mailing and printing services Epasa Shipping Agency Sdn. Bhd. Malaysia 75.00 57.22 Shipping and forwarding agent
E.A. Technique (M) Sdn. Bhd. Malaysia 51.00 38.91 Provision of sea transportation and related services Metro Parking (M) Sdn. Bhd. Malaysia 75.00 57.22 Parking operations and the provision of related consultancy services Microwell Sdn. Bhd. Malaysia 60.00 45.77 Trading of agricultural fertilizers, water treatment, biotechnology research and development MIT Insurance Brokers Sdn. Bhd. Malaysia 90.00 68.66 Insurance broking and consultancy
Orkim Sdn. Bhd. Malaysia 35.86 – Provision of sea transportation and related services
Kulim (Malaysia) Berhad (23370-V) 230 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
16. INVESTMENT IN SUBSIDIARIES (continued)
Effective ownership interest Country of 2011 2010 Name of subsidiaries incorporation % % Principal activities Held through Metro Parking (M) Sdn. Bhd.:
+ Metro Parking (S) Pte. Ltd. Singapore 52.50 40.05 Parking operator and consultancy services
+ Metro Parking (B) Sdn. Bhd. Brunei 75.00 68.66 Parking operator and consultancy services Darussalam
Metro Equipment Systems (M) Sdn. Bhd. Malaysia 75.00 52.26 Trading in parking and other related equipments
Metro Parking (Sabah) Sdn. Bhd. Malaysia 75.00 57.22 Parking operator and other transport related services
Smart Parking Management Sdn. Bhd. Malaysia 75.00 42.91 Parking operator and trading in related equipments
+Metro Parking (HK) Limited Hong Kong 41.25 31.47 Parking operator and other transport related services
+Metro Parking Services (India) Private India 75.00 57.22 Parking operator and consultancy services Limited
Held through Sindora Timber Sdn. Bhd.:
General Access Sdn. Bhd. Malaysia 78.98 61.79 Field clearing, earthwork, road construction and resurfacing
Tiram Fresh Sdn. Bhd. Malaysia 90.00 61.79 Cultivation and trading of mushroom and related products
Jejak Juara Sdn. Bhd. Malaysia 81.00 61.79 Manufacturers and dealers in rubber products
Held through E.A. Technique (M) Sdn. Bhd.:
Johor Shipyard & Engineering Sdn. Bhd. Malaysia 51.00 38.91 Shipbuilding, fabrication of steel structures, engineering services and consultancy
Held through Microwell Sdn. Bhd.:
Julang Sempurna Sdn. Bhd. Malaysia 60.00 45.77 Trading of biochemical fertilizer
+ Audited by fi rms other than Ernst & Young
@ Listed on Port Moresby Stock Exchange (“POMSOX”) and London Stock Exchange
# Listed on the Main Board of Bursa Malaysia Securities Berhad annual report 2011 | 231 Kulim (Malaysia) Berhad (23370-V)
16. INVESTMENT IN SUBSIDIARIES (continued) Acquisition of additional interest in subsidiaries in 2011 During the fi nancial year, the Group and Company acquired an additional 22,076,182 ordinary shares in Sindora Berhad (“Sindora”) representing 23.71% of the issued and paid-up share capital of Sindora for a total purchase consideration of RM70,598,000. Following the acquisition, Sindora became a wholly owned subsidiary of the Group.
Acquisition of subsidiaries in 2011 (i) On 1 November 2010, the Group via its subsidiary, KFCH announced that it had via its wholly-owned subsidiary, Ayamas Food Corporation Sdn. Bhd., entered into Sale and Purchase of Shares Agreements for the acquisition of:
a. 90.0% of the issued and paid up share capital of Southern Poultry Farming Sdn. Bhd.;
b. 84.8% of the issued and paid up share capital of Synergy Poultry Farming Sdn. Bhd.;
c. 90.0% of the issued and paid up share capital of Ventures Poultry Farm Sdn. Bhd.; and
d. 100% of the issued and paid-up share capital of Agrotech Farm Solutions Sdn. Bhd.
for a total cash consideration of RM1,111,951. These acquisitions were completed on 14 January 2011 and did not have any signifi cant impact on the fi nancial position of the Group.
(ii) On 11 March 2011, KFCH announced that it had via its wholly-owned subsidiary, Ayamas Shoppe Sdn. Bhd., incorporated a company, i.e. Ayamas Shoppe (Sabah) Sdn. Bhd. pursuant to the Joint Venture Agreement dated 27 October 2010 with Rastamas Trading Sdn. Bhd. for the purpose of operating Kedai Ayamas businesses in Sabah.
(iii) During the year, the Group through its subsidiary, E.A. Technique Sdn. Bhd. acquired an additional 380,000 ordinary shares in Orkim Sdn. Bhd. (“Orkim”) representing 1.1% of the issued and paid up share capital of Orkim Sdn. Bhd. for a total purchase consideration of RM866,000. Following the acquisition of the additional interest, Orkim became a subsidiary of the Group. The acquisition of Orkim had the following effect on the Group’s assets and liabilities on the acquisition date:
Recognised values on acquisition RM’000 Property, plant and equipment 167,202 Goodwill 518 Investment in associates 14,877 Deferred tax assets 24 Cash and cash equivalents 13,118 Receivables 6,181 Current tax assets 93 Non-controlling interest (19,186) Borrowings (128,043) Payables (6,444) Current tax liabilities (349)
Net identifi able assets 47,991 Less: Non-controlling interest on acquisition (30,781)
Group’s share of net assets 17,210 Goodwill on acquisition 12,589
Consideration paid, satisfi ed in cash 29,799 Cash and cash equivalents acquired (13,118)
Net cash outfl ow 16,681
Kulim (Malaysia) Berhad (23370-V) 232 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
16. INVESTMENT IN SUBSIDIARIES (continued) Acquisition of additional interest in subsidiaries in 2011 (continued) Acquisition of subsidiaries in 2011 (continued) Book values at the date of these acquisitions were determined based on the applicable FRSs immediately before these acquisitions. The book value at the date of acquisition of identifi able assets and liabilities recognised on acquisition approximates their fair values. From the date of acquisition, Orkim has contributed RM12,784,000 to the Group’s profi t net of tax. The effect of net profi ts contributed by the other acquired companies are not material in relation to the consolidated net profi t for the year.
Disposal of interest in subsidiary in 2011 On 2 August 2011, KFCH announced that it had through KFC Marketing Sdn. Bhd. entered into a Sale and Purchase of Shares incorporating Shareholders’ Agreement with Ayamazz Sdn. Bhd. and Mohamed Hashim bin Mohd Kamil (“Intrapreneur”).
The agreement enables the Intrapreneur to subscribe/purchase ordinary shares representing up to 25% equity interest in Ayamazz Sdn. Bhd. arising from the implementation of the Group’s Intrapreneur Scheme.
During the year, the Group disposed off 10% of its interest in Ayamazz Sdn. Bhd. for a cash consideration of RM50,000.
Acquisition of subsidiaries in 2010 Acquisition of Kula Palm Oil Limited (CTP (PNG) Limited)
On April 2010, the Group, via its 50.66% controlled subsidiary New Britain Palm Oil Limited (NBPOL), successfully concluded the acquisition of Kula Palm Oil Limited (“Kula”) by acquiring 80% of the issued share capital of Kula.
The acquisition had the following effect on the Group’s assets and liabilities on acquisition date:
Book value Fair Recognised at date of value values on acquisition adjustments acquisition RM’000 RM’000 RM’000 Cash and cash equivalents 1,694 – 1,694 Trade and other receivables 66,170 – 66,170 Inventories 70,515 14,677 85,192 Property, plant and equipment 293,848 481,977 775,825 Intangible assets – 145,072 145,072 Borrowings (2,804) – (2,804) Trade and other payables (192,070) – (192,070) Deferred tax liabilities (163,366) (72,493) (235,859)
Net identifi able assets 73,987 569,233 643,220
Less: Minority interest on acquisition (128,643)
Total purchase consideration 514,577 Settlement of intercompany payable 91,071
Total settlement in cash 605,648 Less: Cash and cash equivalents (1,694)
Total cash outfl ow on acquisition 603,954 annual report 2011 | 233 Kulim (Malaysia) Berhad (23370-V)
16. INVESTMENT IN SUBSIDIARIES (continued) Acquisition of subsidiaries in 2010 (continued) Effect of acquisition The acquisition of Kula had the following effect on the Group’s operating results, assets and liabilities as at 31 December 2010:
8 months ended 31.12.2010 RM’000
Statement of comprehensive income Revenue 368,200 Operating costs (271,279)
Operating profi t 96,921 Finance costs –
Profi t before tax 96,921 Income tax expense (47,194)
Profi t for the year 49,727 Less: Minority interests (29,566)
Increase in the Group’s net profi t at the end of the fi nancial year 20,161
Statement of fi nancial position Property, plant and equipment 738,743 Current assets 76,461 Current liabilities (39,575) Deferred tax liabilities (246,759) Minority interest (173,950)
Net assets acquired/Group’s share of net assets 354,920 Intangible assets on acquisition 140,301
Increase in the Group’s net assets 495,221 Kulim (Malaysia) Berhad (23370-V) 234 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
16. INVESTMENT IN SUBSIDIARIES (continued) Acquisition of subsidiaries in 2010 (continued) Acquisition of Plantation Contracting Services Limited (“PCSL”) On June 2010, the Group, via its 50.66% controlled subsidiary NBPOL, successfully concluded the acquisition of PCSL by acquiring the remaining 50% of the share capital of PCSL, a company incorporated in Papua New Guinea and in which NBPOL previously held a 50% interest.
The acquisiton had the following effect on the Group’s assets and liabilities on acquisition date:
Book value Fair Recognised at date of value values on acquisition adjustments acquisition RM’000 RM’000 RM’000 Cash and cash equivalents 77 – 77 Trade and other receivables 121 3,175 3,296 Property, plant and equipment 11,831 3,333 15,164 Borrowings (12,735) – (12,735) Trade and other payables (9,422) – (9,422)
Net identifi able assets and liabilities (10,128) 6,508 (3,620)
Impairment charge 6,177
Total purchase consideration 2,557 Cash and cash equivalents (77)
Total cash outfl ow on acquisition 2,480
The acquisition did not have any signifi cant effect on the Group’s profi t net of tax.
Acquisition of subsidiaries by QSR Brands Bhd. (“QSR”) (i) During the year, QSR acquired an additional 800,000 ordinary shares in KFC Holdings (Malaysia) Bhd. (“KFCH”) representing 0.39% of the issued and paid-up share capital of KFCH for a total purchase consideration of RM8,786,563. Following the acquisition, QSR’s shareholdings in KFCH increased from 50.25% to 50.64%.
(ii) On 18 September 2009, KFCH announced that it had entered into a Share Sale Agreement for the acquisition of the entire equity interest in Paramount Management Sdn. Bhd. and Paramount Holdings (M) Sdn. Bhd., comprising 500,000 ordinary shares each and the entire equity interest in Gratings Solar Sdn. Bhd. comprising 200,000 ordinary shares, at a total cash consideration of RM6.5 million. The acquisition was completed on 29 January 2010.
(iii) On 13 April 2010, QSR announced that it had, vide its subsidiary, Kumpuchea Food Corporation Co. Limited, established a wholly owned subsidiary, Pizza (Kampuchea) Private Limited.
(iv) On 9 July 2010, QSR announced that it had, vide its wholly-owned subsidiary, Pizza Hut Restaurant Sdn. Bhd., acquired the entire issued and paid-up share capital of PHD Delivery Sdn. Bhd. (formerly known as Pizza Hut Delivery Sdn. Bhd.) comprising two (2) ordinary shares of RM1 each for a total cash consideration of RM2.
(v) On 16 July 2010, QSR and KFCH announced that they had jointly established a non-government and non-profi table company i.e Yayasan Amal Bistari Sdn. Bhd. for the primary purposes of regulating and driving all Corporate Responsibility endeavours and programmes. annual report 2011 | 235 Kulim (Malaysia) Berhad (23370-V)
16. INVESTMENT IN SUBSIDIARIES (continued) Acquisition of subsidiaries in 2010 (continued) (vi) On 4 October 2010, KFCH announced that it had acquired the entire issued and paid-up share capital of Cemerlang Sinergi Sdn. Bhd. and Efi nite Revenue Sdn. Bhd. comprising 2 ordinary shares of RM1 each at a total cash consideration of RM2, for each of the companies.
(vii) On 4 October 2010, QSR announced that it had acquired the entire issued and paid-up share capital of Efi nite Value Sdn. Bhd. comprising 2 ordinary shares of RM1 each at a total cash consideration of RM2.
(viii) On 27 October 2010, KFCH via its wholly-owned subsidiary, Ayamas Shoppe Sdn. Bhd., acquired the entire issued and paid-up share capital of Ayamas Shoppe (S) Pte. Ltd. comprising 2 ordinary shares of SGD1 each for a total cash consideration of SGD2.
(ix) On 18 November 2010, KFCH announced that it had via its subsidiary, KFC (B) Sdn. Bhd., incorporated a subsidiary in Brunei, i.e. Ayamas Shoppe (Brunei) Sdn. Bhd.
(x) On 13 December 2010, KFCH announced that it had via its subsidiary, Pune Chicken Restaurant Private Limited, entered into a Share Subscription and Share Purchase Agreement for the acquisition of the entire interest in Kernel Foods Private Limited for a cash consideration of Rs.12,000,000 (Rupees Twelve Lacs only) amounting to approximately RM84,000.
The above acquisitions by QSR in the previous fi nancial year had the following combined effects on the Group’s assets and liabilities on acquisition date:
Recognised values on acquisition RM’000 Property, plant and equipment 4,005 Inventories 109 Trade and other receivables 549 Cash and cash equivalents (385) Loans and borrowings (1,023) Deferred tax liabilities (31) Trade and other payables (597) Current tax liabilities (39) Minority interests 3,290
Net identifi able assets and liabilities 5,878 Intangible assets arising from acquisition 5,400 Goodwill arising from acquisition 6,636
Consideration paid, satisfi ed in cash 17,914 Cash and cash equivalents acquired 385
Net cash outfl ow 18,299
Book values at the date of acquisition were determined based on applicable FRSs immediately before the acquisition. The book values at the date of acquisition of identifi able assets and liabilities generally approximate their fair values. The effect of net profi ts and net assets contributed by the acquired companies are not material in relation to the consolidated net profi t for the year and net assets of the Group at the reporting date. Kulim (Malaysia) Berhad (23370-V) 236 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
16. INVESTMENT IN SUBSIDIARIES (continued) Acquisition of subsidiaries in 2010 (continued) Acquisition of subsidiaries by Sindora Berhad During the previous fi nancial year, the Group acquired Microwell Sdn. Bhd. (“Microwell”) and MIT Insurance Brokers Sdn. Bhd. (“MIT”) for a cash consideration of RM5,966,000. The acquisitions had the following effect on the Group’s assets and liabilities on acquisition date.
Recognised values on Microwell MIT acquisition RM’000 RM’000 RM’000 Property, plant and equipment 27 190 217 Intangible assets 210 – 210 Inventories 130 – 130 Receivables, deposit and prepayments 441 3,579 4,020 Cash and cash equivalents 746 277 1,023 Payables and accruals (270) (3,593) (3,863)
Net identifi able assets and liabilities 1,284 453 1,737 Goodwill on acquisition 2,587 1,642 4,229
Consideration paid, satisfi ed in cash 3,871 2,095 5,966 Cash and cash equivalents acquired (1,023)
Net cash outfl ow 4,943
The goodwill recognised on the acquisitions are mainly attributable to the skills and technical talent of the acquired business’s work force and the synergies expected to be achieved from integrating these new subsidiaries into the Group. The acquisitions did not have any signifi cant effect on the Group’s profi t net of tax.
Acquisition of Exquisite Livestock Sdn. Bhd., Extreme Edge Sdn. Bhd., Pinnacle Platform Sdn. Bhd., Perfect Synergy Trading Sdn. Bhd., Optimum Status Sdn. Bhd., KCW Hardware Sdn. Bhd., KCW Kulim Marine Services Sdn. Bhd. and KCW Electrical Sdn. Bhd. During the previous fi nancial year, the Group acquired 8 new companies, Exquisite Livestock Sdn. Bhd., Extreme Edge Sdn. Bhd., Pinnacle Platform Sdn. Bhd., Perfect Synergy Trading Sdn. Bhd., Optimum Status Sdn. Bhd., KCW Hardware Sdn. Bhd., KCW Kulim Marine Services Sdn. Bhd., and KCW Electrical Sdn. Bhd., for a total cash consideration of RM1,308,000. The acquisition did not have any signifi cant effect on the Group’s profi t net of tax.
Disposal of subsidiaries in 2010 (i) Disposal of equity interest in Natural Oleochemicals Sdn. Bhd. and its subsidiaries In September 2010, the Group disposed its entire equity interest in Natural Oleochemicals Sdn. Bhd., and its subsidiaries. Further details are disclosed in Note 11 to the fi nancial statements.
(ii) Partial disposal of Sindora Berhad In June 2010, the Company disposed off 0.20% of its equity shareholding in Sindora Berhad for a total consideration of RM289,018 resulting in a loss on partial disposal to the Group and the Company of RM283,744 and RM52,749 respectively. The Group recognised an increase in minority interest of about RM572,690. The Group’s equity interest in Sindora Berhad fell to 76.30%.
On July 2010, the Company disposed off 0.01% of its equity shareholding in Sindora Berhad for a total consideration of RM19,067 resulting in a loss on partial disposal to the Group and the Company of RM16,624 and RM2,169 respectively. The Group recognised an increase in minority interest of about RM35,690. The Group’s equity interest in Sindora Berhad fell to 76.29%. annual report 2011 | 237 Kulim (Malaysia) Berhad (23370-V)
16. INVESTMENT IN SUBSIDIARIES (continued) Acquisition of subsidiaries in 2010 (continued) Disposal of subsidiaries in 2010 (continued) (iii) Partial disposal of QSR Brands Bhd. During the year, the Company disposed off 3.51% of its equity shareholding in QSR Brands Berhad for a total consideration of RM69,620,000 resulting in a gain on partial disposal to the Group and the Company of RM31,808,000 and RM24,837,000 respectively. The Group recognised an increase in minority interest of about RM32,052,000. The Group’s equity interest in QSR Brands Berhad fell to 56.31%.
(iv) Partial disposal of JTP Trading Sdn. Bhd. During the year, the Company disposed off 10% of its equity interest in JTP Trading Sdn. Bhd. for a consideration of RM88,200 resulting in a loss on partial disposal to the Group of RM1,000 and gain to the Company of RM6,776. The Group recognised an increase in minority interest of RM89,200.
(v) Partial disposal of Renown Value Sdn. Bhd. During the year, the Company disposed off 15% of its equity interest in Renown Value Sdn. Bhd. This disposal did not have any signifi cant effect on the Group and Company’s profi t net of tax.
17. INVESTMENTS IN ASSOCIATES
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Unquoted shares, at cost: – outside Malaysia – 23,686 – – – in Malaysia 16,622 30,384 – – Share of post-acquisition reserves: – in Malaysia 7,712 2,540 – –
24,334 56,610 – – Kulim (Malaysia) Berhad (23370-V) 238 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
17. INVESTMENTS IN ASSOCIATES (continued) Details of the signifi cant associates are as follows:
Effective ownership interest Country of 2011 2010 Name of associate incorporation % % Principal activities Held through Sindora Berhad
Orkim Sdn. Bhd. Malaysia – 35.29 Shipping and forwarding
Held through Orkim Sdn. Bhd
Orkim Discovery Sdn. Bhd. Malaysia 14.32 – Ship owning company
Orkim Reliance Sdn. Bhd. Malaysia 14.32 – Ship owning company
Orkim Challenger Sdn. Bhd. Malaysia 14.32 – Ship owning company
Held through New Britain Palm Oil Limited
PT Damitama Mas Sejahtera Indonesia – 50.00 Production of seed materials
Orkim Sdn. Bhd. became a subsidiary during the fi nancial year, whilst PT Damitama Mas Sejahtera was disposed off during the fi nancial year.
The summarised fi nancial information of the associates, not adjusted for the proportion of ownership interest held by the Group, is as follows:
Net Total Total Total revenues profi t assets liabilities (100%) (100%) (100%) (100%) RM’000 RM’000 RM’000 RM’000 Group 2011 Orkim Challenger Sdn. Bhd. 14,965 5,509 4,286 50,436 Orkim Discovery Sdn. Bhd 14,965 5,822 4,345 50,132 Orkim Reliance Sdn. Bhd 13,999 5,995 6,543 50,484
2010 PT Damitama Mas Sejahtera 16,068 10,237 16,789 3,366 Orkim Sdn. Bhd. 30,238 3,703 203,954 136,985 annual report 2011 | 239 Kulim (Malaysia) Berhad (23370-V)
18. OTHER INVESTMENTS
Subordinated Warrants bond in Shares in Malaysia in Malaysia Malaysia Fund Total Unquoted Quoted Quoted Unquoted investment RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group 2011 Non-current Available-for-sale fi nancial assets 52,479 10,787 41,692 – – –
Current Available-for-sale fi nancial assets 33,384 – 2,777 – – 30,607 Held for trading 63,985 – – 63,985 – –
97,369 – 2,777 63,985 – 30,607
149,848 10,787 44,469 63,985 – 30,607
Representing items: At cost/amortised cost 10,787 10,787 – – – – At fair value 139,061 – 44,469 63,985 – 30,607
149,848 10,787 44,469 63,985 – 30,607
2010 Non-current Available-for-sale fi nancial assets 47,423 12,514 30,909 – 4,000 – Held for trading 166,638 – – 166,638 – –
214,061 12,514 30,909 166,638 4,000 –
Current Available-for-sale fi nancial assets 139,613 – 2,691 – – 136,922 Held for trading 5,904 – 5,665 – – 239
145,517 – 8,356 – – 137,161
359,578 12,514 39,265 166,638 4,000 137,161
Representing items: At cost/amortised cost 16,514 12,514 – – 4,000 – At fair value 343,064 – 39,265 166,638 – 137,161
359,578 12,514 39,265 166,638 4,000 137,161 Kulim (Malaysia) Berhad (23370-V) 240 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
18. OTHER INVESTMENTS (continued)
Warrants Shares in Malaysia in Malaysia Fund Total Unquoted Quoted Quoted investment RM’000 RM’000 RM’000 RM’000 RM’000 Company 2011 Non-current Available-for-sale fi nancial assets 5,778 3,842 1,936 – – Held for trading – – – – –
5,778 3,842 1,936 – –
Current Available-for-sale fi nancial assets 31,219 – 1,200 – 30,019 Held for trading 63,985 – – 63,985 –
95,204 – 1,200 63,985 30,019
100,982 3,842 3,136 63,985 30,019
Representing items: At cost/amortised cost 3,842 3,842 – – – At fair value 97,140 – 3,136 63,985 30,019
100,982 3,842 3,136 63,985 30,019
2010 Non-current Available-for-sale fi nancial assets 8,674 6,242 2,432 – – Held for trading 166,638 – – 166,638 –
175,312 6,242 2,432 166,638 –
Current Available-for-sale fi nancial assets 139,613 – 2,691 – 136,922
314,925 6,242 5,123 166,638 136,922
Representing items: At cost/amortised cost 6,242 6,242 – – – At fair value 308,683 – 5,123 166,638 136,922
314,925 6,242 5,123 166,638 136,922 annual report 2011 | 241 Kulim (Malaysia) Berhad (23370-V)
19. DEFERRED TAX ASSETS AND LIABILITIES Deferred tax assets/(liabilities) as at 31 December relates to the following:
Unutilised investment Fair value Property, Tax losses and re- gains on plant and carried investment Hedge fi nancial equipment forward allowances reserve instruments Others Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group At 1 January 2011 (699,188) 18,175 – 52,400 (17,668) (44,578) (690,859) Acquisition in business combination – – – – – 24 24 Recognised in profi t or loss (113,935) 12,672 5,029 – 4,625 (6,431) (98,040) Recognised in other comprehensive income – – – (59,304) 497 – (58,807) Translation exchange difference (190,237) 3,244 – 6,736 – (12,485) (192,742)
At 31 December 2011 (1,003,360) 34,091 5,029 (168) (12,546) (63,470) (1,040,424)
At 1 January 2010 (499,564) 35,699 26,946 10,243 – (7,236) (433,912) Acquisition in business combination (74,734) (161,156) – – – – (235,890) Recognised in profi t or loss (189,475) 149,099 – – – (21,731) (62,107) Recognised in other comprehensive income – – – 45,594 (17,668) – 27,926 Translation exchange difference 38,674 (5,467) – (3,437) – (15,025) 14,745 Discontinued operation 25,911 – (26,946) – – (586) (1,621)
At 31 December 2010 (699,188) 18,175 – 52,400 (17,668) (44,578) (690,859)
Property, Fair value plant and gains on equipment fi nancial RM’000 instruments Others Total RM’000 RM’000 RM’000 Company At 1 January 2010 (66,530) – 74 (66,456) Recognised in profi t or loss 70 – 241 311 Recognised in other comprehensive income – (17,658) – (17,658)
At 31 December 2010 (66,460) (17,658) 315 (83,803) Recognised in profi t or loss (227) – (122) (349) Recognised in other comprehensive income – 497 – 497
At 31 December 2011 (66,687) (17,161) 193 (83,655)
Kulim (Malaysia) Berhad (23370-V) 242 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
19. DEFERRED TAX ASSETS AND LIABILITIES (continued At the reporting date, deferred tax assets have not been recognised in respect of the following items:
Group 2011 2010 RM’000 RM’000 Unutilised tax losses 59,133 48,672 Unabsorbed capital allowances 67,899 30,532 Unabsorbed reinvestment allowances – 15,127
127,032 94,331
The availability of the above tax losses and allowances for offsetting against future taxable profi ts of the respective subsidiaries in Malaysia are subject to no substantial changes in shareholdings of those subsidiaries under the Income Tax Act, 1967 and other guidelines issued by the tax authority.
20. INVENTORIES
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 At cost: Agricultural produce 637,511 431,184 – – Finished goods 88,651 77,575 – – Materials and consumables 168,758 172,346 1,892 1,905 Livestocks 39,680 14,685 – – Work-in-progress 132 232 – –
934,732 696,022 1,892 1,905 At net realisable value: Finished goods – 2,423 – – Agricultural produce – 2,245 – –
934,732 700,690 1,892 1,905 annual report 2011 | 243 Kulim (Malaysia) Berhad (23370-V)
21. TRADE AND OTHER RECEIVABLES
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Current Trade receivables Third parties 522,777 371,293 847 244 Subsidiaries – – 25,050 12,586 Ultimate holding corporation 53,510 47,882 49,841 49,287 Related companies 5,461 8,411 1,993 1,916
581,748 427,586 77,731 64,033
Less: Allowance for impairment losses Third parties (6,855) (5,212) – – Related companies (4,432) (1,650) (1,650) (1,650)
(11,287) (6,862) (1,650) (1,650)
Trade receivables, net 570,461 420,724 76,081 62,383
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Current Other receivables Third parties 151,796 76,795 11,981 10,558 Subsidiaries – – 331,998 308,875 Deposits 90,409 100,718 1,634 1,123
242,205 177,513 345,613 320,556
Less: Allowance for impairment losses Third parties (4,254) (7,537) (4,057) (4,057) Deposits (55) (55) – – Subsidiaries – – (109,087) (109,087)
(4,309) (7,592) (113,144) (113,144)
237,896 169,921 232,469 207,412
Total trade and other receivables 808,357 590,645 308,550 269,795 Kulim (Malaysia) Berhad (23370-V) 244 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
21. TRADE AND OTHER RECEIVABLES (continued) (a) Trade receivables Third party trade receivables are non-interest bearing and payment terms range from payment in advance to 90 days (2010: payment in advance to 90 days). They are recognised at their original invoice amounts which represent their fair values on initial recognition.
Ageing analysis of trade receivables The ageing analysis of the Group’s and the Company’s trade receivables is as follows:
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Neither past due nor impaired 394,698 284,828 48 181 1 to 30 days past due not impaired 90,225 56,547 10,781 29,987 31 to 60 days past due not impaired 19,893 33,711 4,029 6,539 61 to 90 days past due not impaired 9,343 81 4,791 21,159 91 to 120 days past due not impaired 3,428 6,000 2,335 1,274 More than 121 days past due not impaired 52,874 39,557 54,097 3,243 175,763 135,896 76,033 62,202 Impaired 11,287 6,862 1,650 1,650
581,748 427,586 77,731 64,033
Receivables that are neither past due nor impaired Receivables that are neither past due nor impaired are mainly regular customers that have been transacting with the Group. None of these balances have been renegotiated during the fi nancial year.
Receivables that are past due but not impaired The Group and Company have trade receivables amounting to RM175,763,000 (2010: RM135,896,000) and RM76,033,000 (2010: RM62,202,000) respectively that are past due at the reporting date but not impaired. These balances are not secured. annual report 2011 | 245 Kulim (Malaysia) Berhad (23370-V)
21. TRADE AND OTHER RECEIVABLES (continued) (a) Trade receivables (continued) Receivables that are impaired The Group’s and the Company’s trade receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows:
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Trade receivables – nominal amounts 11,287 6,862 1,650 1,650 Less: Allowance for impairment (11,287) (6,862) (1,650) (1,650)
– – – –
Movement in allowance accounts: At 1 January 6,862 9,055 1,650 1,650 Charge for the year 5,585 1,830 – – Reversal of impairment losses (45) (2,716) – – Written off (1,115) (1,307) – –
At 31 December 11,287 6,862 1,650 1,650
Trade receivables that are determined to be impaired at the reporting date relate to debtors that are in signifi cant fi nancial diffi culties and have defaulted on repayments. These receivables are not secured by any collateral or credit enhancements.
(b) Amount due from subsidiaries (trade and non-trade) These amounts are unsecured, non-interest bearing and repayable on demand except for an amount of RM37,039,000 (2010: RM47,124,000) which bears interest of 5.13% to 6.50% (2010: 4.35% to 6.50%) per annum.
(c) Amount due from ultimate holding corporation and related companies (trade and non-trade) These amounts are unsecured, non-interest bearing and repayable on demand except for an amount of RM43,098,000 (2010: RM42,504,000) which bears interest of 5.13% to 5.14% (2010: 4.35% to 4.43%) per annum. Kulim (Malaysia) Berhad (23370-V) 246 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
21. TRADE AND OTHER RECEIVABLES (continued) (d) Other receivables that are impaired The Group’s and the Company’s other receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows:
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Movement in allowance accounts: At 1 January 7,592 4,180 113,144 4,708 Charge for the year – 3,412 – 108,436 Reversal of impairment losses – – – – Written off (3,283) – – –
At 31 December 4,309 7,592 113,144 113,144
22. CASH AND BANK BALANCES
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Cash and bank balances 561,726 309,602 9,272 24,908 Deposits placed with licensed banks 82,976 142,544 70,392 49,918
644,702 452,146 79,664 74,826
Included in deposits placed with licensed banks of the Group and of the Company are amounts of RM61,865,000 (2010: RM12,791,000) and RM350,000 (2010: RM366,000) of the Group and of the Company, respectively, pledged for bank facilities granted to the Group and the Company.
For the purposes of the statements of cash fl ows, cash and cash equivalents comprise the following at the reporting date:
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Cash and bank balances 499,861 309,602 9,272 24,908 Deposits with licensed banks 144,841 142,544 70,392 49,918
644,702 452,146 79,664 74,826 Less: Deposits pledged (61,865) (12,791) (350) (366) Bank overdrafts (Note 23) (26,119) (32,921) – –
Cash and cash equivalents 556,718 406,434 79,314 74,460 annual report 2011 | 247 Kulim (Malaysia) Berhad (23370-V)
23. LOANS AND BORROWINGS
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Current Secured: Obligations under fi nance leases 2,614 2,507 – – Bank overdrafts (Note 22) 17,080 23,021 – – Revolving credit 30,000 – – – Term loans 135,522 826,780 – 100,000
185,216 852,308 – 100,000
Unsecured: Obligations under fi nance leases 150 34 – – Bank overdrafts (Note 22) 9,039 9,900 – – Bankers’ acceptances 35,431 9,412 – – Revolving credit 163,747 21,200 – – Term loans 178,260 102,556 – –
386,627 143,102 – –
Current loans and borrowings 571,843 995,410 – 100,000
Non-current Secured: Obligations under fi nance leases 1,872 4,076 – – Term loans 1,627,283 814,690 273,171 273,171
1,629,155 818,766 273,171 273,171
Unsecured: Obligations under fi nance leases 362 128 – – Term loans 419,584 112,126 – –
419,946 112,254 – –
Non-current loans and borrowings 2,049,101 931,020 273,171 273,171
Total loans and borrowings 2,620,944 1,926,430 273,171 373,171 Kulim (Malaysia) Berhad (23370-V) 248 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
23. LOANS AND BORROWINGS (continued) Details of the Group’s and Company’s term loans are as follows:
2012 2013 2014 – 2016 >2016 Year of Carrying Under 1 1 – 2 2 – 5 Over 5 maturity amount year years years years RM’000 RM’000 RM’000 RM’000 RM’000
Group 2011 Term loan: 2 2013 5,000 4,000 1,000 – – 5 2016 5,952 1,228 1,228 3,496 – 6 2016 5,951 1,228 1,228 3,495 – 7 2014 4,520 1,957 1,957 606 – 8 2012 7,984 7,984 – – – 9 2014 4,855 1,886 1,886 1,083 – 10 2016 18,349 5,463 5,177 7,709 – 11 2013 683 341 341 – – 12 2013 904 452 452 – – 14 2018 2,293 296 336 1,167 494 17 2021 76,330 8,253 8,253 24,753 35,071 18 2020 42,479 4,471 4,471 13,414 20,122 19 2016 273,171 – 30,000 243,171 – 20 2014 2,979 1,192 1,192 596 – 23 2013 9,094 7,275 1,819 – – 24 2014 45,000 – – 45,000 – 25 2013 677 369 308 – – 27 2020 59,034 – 8,360 25,080 25,594 28 2020 47,279 – 8,737 26,211 12,331 29 2020 44,314 6,952 8,737 26,211 2,414 30 2017 183,000 6,863 9,150 135,878 31,110 31 2014 4,500 2,000 2,000 500 – 32 2015 39,900 11,400 11,400 17,100 – 33 2015 31,779 2,701 5,402 23,675 – 37 2015 4,116 1,241 1,181 1,694 – 38 2015 11,792 3,544 3,372 4,876 – 39 2012 2,464 2,464 – – – 43 2013 10,080 5,847 4,233 – – 44 2012 119,692 119,692 – – – 45 2016 735,217 81,675 77,296 576,245 – 46 2018 46,400 – 580 13,340 32,480 47 2016 23,200 – 5,800 17,400 – 48 2016 6,435 – 644 5,792 – 49 2016 5,265 – 527 4,739 – 50 2018 275,000 – – 165,000 110,000 51 2020 12,800 1,544 2,059 6,177 3,020 52 2020 12,800 1,544 2,059 6,177 3,020 53 2020 9,600 1,544 2,059 5,997 – 54 2020 6,200 1,447 1,930 2,823 – 55 2022 39,284 4,027 8,055 12,082 15,120 56 2022 39,770 4,027 8,054 12,081 15,608 57 2020 36,571 4,100 8,200 12,300 11,971 58 2021 37,945 4,100 8,200 12,300 13,345 59 2018 8,757 – 2,877 2,879 3,001 60 2013 785 562 223 – – 61 2015 448 112 148 188 –
2,360,649 313,783 250,931 1,461,234 334,702 annual report 2011 | 249 Kulim (Malaysia) Berhad (23370-V)
23. LOANS AND BORROWINGS (continued)
2012 2013 2014 – 2016 >2016 Year of Carrying Under 1 1 – 2 2 – 5 Over 5 maturity amount year years years years RM’000 RM’000 RM’000 RM’000 RM’000 Group 2010 Term loan: 1 2016 28,309 1,814 6,170 14,068 6,257 2 2013 9,000 4,000 5,000 – – 3 2011 100,000 100,000 – – – 4 2011 8,000 8,000 – – – 5 2016 6,749 787 843 2,907 2,212 6 2016 6,748 787 843 2,907 2,211 7 2014 6,181 1,659 1,753 2,769 – 8 2012 16,007 10,516 5,491 – – 9 2014 6,258 1,402 1,651 3,205 – 10 2016 22,719 – – – 22,719 11 2013 2,651 1,099 1,100 452 – 12 2011 10 10 – – – 13 2011 40,000 40,000 – – – 14 2018 1,868 208 213 747 700 15 2018 662 84 83 259 236 16 2011 1,475 1,475 – – – 17 2021 65,250 2,292 6,525 28,627 27,806 18 2015 35,355 2,653 10,607 22,095 – 19 2016 273,171 – – 185,000 88,171 20 2014 4,049 1,157 1,157 1,735 – 21 2011 10,000 10,000 – – – 22 2011 10,000 10,000 – – – 23 2013 18,187 7,275 7,275 3,637 – 24 2014 45,000 – – 45,000 – 25 2013 1,046 369 369 308 – 26 2011 154 154 – – – 27 2020 58,293 4,352 4,655 16,000 33,286 28 2020 52,821 – – – 52,821 29 2020 50,309 – – – 50,309 30 2017 183,000 – 6,863 38,887 137,250 31 2013 5,000 2,000 2,000 1,000 – 32 2015 33,000 6,188 8,250 18,562 – 33 2015 18,510 – 2,622 15,888 – 34 2031 483 14 15 49 405 35 2031 272 7 8 26 231 36 2022 212 13 14 48 137 37 2015 4,795 960 960 2,875 – 38 2015 13,686 2,740 2,740 8,206 – 39 2011 1,153 1,153 – – – 40 2011 33,936 33,936 – – – 41 2011 617,020 617,020 – – – 42 2011 55,212 55,212 – – – 43 2016 9,601 – – 4,782 4,819
1,856,152 929,336 77,207 420,039 429,570 Kulim (Malaysia) Berhad (23370-V) 250 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
23. LOANS AND BORROWINGS (continued)
2012 2013 2014 – 2016 >2016 Year of Carrying Under 1 1 – 2 2 – 5 Over 5 maturity amount year years years years RM’000 RM’000 RM’000 RM’000 RM’000 Company 2011 Term loan: 19 2016 273,171 – – 185,000 88,171
273,171 – – 185,000 88,171
2010 Term loan: 3 2011 100,000 100,000 – – – 19 2016 273,171 – – 185,000 88,171
373,171 100,000 – 185,000 88,171
Securities The term loans are secured by the following:
(a) Charges over certain property, plant and equipment of the Group and Company as disclosed in Note 13 to the financial statements;
(b) Charges over certain investment properties of the Group and Company as disclosed in Note 14 to the fi nancial statements;
(c) Charges over the quoted shares in subsidiaries as disclosed in Note 16 to the fi nancial statements;
(d) Charges over certain fi xed deposits of the Group and Company as disclosed in Note 22 to the fi nancial statements; and
(e) Corporate guarantee from the Company as disclosed in Note 36(a) to the fi nancial statements.
Signifi cant covenants In connection with the signifi cant term loan facilities, the Group and the Company have agreed on the following signifi cant covenants with the lenders:
(i) The consolidated shareholders’ funds of the Group to be at least RM2.5 billion and such consolidated shareholders’ funds excluding its asset revaluation reserve to be at least RM1.0 billion;
(ii) The ratio of the consolidated total borrowings to the consolidated shareholders’ funds at all times to be below 0.8 times;
(iii) The ratio of the earnings before interest, tax, depreciation and amortisation (EBITDA) to interest expense of the Group to be at least 1.5 times;
(iv) The Company will continue to maintain at least 50.1% of the issued and paid-up capital of QSR; and
(v) The Company will procure and ensure that each of its subsidiary companies does not and/or will not enter into any agreements which impose restrictions on each of the subsidiary companies ability to make or pay dividend or other forms of distributions to the shareholders. annual report 2011 | 251 Kulim (Malaysia) Berhad (23370-V)
23. LOANS AND BORROWINGS (continued)
Group Company 2011 2010 2011 2010 % % % % Weighted average effective interest rates at the end of reporting period: – Term loans 3.89 4.77 5.23 4.84
24. DERIVATIVE FINANCIAL INSTRUMENTS
Group Group National amount Carrying amount 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Cash fl ow hedges Commodity forward contracts – current liabilities 313,516 204,096 2,104 149,476 – non-current liabilities – 33,224 – 25,201
313,516 237,320 2,104 174,677
The Group, via its subsidiary, NBPOL has entered into commodity forward contracts to hedge its exposure to movements in palm oil prices. These forward contracts have been designated as a hedge of highly probable forecast sales of crude palm oil and related products. It is not the Group’s policy to engage in speculative hedging activities.
There were no highly probable transactions for which hedge accounting had previously been used, which is no longer expected to occur.
As all hedge transactions are highly effective, all gains and losses relating to their remeasurement to fair value are recognised in the hedge reserve within equity and subsequently brought to account in the profi t or loss in the same period as the physical sales transaction occurs to which the hedges relate.
The cash fl ow hedges of the highly probable forecast sales of crude palm oil and related products were assessed to be highly effective and as at 31 December 2011, a net gain of RM120,801,000 (2010: net loss of RM98,372,000), including the related deferred tax liability of RM51,772,000 (2010: deferred tax asset of RM42,159,000) was included in other comprehensive income in respect of these contracts.
The losses retained in equity at the reporting date are expected to mature and affect the profi t or loss as follows:
Group 2011 2010 RM’000 RM’000 Within 12 months 1,471 104,634 After 12 months – 17,641
1,471 122,275 Kulim (Malaysia) Berhad (23370-V) 252 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
25. TRADE AND OTHER PAYABLES
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Current Trade Third parties 363,951 252,966 4,754 5,865 Ultimate holding corporation 4,072 19,446 – – Subsidiaries – – 98,558 – Related companies 14,940 11,488 747 350
382,963 283,900 104,059 6,215
Non-trade Third parties 414,157 393,391 6,302 7,367 Subsidiaries – – 97,315 63,406
414,157 393,391 103,617 70,773
Total trade and other payables 797,120 677,291 207,676 76,988
(a) Third parties Trade and other payables due to third parties are generally unsecured and non-interest bearing. Credit terms range from payment in advance to 90 days (2010: payment in advance to 90 days).
(b) Amounts due to ultimate holding corporation and related companies These amounts which arose mainly from normal trade transactions are unsecured, non-interest bearing and subject to normal trade terms.
(c) Amounts due to subsidiaries These amounts which arose mainly from advances and payments on behalf are unsecured, non-interest bearing and repayable on demand except for an amount of RM42,517,000 (2010: RM23,300,000) which is subject to interest at rates ranging from 2.76% to 3.36% (2010: 2.74% to 3.05%) per annum. annual report 2011 | 253 Kulim (Malaysia) Berhad (23370-V)
26. SHARE CAPITAL
Number of ordinary shares Amount 2011 2010 2011 2010 ‘000 ‘000 RM’000 RM’000 Authorised At 1 January 400,000 400,000 200,000 200,000 Effect of share split 400,000 – – – Created during the year 1,200,000 – – –
At 31 December 2,000,000 400,000 200,000 200,000
Issued and fully paid At 1 January 318,670 318,670 159,336 159,336 Effect of share split 318,670 – – – Bonus issue 624,697 – 156,173 –
At 31 December 1,262,037 318,670 315,509 159,336
(a) Share capital The holders of the ordinary shares are entitled to receive dividends, as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
(b) Share split and bonus issue During the fi nancial year, the Company increased its authorised share capital from RM200,000,000 comprising 400,000,000 shares of RM0.50 each to RM500,000,000 comprising 2,000,000,000 shares of RM0.25 each;
During the financial year, the Company also increased its issued and paid-up ordinary share capital from RM159,336,000 to RM315,509,000 by way of:
(i) Share split involving the subdivision of every one (1) existing ordinary share of RM0.50 each held in the Company into two (2) ordinary shares of RM0.25 each (“sub-divided share(s)”) (Share Split); and
(ii) Bonus issue of new sub-divided shares on the basis of one (1) bonus share for every one (1) sub-divided share held after the share split (“Bonus Issue”).
The Share Split and Bonus Issue were completed on 28 February 2011.
The above new shares issued during the fi nancial year ranked pari passu in all respects with the existing ordinary shares of the Company. Kulim (Malaysia) Berhad (23370-V) 254 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
27. OTHER RESERVES
Group Company 2011 2010 2011 2010 Note RM’000 RM’000 RM’000 RM’000 Reserves Non-distributable Share premium reserve (a) 116,013 272,184 116,013 272,184 Translation reserve (b) 95,714 (123,896) – – Hedge reserve (c) (748) (67,782) – – Fair value reserve (d) 1,256 55,617 (313) 54,526 Revaluation reserve (e) 1,337,757 1,337,816 897,579 897,579 Other reserve (f) 4,933 4,933 4,165 4,165 Warrant reserve (g) 113,945 – 113,944 – Treasury shares (h) (96,186) (45,690) (96,187) (45,690) Equity transaction reserve (i) (32,597) – – –
1,540,087 1,433,182 1,035,201 1,182,764
The movements of each category of the reserves during the fi nancial year are disclosed in the statements of changes in equity.
The nature and purpose of each category of reserves are as follows:
(a) Share premium reserve This reserve comprises the premium paid on subscription of shares in the Company over and above the par value of the shares.
(b) Translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the fi nancial statements of foreign operations where functional currencies are different from that of the Group’s presentation currency.
(c) Hedge reserve The hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash fl ow hedges related to hedged transactions that have not yet occurred.
(d) Fair value reserve The fair value reserve comprises the cumulative net change in the fair value of available-for-sale fi nancial assets until the investments are derecognised or impaired.
(e) Revaluation reserve The revaluation reserve relates to the revaluation of the Group’s freehold and leasehold lands in Malaysia on 31 December 1997.
(f) Other reserve Other reserves consist mainly of reserves arising from the scheme of reconstruction, amalgamation and liquidation of a former subsidiary in 1975. annual report 2011 | 255 Kulim (Malaysia) Berhad (23370-V)
27. OTHER RESERVES (continued) (g) Warrant reserve A total of 156,174,319 free warrants were issued by the Company in conjunction with the share split and bonus issue on 28 February 2011. Each warrant entitles the holder to subscribe for one (1) new sub-divided share at the exercise price of RM3.85 per share at any time during the exercise period. The warrants have an exercise period of fi ve (5) years commencing 28 February 2011 and expiring on 27 February 2016.
As at the reporting date, 500 warrants have been exercised and the number of outstanding warrants was 156,173,819.
(h) Treasury shares Treasury shares relate to ordinary shares of the Company that are held by the Company. The amount consists of the acquisition costs of treasury shares net of the proceeds received on their subsequent sale or issuance. Rights on treasury shares are suspended until those shares are reissued.
The Company acquired 14,840,000 (2010: Nil) shares in the Company through purchases on Bursa Malaysia Securities Berhad during the fi nancial year. The total amount paid to acquire the shares was RM50,496,000 (2010: Nil) and this was presented as a component within shareholders’ equity.
The Directors of the Company are committed to enhancing the value of the Company for its shareholders and believe that the repurchase plan can be applied in the best interests of the Company and its shareholders. The repurchase transactions were fi nanced by internally generated funds. The shares repurchased are being held as treasury shares.
At 31 December 2011, the Company held 27,482,000 of its own shares of RM0.25 each (2010: 6,321,000 shares of RM0.50 each). The number of outstanding ordinary shares of RM0.25 each in issue after the set-off is 1,234,555,000 (2010: 312,348,639 ordinary shares of RM0.50 each).
(i) Equity transaction reserve The equity transaction reserve comprises the differences between the share of non-controlling interests in subsidiaries acquired/ disposed and the consideration paid/received.
28. RETAINED EARNINGS During the fi nancial year, the Company has elected for the irrevocable option to disregard its 108 balance. As such, the entire retained earnings of the Company as at 31 December 2011 may be distributed as dividends under the single tier system. Kulim (Malaysia) Berhad (23370-V) 256 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
29. EMPLOYEE BENEFITS Certain subsidiaries operate an unfunded, defi ned Retirement Benefi t Scheme (“the Scheme”) for its eligible employees. Under the Scheme, eligible employees are entitled to retirement benefi ts calculated by reference to their length of service and earnings. Provision for retirement benefi ts is calculated based on the pre-determined rate of basic salaries and length of service.
The following tables summarise the components of net benefi t expense recognised in profi t or loss and the amounts recognised in the statement of fi nancial position for the Scheme.
Net benefi t expense
Group 2011 2010 RM’000 RM’000 Current service costs 126 138 Interest cost on benefi t obligation 155 164 Past service cost (195) (32)
Net benefi t expense 86 270
The net benefi t expense has been included in administrative expenses.
Benefi t liabilities
Group 2011 2010 RM’000 RM’000
Defi ned benefi t obligation – Current 301 644 – Non-current 2,700 2,913
3,001 3,557
Changes in present value of defi ned benefi t obligations are as follows:
Group 2011 2010 RM’000 RM’000 At 1 January 3,557 3,500 Current service costs and interest 86 270 Benefi ts paid (642) (213)
At 31 December 3,001 3,557
The principal actuarial assumptions used in determining the retirement benefi t obligations at the end of the reporting period (expressed as weighted averages) are as follows:
Group 2011 2010 % % Discount rates 5.1 5.6 Future salary increases 4.0 4.0 annual report 2011 | 257 Kulim (Malaysia) Berhad (23370-V)
30. RELATED PARTY TRANSACTIONS (a) Sale and purchase of goods and services For the purposes of the fi nancial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise signifi cant infl uence over the party in making fi nancial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common signifi cant infl uence. Related parties may be individuals or other entities.
All entities within the Johor Corporation Group are considered related companies / parties.
In addition to the related party information disclosed elsewhere in the fi nancial statements, the following signifi cant transactions between the Group and related parties took place at terms agreed between the parties during the fi nancial year:
Transaction value for the year ended 31 December 2011 2010 RM’000 RM’000 Group Ultimate holding corporation Johor Corporation – Agency fees received 334 404 – Sales of oil palm fresh fruit bunches 531 23,412 – Purchase and sales commission received 2,335 3,074 – Planting advisory and agronomy fees received 173 174 – Computer charges received 97 108 – Inspection fees received 30 60 – Training, seminar and course fees received 60 83 – Sales of goods 2,909 2,174 – Construction work and maintenance fees received 608 125 – Event management fees received 122 146 – Rental income 159 – – Sales of oil palm seedling and bio compost fertilizer 871 – – Rental payable (629) (629)
Other related companies Johor Foods Sdn. Bhd. – Agency fees received 392 373 – Sales of oil palm fresh fruit bunches 23,570 31,060 – Purchase and sales commission received 2,059 1,657 – Planting advisory and agronomy fees received 95 100 – Computer charges received 69 63 – Inspection fees received 30 30 – Training, seminar and course fees received 35 50 – Sales of goods 836 642 – Construction work and maintenance fees received 657 – – Sales of oil palm seedling and bio compost fertilizer 1,738 – Kulim (Malaysia) Berhad (23370-V) 258 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
30. RELATED PARTY TRANSACTIONS (continued) (a) Sale and purchase of goods and services (continued)
Transaction value for the year ended 31 December 2011 2010 RM’000 RM’000 Group Other related companies (continued) Kumpulan Penambang Sdn. Bhd. – Agency fees received 139 131 – Purchase and sales commission received 529 401 – Planting advisory and agronomy fees received 60 58 – Computer charges received 27 17 – Training, seminar and course fees received 17 18 – Sales of goods 1,004 830 – Construction work and maintenance fees received 61 – – Sales of oil palm seedling and bio compost fertilizer 61 –
Johor Franchise Development Sdn. Bhd. – Agency fees received 207 199 – Purchase and sales commission received 774 560 – Planting advisory and agronomy fees received 85 86 – Computer charges received 39 36 – Training, seminar and course fees received 19 29 – Sales of goods 1,812 985 – Construction work and maintenance fees received 61 – – Sales of oil palm seedling and bio compost fertilizer 72 –
Pro Biz Solution Sdn. Bhd. – Rental income 60 171
Pro Corporate Management Services Sdn. Bhd. – Secretarial and share registration fees paid (1,266) (249)
Damansara Assets Sdn. Bhd. – Construction work and maintenance fees received – 1,045 – Management fees and services payable (10) (10) – Rental commission payable (617) (469)
Johor Land Berhad – Purchase of oil palm fresh fruit bunches (4,777) (3,323) – Management fees received 367 353
Kelab Bolasepak Perbadanan Johor – Donation paid (5,330) (3,910)
Tanjung Langsat Port Sdn. Bhd. – Event management and booth rental received – 83 – Computer charges received 89 167 annual report 2011 | 259 Kulim (Malaysia) Berhad (23370-V)
30. RELATED PARTY TRANSACTIONS (continued) (a) Sale and purchase of goods and services (continued)
Transaction value for the year ended 31 December 2011 2010 RM’000 RM’000 Group Other related companies (continued) IPPJ Sdn. Bhd. – Training, seminar and course fees received – 68 – Event management and booth rental received 164 200
Pacifi c Rim Plantation Services Pte Limited – Sales and marketing agency commission 15,706 9,364 – Project management services 2,356 2,272 – Interest and other charges 353 124
Company Ultimate holding corporation Johor Corporation – Sales of oil palm fresh fruit bunches 531 23,412 – Management fees received – 353
Kelab Bolasepak Perbadanan Johor – Donation (5,330) (3,910)
Johor Foods Sdn. Bhd. – Sales of oil palm fresh fruit bunches 21,052 14,386
Damansara Assets Sdn. Bhd. – Management fees and services payable (10) (10) – Rental commission payable (617) (469)
Subsidiaries New Britain Palm Oil Limited – Dividend income 34,184 – – Agriculture consultancy services charged – 201
Pro Biz Solution Sdn. Bhd. – Rental income 60 171
Kulim (Malaysia) Berhad (23370-V) 260 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
30. RELATED PARTY TRANSACTIONS (continued) (b) Compensation of key management personnel Key management personnel are defi ned as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel includes all the Directors of the Group, and certain members of senior management of the Group.
The compensation of directors of the Group are disclosed in Note 9 to the fi nancial statements. The compensation of other members of senior management considered as key management personnel (excluding directors) are as follows:
Group 2011 2010 RM’000 RM’000 Salaries, allowance and bonuses 1,877 2,334 Defi ned contribution plan 236 351 Other employee benefi ts 103 98
2,216 2,783
31. COMMITMENTS (a) Capital commitments Committed capital expenditure as at the reporting date is as follows:
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Authorised capital expenditure in respect of property, plant and equipment not provided for in the fi nancial statements at the end of the year: – Contracted for 388,461 101,785 3,873 606 – Not contracted for 351,934 348,109 1,176 85
740,395 449,894 5,049 691
annual report 2011 | 261 Kulim (Malaysia) Berhad (23370-V)
31. COMMITMENTS (continued) (b) Operating lease commitments – as lessee The Group’s food and restaurants business segment has entered into non-cancellable operating lease agreements for the use of land and buildings. These leases have an average tenure of 15 years with no renewal or purchase options included in the contracts of the leases. Certain contracts also include escalation clauses or contingent rental arrangements computed based on sales achieved while others include fi xed rentals for an average of 3 years. There are no restrictions placed upon the Group by entering into these leases.
The Group’s major plantation subsidiary, NBPOL, has entered into non-cancellable operating lease agreements for the use of mini estate land, for terms of 20 or 40 years, and state-owned land for terms of 99 years. These leases are renewable.
Future minimum rentals payable under non-cancellable operating leases at the reporting date are as follows:
Group 2011 2010 RM’000 RM’000 Not later than one year 139,105 156,388 Later than 1 year but not later than 5 years 166,614 190,959 Later than 5 years 104,613 102,190
410,332 449,537
(c) Finance lease commitments Future minimum lease payments under fi nance leases together with the present value of the net minimum lease payments are as follows:
Group 2011 2010 RM’000 RM’000
Minimum lease payments Not later than one year 3,031 2,979 Later than 1 year but not later than 5 years 2,462 4,726
Total minimum lease payments 5,493 7,705 Less: Amounts representing fi nance charges (495) (960)
Present value of minimum lease payments 4,998 6,745
Present value of payments Not later than one year 2,764 2,541 Later than 1 year but not later than 5 years 2,234 4,204
Present value of minimum lease payments 4,998 6,745 Less: Amount due within 12 months (2,764) (2,541)
Amount due after 12 months 2,234 4,204 Kulim (Malaysia) Berhad (23370-V) 262 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
32. CONTINGENCIES At the reporting date, the Group, via NBPOL, had contingent liabilities in respect of legal claims in the ordinary course of business pertaining to land disputes, employee issues and GST disputes. NBPOL has disclaimed all liability in these cases and is vigorously defending these actions. It is not practical to estimate the potential effect of these claims but legal advice indicates that any liability that may arise in the unlikely event these claims are successful will not be signifi cant.
33. SIGNIFICANT EVENTS Kulim (Malaysia) Berhad (i) During the fi nancial year, the Company announced the completion and approval of the following proposals:
(a) 11 February 2011: Increase in authorised share capital of the Company from RM200,000,000 comprising 400,000,000 shares of RM0.50 each to RM500,000,000 comprising 2,000,000,000 subdivided shares of RM0.25 each (“proposed increase in authorised share capital”);
(b) 17 February 2011: Share split involving the sub-division of every one (1) existing ordinary share of RM0.50 each held in the Company or (“share(s)”) into two (2) ordinary shares of RM0.25 each (“sub-divided share(s)”) (“proposed share split”);
(c) 17 February 2011: Bonus issue of new sub-divided shares (“bonus share(s)”) on the basis of one (1) bonus share for every one (1) sub-divided share held after the proposed share split (“proposed bonus issue”); and
(d) 24 February 2011: Issue of free warrants in the Company (“warrant(s)”) on the basis of one (1) warrant for every eight (8) sub- divided shares held after the proposed share split and the proposed bonus issue (“proposed free warrants issue”).
(ii) The Company had on 16 August 2011 announced the proposed acquisition of plantation assets from its ultimate holding corporation, Johor Corporation (“JCorp”) by Mahamurni Plantations Sdn. Bhd. (“MPSB”), a wholly-owned subsidiary of Kulim, of six (6) estates (together with all buildings and mills (including their plant and machineries erected thereon)), all located in the state of Johor with a total land area measuring approximately 13,687 hectares for a total cash consideration of RM700 million.
Of the above proposed acquisition, the following was completed as at year end:
(i) The SPA between MPSB and JCorp for the acquisition of the oil palm plantation land (together with all buildings erected thereon together with assets, equipments, appliances, and plant and machineries located within the oil palm plantation) known as “Sungai Papan Estate” for a total cash consideration of RM183,300,000 and SPA between MPSB and JCorp Hotels and Resorts Sdn. Bhd. (“JHRSB”) (formerly known as Kumpulan Penambang (J) Sdn. Bhd), a wholly-owned subsidiary of JCorp, for the acquisition of the oil palm plantation land (together with all buildings erected thereon together with assets, equipments, appliances, and plant and machineries located within the oil palm land) known as “Part of Siang Estate” for a total cash consideration of RM191,600,000. Payments were effected on 31st December 2011.
The proposed acquisitions that are yet to be completed as at year end are as follows:
(i) a SPA between MPSB and JCorp for the proposed acquisition of the land currently planted with oil palm cultivation (together with all buildings and the palm oil mill (“Pasir Panjang Mill”) erected thereon (together with assets, equipments, appliances, and plant and machineries located within the land and Pasir Panjang Mill)) known as “Part of Pasir Panjang Estate” for a total cash consideration of RM71,783,000; and
(ii) a SPA between MPSB and Johor Foods Sdn. Bhd. (“JFSB”), a wholly-owned subsidiary of JCorp, for the proposed acquisition of the land currently planted with oil palm cultivation (together with all buildings and the palm oil mill (“Palong Mill”) erected thereon (together with assets, equipments appliances, and plant and machineries located within the land and Palong Mill)) known as “Mungka, Kemedak and Palong Estate” for a total cash consideration of RM253,317,000. annual report 2011 | 263 Kulim (Malaysia) Berhad (23370-V)
33. SIGNIFICANT EVENTS (continued) Kulim (Malaysia) Berhad (continued) (iii) On 5 December 2011, the Company announced that Sindora Berhad had successfully become a wholly-owned subsidiary on even date under the conditional take-over offer to acquire all the remaining ordinary shares of RM1.00 each in Sindora Berhad not already owned by the Company for a cash offer price of RM3.10 per share.
Pursuant to the above, the entire issued and paid-up share capital of Sindora Berhad was removed from the Offi cial List of Bursa Malaysia Securities Berhad.
QSR Brands Berhad (“QSR”) (i) On 19 September 2011, the Group via its subsidiary, QSR, announced the re-organisation of its group structure resulting in QSR acquiring the following wholly-owned subsidiaries from its other subsidiaries:
Cost Target companies Vendor RM’000 Pizza Hut Restaurants Sdn. Bhd. Pizza Hut Holdings (Malaysia) Sdn. Bhd. 44,134 PH Property Holdings Sdn. Bhd. Pizza Hut Holdings (Malaysia) Sdn. Bhd. – * Multibrand QSR Holdings Pte. Ltd. Pizza Hut Holdings (Malaysia) Sdn. Bhd. 10,000
54,134
* represents RM2
(ii) On 19 September 2011, KFCH announced the re-organisation of its group structure resulting in KFCH acquiring the following subsidiaries from its other subsidiaries:
Cost Target companies Vendor RM’000 KFC (Sarawak) Sdn. Bhd. KFC (East Malaysia) Sdn. Bhd. 2,198 KFC (Sabah) Sdn. Bhd. KFC (East Malaysia) Sdn. Bhd. 4,363 KFC (Peninsular Malaysia) Sdn. Bhd. KFC Restaurants Holdings Sdn. Bhd. 9,250 Kentucky Fried Chicken (Malaysia) Sdn. Bhd. KFC Restaurants Holdings Sdn. Bhd. 2,406 Asbury’s (Malaysia) Sdn. Bhd. KFC Restaurants Holdings Sdn. Bhd. 1,145 WQSR Holdings (S) Pte. Ltd. KFC Restaurants Holdings Sdn. Bhd. 10,000 KFC (East Malaysia) Sdn. Bhd. KFC Restaurants Holdings Sdn. Bhd. 6,038 Ayamas Shoppe Sdn. Bhd. Ayamas Food Corporation Sdn. Bhd. 1,829 Rasamas Holdings Sdn. Bhd. Ayamas Food Corporation Sdn. Bhd. 3,000
40,229 Kulim (Malaysia) Berhad (23370-V) 264 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
33. SIGNIFICANT EVENTS (continued) QSR Brands Berhad (“QSR”) (continued) (iii) On 14 December 2011, QSR announced that it had received a letter of offer from Massive Equity Sdn. Bhd. (“MESB”) dated 14 December 2011, stating MESB’s intention to acquire substantially all businesses and undertakings of QSR, including substantially all the assets and liabilities of QSR, at an aggregate cash consideration equivalent to:
(a) RM6.80 per ordinary share of RM1.00 each held in QSR (“QSR Share”) multiplied by the total outstanding QSR shares (less treasury shares, if any) at a date to be determined later; and
(b) RM3.79 per warrant of QSR (“QSR Warrant”) multiplied by the total outstanding number of QSR Warrants in issue at a date to be determined later.
(hereinafter referred to as the “QSR Offer”)
MESB had also on even date made an offer to acquire the entire businesses and undertakings of KFC Holdings (Malaysia) Bhd. (“KFCH”), including all of the assets and liabilities of KFCH (“KFCH Offer”). The KFCH Offer and the QSR Offer are inter-conditional.
The boards of directors of QSR and KFCH had on 21 December 2011 announced that they (save for the interested directors under the QSR Offer and KFCH Offer) had accepted the QSR Offer and KFCH Offer respectively, subject to the execution of the relevant sale and purchase agreement.
The QSR Offer and KFCH Offer are in the midst of being implemented for the approval of the relevant shareholders and warrant holders. Full details will be announced in due course.
New Britain Palm Oil Limited (“NBPOL”) (i) On 31 March 2011, NBPOL entered into a Facility Agreement with a consortium of local and foreign banks for a USD240 million fi ve (5) year facility, the proceeds of which will be used to repay the USD200 million twelve (12) month facility taken out for the acquisition of Kula (due for repayment on 15 April 2011), and the balance for various capital projects and working capital. The following securities have been provided against this facility:
• Registered equitable mortgage over all the assets and undertakings of the NBPOL group except for 2 (two) subsidiaries, Ramu Agri Industries Limited and New Britain Oils Limited; and
• Registered mortgage leasehold over all state leases and sub leases greater than 500 hectares comprising all available land and buildings owned by NBPOL.
The Facility comprises a USD120 million Tranche 1 and a USD120 million Tranche 2. The principal amount outstanding under Tranche 1 shall be repaid in 18 quarterly instalments of USD6.3 million commencing 6 months from the fi rst drawdown and a fi nal installment of USD6.6 million. The principal amount outstanding under Tranche 2 shall be repaid at maturity. annual report 2011 | 265 Kulim (Malaysia) Berhad (23370-V)
34. SUBSEQUENT EVENT The Company had on 10 January 2012 announced, in reference to the announcement on 9 January 2012 by NBPOL, a 50.68% owned subsidiary of the Company, that NBPOL is seeking authority from its shareholders to disapply pre-emption rights for a potential new issue of shares of up to a maximum of fi ve percent of the current issued share capital of NBPOL. The purpose of the potential new issue of shares is to acquire the non-controlling interest in certain subsidiaries of NBPOL.
The issuance of the new shares by NBPOL, if so approved by the shareholders of NBPOL, will dilute the Company’s shareholding in NBPOL from 50.68% to 48.26%, thus potentially rendering NBPOL an associate of the Company.
The resolution seeking approval from the shareholders of NBPOL to disapply their pre-emption rights for the potential issue of new shares up to a maximum of fi ve percent of the current issued share capital of NBPOL was approved by the shareholders of NBPOL on 30 January 2012.
35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group and the Company are exposed to fi nancial risks arising from their operations and the use of fi nancial instruments. The key fi nancial risks include credit risk, liquidity risk, interest rate risk, foreign currency risk and market price risk.
The Board of Directors reviews and agrees policies and procedures for the management of these risks, which are executed by the management team. The audit committee provides independent oversight to the effectiveness of the risk management process.
It is, and has been throughout the current and previous fi nancial year, the Group’s policy that no derivatives shall be undertaken except for the use as hedging instruments where appropriate and cost-effi cient. The Group applies cash fl ow hedge accounting on those hedging relationships that qualify for hedge accounting.
The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned fi nancial risks and the objectives, policies and processes for the management of these risks.
(a) Credit risk Credit risk is the risk of loss that may arise on outstanding fi nancial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other fi nancial assets (including investments, cash and bank balances and derivatives), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.
The Group seeks to invest cash assets safely and profi tably. The Group has no signifi cant concentration of credit risk and it is not the Group’s policy to hedge its credit risk. The Group has in place, for signifi cant operating subsidiaries, policies to ensure that sales of products and services are made to customers with an appropriate credit history and sets limits on the amount of credit exposure to any one customer. For signifi cant subsidiaries, there were no instances of credit limits being materially exceeded during the reporting periods and management does not expect any material losses from non-performance by counterparties.
Exposure to credit risk At the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by:
• The carrying amount of each class of fi nancial assets recognised in the statements of fi nancial position;
• Guarantees given by the Group and Company to banks in favor of the ultimate holding corporation and various related companies amounting to RM3,940,000 (2010: RM14,469,000).
• Corporate guarantees provided by the Company to banks for credit facilities granted to subsidiaries. The amount outstanding on such facilities was RM428,246,350 (2010: RM28,900,000) as at the reporting date. Kulim (Malaysia) Berhad (23370-V) 266 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued) (a) Credit risk (continued) Financial guarantees have not been recognised in the fi nancial statements as the directors are of the opinion that the fair value on initial recognition was not material and that it is not probable that a future sacrifi ce of economic benefi ts will be required.
Credit risk concentration profi le Other than the amounts due from the subsidiaries to the Company, the Group and the Company is not exposed to any signifi cant concentration of credit risk in the form of receivables due from a single debtor or from groups of debtors.
Financial assets that are neither past due nor impaired Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 21. Deposits with banks and other fi nancial institutions and investments are placed with or entered into with reputable fi nancial institutions or companies with high credit ratings and no history of default.
Financial assets that are either past due or impaired Information regarding fi nancial assets that are either past due or impaired is disclosed in Note 21.
(b) Liquidity risk Liquidity risk is the risk that the Group and the Company will encounter diffi culty in meeting fi nancial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of fi nancial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and fl exibility through the use of stand-by credit facilities.
Analysis of fi nancial instruments by remaining contractual maturities The table below summarises the maturity profile of the Group and the Company’s liabilities at the reporting date based on contractual undiscounted repayment obligations.
On demand or within one One to fi ve Over fi ve year years years Total At 31 December 2011 RM’000 RM’000 RM’000 RM’000 Group Financial liabilities: Trade and other payables 797,120 – – 797,120 Loans and borrowings 595,595 2,156,848 374,212 3,126,655 Forward commodity contracts settled gross – Gross payments (392,048) – – (392,048) – Gross receipts 78,618 – – 78,618
Total undiscounted fi nancial liabilities 1,079,285 2,156,848 374,212 3,610,345
Company Financial liabilities: Trade and other payables 207,676 – – 207,676 Loans and borrowings – 296,057 – 296,057
Total undiscounted fi nancial liabilities 207,676 296,057 – 503,733
Financial guarantees have not been included in the above maturity analysis as no default has occurred. annual report 2011 | 267 Kulim (Malaysia) Berhad (23370-V)
35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued) (c) Interest rate risk Interest rate risk is the risk that the fair value or future cash fl ows of the Group’s and the Company’s fi nancial instruments will fl uctuate because of changes in market interest rates.
The Group’s and the Company’s exposure to interest rate risk arises primarily from their loans and borrowings. Borrowings issued at variable rates expose the Group to cash fl ow interest rate risk whereas those issued at fi xed rates expose the Group to fair value interest rate risk.The Group manages its interest rate exposure by maintaining a mix of fi xed and fl oating rate borrowings.
Sensitivity analysis for interest rate risk At the reporting date, a change of 50 basis points (“bp”) in interest rates would have increased/(decreased) post-tax profi t or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
50 bp increase in interest rates (13,105) (5,210) (1,366) (1,025) 50 bp decrease in interest rates 13,105 5,210 1,366 1,025
(d) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate because of changes in foreign exchange rates.
The Group operates internationally and is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Group entities. The foreign currencies in which these transactions are denominated are principally United States Dollars (“USD”) and Papua New Guinea (“PNG”) Kina.
It is not the Group’s policy to hedge its transactional foreign currency risk exposure.
The Group also has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. It is not the Group’s policy to hedge foreign currency translation risk. The Group maintains bank accounts denominated in foreign currencies, primarily in USD, as a natural hedge against foreign currency risk. Kulim (Malaysia) Berhad (23370-V) 268 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued) (d) Foreign currency risk (continued) The Group’s exposure to foreign currency risk, based on carrying amounts as at the end of the reporting period was:
Group Denominated in USD PNG Kina RM’000 RM’000
As at 31 December 2011 Trade receivables 347,176 – Trade payables (56,271) – Loans and borrowings (999,945) – Derivative fi nancial instruments (2,104) –
Net exposure in the statement of fi nancial position (711,144) –
As at 31 December 2010 Trade receivables 215,445 59,974 Trade payables (9,407) (93,108) Loans and borrowings (754,639) (137,099) Derivative fi nancial instruments (174,677) –
Net exposure in the statement of fi nancial position (723,278) (170,233)
Sensitivity analysis for foreign currency risk The following table demonstrates the sensitivity of the Group’s profi t net of tax and other comprehensive income net of tax (“OCI”) to a reasonably possible change in the USD and PNG Kina exchange rates against the respective functional currencies of the Group entities, with all other variables held constant.
Other comprehensive Profi t net of tax income net of tax 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 USD / PNG Kina – strengthen 5% (2010: 5%) (160,483) (93,000) 318 6,200 – weaken 5% (2010: 5%) 160,483 93,000 (318) (6,200) annual report 2011 | 269 Kulim (Malaysia) Berhad (23370-V)
35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued) (e) Market price risk Market price risk is the risk that the fair value or future cash fl ows of the Group’s fi nancial instruments will fl uctuate because of changes in market prices (other than interest or exchange rates).
The Group is exposed to equity price risk arising from its investment in quoted equity instruments which are mainly listed on Bursa Malaysia.
The management monitors the equity investments on a portfolio basis. Material investments within the portfolio are managed on an individual basis and all buy and sell decisions are approved by the Risk Management Committee of the Group.
Sensitivity analysis for market price risk At the reporting date, a 5% (2010: 5%) strengthening in the FTSE Bursa Malaysia KLCI would have increased the Group’s pre-tax profit by RM3,199,000 (2010: RM1,524,000) and its other comprehensive income by RM2,224,000 (2010: RM23,260,000). A 5% weakening in the FTSE Bursa Malaysia KLCI would have an equal but opposite effect on the Group’s pre-tax profi t and other comprehensive income.
(f) Commodity price risk The Group derives a signifi cant proportion of its revenues from the sale of palm oil products. The Group uses derivative fi nancial instruments (forward sales and purchases of Malaysian palm oil) to guarantee a minimum price for the sale of its own palm oil and to close out positions previously taken out. Cash fl ow hedge accounting is applied on such derivatives.
At the reporting date, a 10% fluctuation on palm oil prices would have the following effect on the Group’s hedge reserve within equity:
(Decrease)/Increase 2011 2010 RM’000 RM’000
10% increase in palm oil prices (15,889) (12,027) 10% decrease in palm oil prices 15,889 12,027 Kulim (Malaysia) Berhad (23370-V) 270 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued) (g) Fair value Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair values The following are classes of fi nancial instruments that are not carried at fair value and whose carrying amounts are reasonable approximations of fair values:
Note Trade and other receivables 21 Loans and borrowings 23 Trade and other payables 25
The carrying amounts of these fi nancial assets and liabilities are reasonable approximations of fair values, either due to their short- term nature or that they are fl oating rate instruments that are re-priced to market interest rates on or near the reporting date.
The fair values of borrowings are estimated by discounting expected future cash fl ows at the market incremental lending rate for similar types of lending, borrowing or leasing arrangements at the reporting date.
Quoted equity instruments Fair value is determined directly by reference to their published market bid price at the reporting date.
Derivatives Fair values of forward commodity contracts are calculated by reference to forward rates quoted at the reporting date for contracts with similar maturity profi les.
Financial guarantees The Company provides fi nancial guarantees to banks for credit facilities granted to certain subsidiaries. The fair value of such guarantees is not expected to be material as the probability of the subsidiaries defaulting is remote.
Fair value hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: Other techniques for which all inputs that have a signifi cant effect on the recorded fair value are observable, either directly or indirectly.
• Level 3: Techniques that use inputs that have a signifi cant effect on the recorded fair value that are not based on observable market data. annual report 2011 | 271 Kulim (Malaysia) Berhad (23370-V)
35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued) (g) Fair value (continued) As at 31 December 2011, the Group held the following financial instruments carried at fair value in the statement of fi nancial position:
Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000 Group At 31 December 2011 Financial assets measured at fair value Quoted shares 44,469 – – 44,469 Quoted warrants 63,985 – – 63,985 Fund investments – 30,607 – 30,607
108,454 30,607 – 139,061
Financial liabilities measured at fair value Derivative fi nancial instruments – 2,104 – 2,104
At 31 December 2010 Financial assets measured at fair value Quoted shares 39,265 – – 39,265 Quoted warrants 166,638 – – 166,638 Fund investments – 137,161 – 137,161
205,903 137,161 – 343,064
Financial liabilities measured at fair value Derivative fi nancial instruments – 174,677 – 174,677
Company At 31 December 2011 Financial assets measured at fair value Quoted shares 3,136 – – 3,136 Quoted warrants 63,985 – – 63,985 Fund investments – 30,019 – 30,019
67,121 30,019 – 97,140
At 31 December 2010 Financial assets measured at fair value Quoted shares 5,123 – – 5,123 Quoted warrants 166,638 – – 166,638 Fund investments – 136,922 – 136,922
171,761 136,922 – 308,683 Kulim (Malaysia) Berhad (23370-V) 272 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
36. FINANCIAL INSTRUMENTS The fi nancial instruments of the Group and the Company as at 31 December are categorised into the following classes:
Note 2011 2010 RM’000 RM’000 Group (a) Loans and receivables Trade and other receivables 21 808,357 590,645 Cash and cash equivalents 22 644,702 452,146
1,453,059 1,042,791
(b) Financial assets at fair value through profi t or loss – held for trading Other investments 18 63,985 172,542
(c) Available-for-sale fi nancial assets Other investments (at fair value) 18 75,076 174,522 Other investments (at cost less impairment) 18 10,787 12,514
85,863 187,036
(d) Financial liabilities measured at amortised cost Trade and other payables 25 797,120 677,291 Loans and borrowings 23 2,620,944 1,926,430
3,418,064 2,603,721
(e) Derivative liabilities designated as hedging instruments Derivative fi nancial instruments 24 2,104 174,677
Company (a) Loans and receivables Trade and other receivables 21 308,550 269,795 Cash and cash equivalents 22 79,664 74,826
388,214 344,621
(b) Financial assets at fair value through profi t or loss – held for trading Other investments 18 63,985 166,638
(c) Available-for-sale fi nancial assets Other investments (at fair value) 18 33,155 142,045 Other investments (at cost less impairment) 18 3,842 6,242
36,997 148,287
(d) Financial liabilities measured at amortised cost Trade and other payables 25 207,676 76,988 Borrowings 23 273,171 373,171
480,847 450,159 annual report 2011 | 273 Kulim (Malaysia) Berhad (23370-V)
37. CAPITAL MANAGEMENT The primary objective of the Group’s capital management is to ensure that it maintains a strong capital base and healthy capital ratios in order to support its business and maximise shareholder value.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the fi nancial years ended 31 December 2011 and 31 December 2010.
A subsidiary of the Group which is involved in insurance broking and consultancy is required by Bank Negara Malaysia to maintain a minimum shareholders’ fund of RM600,000 at any point in time. This externally imposed capital requirement has been complied with by the abovementioned subsidiary for the fi nancial years ended 31 December 2011 and 2010.
Bursa Malaysia Practice Note No. 17/2005 imposes a requirement on the Company to maintain a consolidated shareholders’ equity equal to or not less than the 25 percent of the issued and paid up capital (excluding treasury shares) and such shareholders’ equity is to be not less than RM40 million. The Company has complied with this requirement.
The Group monitors capital using the debt-to-equity ratio. The Group’s policy, which is unchanged from 2010, is to maintain the debt- to-equity ratio at the lower bound of the band between 0.5:1 and 0.8:1. The debt-to-equity ratios at 31 December 2011 and at 31 December 2010 were as follows:
Group 2011 2010 RM’000 RM’000 Total borrowings (Note 23) 2,620,944 1,926,430 Less: Cash and bank balances (Note 22) (644,702) (452,146)
Net debt 1,976,242 1,474,284
Total equity 6,920,699 5,542,742
Debt-to-equity ratios 0.29 0.27
38. SEGMENT INFORMATION For management purposes, the Group is organised into strategic business units based on their products and services, and has fi ve reportable segments. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. The Group Managing Director (Group MD) reviews internal management reports for each of the strategic business units on a monthly basis. The operations of each of the Group’s reportable segments are summarised below:
• Plantation operations – Oil palm planting, crude palm oil processing and plantation management services and consultancy • Manufacturing products – Manufacture and sale of oleochemical, biodiesel and rubber products • Food and service restaurants – Pizza Hut, Ayamas and Kentucky Fried Chicken outlets • Intrapreneur ventures – Sea transportation, parking management, sales of wood based products and bulk mailing and printing • Property investment – Rental of offi ce building
Performance is measured based on segment profi t before tax and interest as included in the internal management reports that are reviewed by the Group MD. Management believes that segment profi ts are the most relevant measure by which it can assess the results of the segments against those of other entities operating in the same industries
Other operations of the Group mainly comprise investment holding and intrapreneur ventures which are not of suffi cient size to be reported separately. Kulim (Malaysia) Berhad (23370-V) 274 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011 RM’000 Notes Consolidated and RM’000 eliminations Adjustments Other RM’000 operations RM’000 Property investment RM’000 ventures Intrapreneur RM’000 Food and Food restaurants RM’000 Biodiesel based Rubber RM’000 products Manufacturing
RM’000 Oleochemicals (Discontinued) Islands RM’000 Solomon Guinea & Papua New (continued) – – – – 4,811 – – – – – 4,811 4,811 – – – – – – – – – – 24,334 – 24,334 24,334 – – Plantation RM’000 821,485 2,442,799 – 8,304 – 3,349,914 396,618 8,200 14,451 – A 7,041,771 A 14,451 – 8,200 396,618 3,349,914 8,304 – 2,442,799 – 821,485 410,933 654,525 – 6 205 393,088 137,624 – 3,891 1,600,272 – Malaysia 2,024,830 635,120 – 1,034,260 439,520 4,490 125,769 – 335,550 4,599,539 –
t/(loss) 236,602 893,217 – (972) (8,864) 282,916 42,944 (4,364) 3,602 (8,393) B 1,436,688 B 893,217 t/(loss) 236,602 42,944 (4,364) 3,602 (8,393) 282,916 – (8,864) (972) assets – – – – – 7,814 1,146 – 412 – 9,372 412 – 1,146 – assets 7,814 – assets – 177,435 – – – 888,972 28,698 – 2,694 – 1,097,799 2,694 – 28,698 – 888,972 177,435 – assets – income 7,721 2,950 – – – 984 (1,019) – 1,955 – 12,591 1,955 – – (1,019) 984 2,950 – income 7,721 nancial equipment 88,277 163,398 – 177 2,748 135,764 22,632 – 2,559 – 415,555 2,559 – 22,632 – 135,764 2,748 177 163,398 – equipment 88,277 intangible assets associates associates
Results costs Interest Finance ofDepreciation (22,071) (33,307) plant and property, – Amortisation of (112) (652) (13,972) (22,003) – 642 – (91,475) 31 December 2011 revenue Segment Impairment of non-fi
Segment profi Assets in Investments Segment assets 3,405,097 4,665,389 – 5,316 35,565 2,686,468 533,306 94,602 42,016 52,479 C 11,520,238 assets C 4,665,389 533,306 94,602 42,016 52,479 3,405,097 2,686,468 Segment – 5,316 35,565 Segment liabilities assets to Additions non-current Intangible 38. SEGMENT INFORMATION SEGMENT INFORMATION 38.
annual report 2011 | 38. SEGMENT INFORMATION(continued)
Plantation Manufacturing Papua New Guinea & Rubber Adjustments SolomonOleochemicals based Food and Intrapreneur Property Other and Malaysia Islands (Discontinued) products Biodiesel restaurants ventures investment operations eliminations Notes Consolidated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 275 31 December 2010 Segment revenue 575,131 1,532,526 881,511 4,988 22,908 3,035,827 292,799 7,587 17,173 (881,511) A 5,488,939
Results Interestincome 4,041 482 – 3 – – 56 – 1,788 – 6,370 Finance costs 32,347 29,302 7,004 75 1,521 10,496 8,998 – (1,299) (7,004) 81,440 Depreciation of property, plant and equipment 51,400 121,362 – 114 4,421 117,560 24,181 – 2,151 – 321,189 Amortisation of intangibleassets – – – – – 9,412 1,070 – – – 10,482 Impairment of non-fi nancial assets – – – – 35,404 11,036 – – – – 46,440 Segment profi t/(loss) 212,613 456,305 8,479 (2,858) (63,347) 277,355 13,233 3,513 (35,539) (18,962) B 850,792
Assets Investments in associates – – – – – – – – 56,610 – 56,610 Intangibleassets – 140,301 – – – 878,491 26,698 – 1,405 – 1,046,895 Additions to non-current assets 48,362 312,973 – 354 4,015 260,545 98,028 – 5,021 – 729,298 Segment assets 2,815,523 3,141,165 – 5,654 44,713 2,353,332 482,998 94,503 93,743 214,061 C 9,245,692
Segment liabilities 626,094 1,702,335 – 3,743 125,401 845,920 391,092 – 8,365 – 3,702,950 Kulim (Malaysia) Berhad
(23370-V) Kulim (Malaysia) Berhad (23370-V) 276 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
38. SEGMENT INFORMATION (continued) The intrapreneur venture business segment can be further analysed as follows:
Wood Bulk Total Sea Parking based mailing and intrapreneur transportation managements product printing Others venture RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2011 Segment revenue 169,935 115,665 6,488 30,416 74,114 396,618
Results Interest income – – – – (1,019) (1,019) Finance costs (20,467) (791) (82) (271) (392) (22,003) Depreciation of property, plant and equipment 14,062 3,314 236 809 4,211 22,632 Amortisation of intangible assets – 1,146 – – – 1,146 Segment profi t 37,469 3,234 280 991 970 42,944
Assets Intangible assets 8,996 12,545 – 1,931 5,226 28,698 Additions to non-current assets 92,291 5,660 – 354 39,319 137,624 Segment assets 404,011 47,468 4,662 15,027 62,138 533,306
Segment liabilities 300,422 44,402 23,872 4,643 66,181 439,520
31 December 2010 Segment revenue 87,153 111,888 8,962 33,625 51,171 292,799
Results Interest income 241 315 – – (500) 56 Finance costs 7,305 992 80 283 338 8,998 Depreciation of property, plant and equipment 18,122 4,432 228 809 590 24,181 Amortisation of intangible assets – 1,070 – – – 1,070 Segment profi t/(loss) 12,283 3,072 893 3,134 (6,149) 13,233
Assets Intangible assets 6,993 13,545 – 1,931 4,229 26,698 Additions to non-current assets 83,707 9,634 364 1,440 2,883 98,028 Segment assets 384,116 54,028 6,457 18,873 19,524 482,998
Segment liabilities 273,776 37,344 25,650 7,099 47,223 391,092 annual report 2011 | 277 Kulim (Malaysia) Berhad (23370-V)
38. SEGMENT INFORMATION (continued) Notes Nature of adjustments and eliminations to arrive at amounts reported in the consolidated fi nancial statements A The amounts relating to the discontinued operation (i.e. oleochemical segment) have been excluded to arrive at the amounts shown in the consolidated statement of comprehensive income as they are presented separately in the statement of comprehensive income within one line item, “Gain from discontinued operation, net of tax”.
B The following items are added to / (deducted from) segment profi t to arrive at “Profi t before tax from continuing operations” presented in the consolidated statement of comprehensive income:
2011 2010 RM’000 RM’000 Share of results of associates 6,992 2,174 Interest income 12,591 6,370 Finance costs (91,475) (81,440)
(71,892) (72,896)
C This amount comprises of other items which cannot be allocated to any operating segment.
Geographical information Revenue and non-current assets information based on the geographical location of customers and assets respectively are as follows:
Revenue Non-current assets 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Malaysia 4,677,679 4,051,986 5,592,816 4,927,178 Papua New Guinea 276,953 242,479 2,931,097 2,103,656 Europe (mainly United Kingdom and Netherlands) 2,074,140 1,185,754 413,413 261,931 Others 12,999 8,720 12,686 8,419
7,041,771 5,488,939 8,950,012 7,301,184
Non-current assets information presented above consist of the following items as presented in the consolidated statement of fi nancial position: 2011 2010 RM’000 RM’000 Property, plant and equipment 7,667,603 5,876,948 Investment properties 98,296 97,863 Intangible assets 1,097,799 1,046,895 Investments in associates 24,334 56,610 Other investments 52,479 214,061 Deferred tax assets – 917 Deferred farm expenditure 9,501 7,890
8,950,012 7,301,184
39. COMPARATIVES AND AUTHORISATION OF FINANCIAL STATEMENTS FOR ISSUE (a) The comparatives were audited by a fi rm of chartered accountants other than Ernst & Young.
(b) The fi nancial statements for the year ended 31 December 2011 were authorised for issue in accordance with a resolution of the directors on 30 March 2012. Kulim (Malaysia) Berhad (23370-V) 278 | annual report 2011
NOTES TO THE FINANCIAL STATEMENTS (continued) 31 DECEMBER 2011
40. SUPPLEMENTARY INFORMATION ON THE BREAKDOWN OF REALISED AND UNREALISED PROFITS AND LOSSES On 25 March 2010, Bursa Malaysia Securities Berhad (“Bursa Malaysia”) issued a directive to all listed entities pursuant to Paragraph 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements. The directive requires all listed issuers to disclose the breakdown of the unappropriated profi ts or accumulated losses as at the end of the reporting period, into realised and unrealised profi ts or losses.
On 20 December 2010, Bursa Malaysia further issued another directive on the disclosure and the prescribed format of presentation.
The breakdown of the retained earnings of the Group and of the Company as at 31 December 2010, into realised and unrealised profi ts, pursuant to the directive, is as follows:
Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000
Total retained earnings of the Company and its subsidiaries: – realised 4,244,855 2,420,389 1,119,132 1,135,982 – unrealised (681,525) (636,451) (51,353) (73,429)
3,563,330 1,783,938 1,067,779 1,062,553 Total share of retained earnings associates: – realised 7,712 5,569 – –
3,571,042 1,789,507 1,067,779 1,062,553 Add: Consolidated adjustments (1,134,542) 183,343 – –
Total retained earnings 2,436,500 1,972,850 1,067,779 1,062,553
The determination of realised and unrealised profi ts is based on the Guidance of Special Matter No.1, Determination of Realised and Unrealised Profi ts or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by Malaysian Institute of Accountants on 20 December 2010. SECTION 8: OTHER CORPORATE INFORMATION 280 LOCATIONS OF THE GROUP’S PALM OILS DIVISION OPERATIONS 282 PROPERTIES OF THE GROUP • MALAYSIA • PAPUA NEW GUINEA • SOLOMON ISLANDS 297 NOTICE OF ANNUAL GENERAL MEETING 301 STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING PROXY FORM Kulim (Malaysia) Berhad (23370-V) 280 | annual report 2011
MALAYSIA
LOCATIONS OF THE GROUP’S PALM OILS DIVISION OPERATIONS annual report 2011 | 281 Kulim (Malaysia) Berhad (23370-V)
ESTATES AND MILLS:
1. Bukit Layang Estate 12. Tereh Utara Estate and Tereh Mill 2. Basir Ismail Estate 13. Sungai Tawing Estate 3. REM Estate 14. Selai Estate 4. Ulu Tiram Estate 15. Sungai Sembrong Estate 5. Sedenak Estate and Mill 16. Labis Bahru Estate 6. Kuala Kabung Estate 17. Sepang Loi Estate 7. Rengam Estate 18. UMAC Estate 8. Sindora Estate and Mill 19. Sungai Papan Estate 9. Tereh Selatan Estate 20. Siang Estate 10. Enggang Estate 11. Mutiara Estate Kulim (Malaysia) Berhad (23370-V) 282 | annual report 2011 PROPERTIES OF THE GROUP IN MALAYSIA
Net Book Value @ Year of 31.12.2011 Acquisition/ Tenure Hectares Description RM’000 Revaluation
KULIM (MALAYSIA) BERHAD
Labis Bahru Estate Freehold 2,109 Oil palm and rubber 43,950 1997* K B 517 estate 85009 Segamat, Johor
Mutiara Estate Leasehold expiring 1,619 Oil palm estate 30,122 1997* P O Box 21 20.06.2085 324 Kahang New Village 26.09.2085 607 86700 Kahang, Johor 04.11.2074
Basir Ismail Estate Freehold 2,875 Oil palm estate 432,330 1997* K B 502 81909 Kota Tinggi, Johor
REM Estate Freehold 2,571 Oil palm estate 330,515 1997* K B 501 Leasehold expiring 15.04.2093 5 Staff training centre 81909 Kota Tinggi, Johor (Building age: 13 years)
Sg. Sembrong Estate Leasehold expiring 607 Oil palm estate 14,846 1997* P O Box 21 05.05.2074 607 Kahang New Village 25.11.2082 29 86700 Kahang, Johor 13.10.2102
Ulu Tiram Estate Freehold 502 Oil palm estate 93,491 1997* K B 710 80990 Johor Bahru, Johor
Kuala Kabung Estate Leasehold expiring 16.08.2081 1,705 Oil palm estate 10,315 1997* No 70, Jalan Ria 3 Taman Ria, Bukit Batu 81020 Kulai, Johor
Mukim of Plentong, Johor Vacant land 17,458 1997* Lot 1581 Freehold 5 Lot 2222 Freehold 8 Lot 2223 Freehold 66 Lot 2226 Freehold 4 Lot 2227 Freehold 5
Menara Ansar Leasehold expiring 18.12.2080 – 21-storey Intelligent 99,751 1998+ 65, Jalan Trus (Building age: 13 years) offi ce building 80000 Johor Bahru comprising 3-level Basement Carpark, 5-level Podium and 16-level Tower
13,648 1,072,778
KULIM PLANTATIONS (MALAYSIA) SDN BHD
Tereh Selatan Estate Freehold 1,929 Oil palm estate 45,086 1997* K B 537 Leasehold expiring 27.08.2078 869 86009 Kluang, Johor
Tereh Utara Estate Freehold 834 Oil palm estate 44,716 1997* K B 536 Leasehold expiring 27.08.2078 1,560 86009 Kluang, Johor Leasehold expiring 27.06.2079 607
5,799 89,802 annual report 2011 | 283 Kulim (Malaysia) Berhad (23370-V)
Net Book Value @ Year of 31.12.2011 Acquisition/ Tenure Hectares Description RM’000 Revaluation
MAHAMURNI PLANTATIONS SDN BHD
Rengam Estate Freehold 2,439 Oil palm and rubber 165,553 1997* K B 104 estate 86300 Rengam, Johor
Sedenak Estate Freehold 2,861 Oil palm estate 188,433 1997* K B 726 80990 Johor Bahru, Johor
UMAC Estate Leasehold expiring on: Oil palm estate 17,348 1997* P O Box 64 17.03.2070 228 86007 Segamat, Johor 29.08.2071 237 11.12.2071 324 28.11.2072 346 25.02.2074 481
Siang Estate Leasehold expiring on 3,414 Oil palm estate 103,077 2011 K B 515 23.01.2087 81909 Kota Tinggi, Johor
Sg. Papan Estate Leasehold expiring on 3,026 Oil palm estate 94,945 2011 P O Box 15 22.09.2090 Bandar Penawar 81909 Kota Tinggi, Johor
13,356 569,356
ULU TIRAM MANUFACTURING COMPANY (MALAYSIA) SDN BHD
Bukit Layang Estate Freehold 398 Oil palm estate 52,383 1997* K B 502 81909 Kota Tinggi, Johor
398 52,383
SELAI SDN BHD
Enggang Estate Freehold 356 Oil palm estate 25,872 1997* K B 503 86009 Kluang, Johor
Selai Estate Freehold 3,179 Oil palm estate 23,618 1997* K B 529 86009 Kluang, Johor
3,535 49,490
KUMPULAN BERTAM PLANTATIONS BERHAD
Sepang Loi Estate Freehold 1,016 Oil palm estate 9,644 2003 K B 520 85009 Segamat
1,016 9,644 Kulim (Malaysia) Berhad (23370-V) 284 | annual report 2011
PROPERTIES OF THE GROUP IN MALAYSIA (continued)
Net Book Value @ Year of 31.12.2011 Acquisition/ Tenure Hectares Description RM’000 Revaluation
SINDORA BERHAD
Sindora Estate Leasehold expiring 3,919 Oil palm estate 54,682 1987 K B 539 24.01.2086 86009 Kluang, Johor
Sg. Tawing Estate Leasehold expiring 2,219 Oil palm estate 33,463 2009 K B 531 27.06.2079 86009 Kluang, Johor
6,138 88,145
Total – Plantation 43,890 1,931,598
+ This property was acquired during the year as indicated and is stated at cost less accumulated depreciation and impairment losses. * These properties were revalued in 1997. The accounting policy on revaluation is disclosed in Note 2.7 to the Financial Statements. annual report 2011 | 285 Kulim (Malaysia) Berhad (23370-V)
Net Book Value @ Year of 31.12.2011 Acquisition/ Tenure Area Description RM’000 Revaluation QSR BRANDS BHD AGRICULTURAL PROPERTIES SELANGOR Geran 24766 Lot 1462 Freehold 63 Breeder farm 13,043 2010 Mukim Beranang (Building age: 22 years) acres Daerah Hulu Langat HS (D) 20746, PT153 Leasehold expiring 32 Breeding farm and 9,684 2010 Bandar Baru Salak Tinggi 25.01.2105 acres hatchery District of Sepang (Building age: 13 years) 22,727 KEDAH Geran 34780, Lot 1908 Freehold 47 Breeding farm and 15,249 2011 Mukim Sidam Kiri (Building age: 9 years) acres hatchery Daerah Kuala Muda, Kedah 15,249 NEGERI SEMBILAN Geran 22067 Lot 3468 Freehold 55 Breeder farm 5,222 2010 Mukim Linggi (Building age: 21 years) acres Daerah Port Dickson Geran 6348 PT 2149 Freehold 20 Breeder farm 2,939 2010 Mukim Lenggeng (Building age: 21 years) acres Daerah Seremban Lot 559 Mukim Gemencheh Freehold 30,557 Breeder farm 4,805 2010 Daerah Tampin (Building age: 15 years) sq. ft. HS (D) 5977-5980, PT 924-927 Freehold 20 Vacant land for 1,362 2010 Mukim Titian Bintangor acres future expansion Daerah Rembau 14,328 MELAKA Lots 1375-1397, 1689 and 1706 Freehold 151 Breeder farm 9,760 2010 Mukim Ayer Pa’abas (Building age: 21 years) acres Daerah Alor Gajah PM 1026 Lot 2294 Leasehold expiring 6 Contract broiler 203 2010 Mukim Machap 27.05.2038 acres farming Daerah Alor Gajah (Building age: 16 years) 9,963 JOHOR Mukim of Mersing Freehold 855 Vacant land and 44,000 2010 District of Johor acres oil palm estate Part of Lot land held under Leasehold 400 Broiler farms 33,007 2011 PTD 9374, HSD 14897 16.08.2081 acres Mukim Bukit Batu (Building age: 1 year) Daerah Kulai Jaya, Johor 77,007 Kulim (Malaysia) Berhad (23370-V) 286 | annual report 2011
PROPERTIES OF THE GROUP IN MALAYSIA (continued)
Net Book Value @ Year of 31.12.2011 Acquisition/ Tenure Sq. Ft. Description RM’000 Revaluation
QSR BRANDS BHD COMMERCIAL PROPERTIES
PERLIS
9 Persiaran Putra Timur Satu Leasehold expiring 2,660 Double-storey intermediate 368 2010 02000 Kuala Perlis 25.09.2092 shophouse for storage and (Building age: 17 years) accommodation
368
KEDAH
Lot No. 269 Pekan Dindong Freehold 3,260 3-storey intermediate 443 2010 07000 Kuah (Building age: 17 years) shopoffi ce for warehouse, Langkawi commissary and staff hostel
45 Arked Pokok Asam Freehold 4,077 Double-storey corner 648 2010 Langkawi Mall (Building age: 16 years) shophouse for restaurant 07000 Kuah Langkawi
46 & 47 Lengkok Cempaka 1 Freehold 7,220 3-storey corner and 475 2010 Persiaran Cempaka (Building age: 13 years) intermediate shopoffi ces for 08000 Amanjaya restaurant and hostel
No. 5 Bangunan Joota Brothers Freehold 1,240 2-storey shopoffi ce for 495 2011 Jalan Sungai Korok, 06000 Jitra (Building age: 21 years) restaurant
2,061
PULAU PINANG
Unit No. G-104 Leasehold expiring 2,762 Ground fl oor of a shopping 1,401 2010 Megamall Pinang 04.07.2094 complex for restaurant 2828 Jalan Baru (Building age: 15 years) Bandar Perai Jaya 13600 Seberang Perai Tengah
1-10G Eden Parade Freehold 1,409 Ground and mezzanine fl oors 450 2010 Jalan Sungai Emas (Building age: 11 years) of a shopping complex for 11100 Batu Ferringi restaurant
34 Jalan Mahsuri Leasehold expiring 7,176 Double-storey shophouse for 2,656 2010 11950 Bandar Bayan Baru 15.05.2090 restaurant (Building age: 19 years)
3A-G-18 Blok 3A Freehold 2,972 Ground fl oor of a shopping 2,431 2010 Kompleks Bukit Jambul (Building age: 15 years) complex for restaurant Jalan Rumbia 11900 Pulau Pinang
Unit No. G-103 Leasehold expiring 3,342 Ground fl oor of a shopping 1,683 2010 Megamall Pinang 04.07.2094 complex for restaurant 2828 Jalan Baru (Building age: 15 years) Bandar Perai Jaya 13600 Seberang Perai Tengah
Parcel No. S-C1-05 Freehold 2,798 Double-storey intermediate 247 2010 Pusat Bandar Nibong Tebal (Building age: 8 years) shophouse for restaurant 14300 Pulau Pinang annual report 2011 | 287 Kulim (Malaysia) Berhad (23370-V)
Net Book Value @ Year of 31.12.2011 Acquisition/ Tenure Sq. Ft. Description RM’000 Revaluation
QSR BRANDS BHD COMMERCIAL PROPERTIES (continued)
PULAU PINANG (continued)
1-5G, 1-6G & 1-9G Freehold 4,397 3 adjoining ground and 1,512 2010 Eden Parade (Building age: 11 years) mezzanine fl oors of a Jalan Sungai Emas shopping complex for 11100 Batu Ferringhi restaurant
GF-12A Queensbay Mall Freehold 5,870 Ground fl oor of a shopping 6,848 2010 100 Persiaran Bayan Indah (Building age: 6 years) complex for restaurant 11900 Bayan Lepas Pulau Pinang
Geran No. 23532 Freehold 30,453 Plot of land with a colonial 9,600 2010 Lot 599 Seksyen 5 heritage bungalow Bandar Georgetown No. 10-A Jalan Masjid Negeri 11600 Daerah Timor Laut Pulau Pinang
26,828
PERAK
79 Jalan Dato’ Lau Pak Khuan Freehold 4,980 Double-storey intermediate 589 2010 Ipoh Garden (Building age: 41 years) shophouse for restaurant 31400 Ipoh
65 Jalan Dato’ Onn Jaafar Freehold 19,375 6-storey commercial 1,750 2010 30300 Ipoh (Building age: 25 years) building for restaurant and staff hostel
158 Jalan Idris Freehold 7,542 3½-storey shopoffi ce 589 2010 31900 Kampar (Building age: 27 years) for restaurant
PTD 217643 Freehold 43,561 Vacant land for restaurants 6,717 2010 Jalan Kuala Kangsar Daerah Hulu Kinta Klebang, Ipoh
9,645
SELANGOR
20-4 & 22-4 Jalan 14/22 Leasehold expiring 3,080 3rd fl oor of 2 adjoining units 730 2010 The Right Angle 16.12.2086 of a 4-storey shophouse 46100 Petaling Jaya (Building age: 22 years)
18A Ground Floor Freehold 1,490 Ground fl oor of a 5-storey 801 2010 Jalan SS6/3 Kelana Jaya (Building age: 23 years) shophouse for retail outlet 47301 Petaling Jaya
60 & 62 Jalan PJS 11/28A Leasehold expiring 15,237 2 units of 4-storey shopoffi ce 4,719 2010 Bandar Sunway 11.03.2095 & 28.12.2092 for restaurant, offi ce and 46150 Petaling Jaya (Building age: 16 years) hostel 9 Jalan Taiping Freehold 12,202 4½-storey corner shophouse 1,963 2010 41400 Klang (Building age: 31 years) for restaurant and staff hostel Kulim (Malaysia) Berhad (23370-V) 288 | annual report 2011
PROPERTIES OF THE GROUP IN MALAYSIA (continued)
Net Book Value @ Year of 31.12.2011 Acquisition/ Tenure Sq. Ft. Description RM’000 Revaluation QSR BRANDS BHD COMMERCIAL PROPERTIES (continued) SELANGOR (continued) 18 & 20 Jalan Sulaiman Freehold 4-storey shophouse for 4,667 2010 43000 Kajang (Building age: 30 years) 17,088 restaurant Lot PT 12209 Leasehold expiring 95,788 Vacant land for restaurant 7,902 2010 Mukim Damansara 01.11.2092 Daerah Petaling 2105 Jalan 3/1 Leasehold expiring 2,423 Double-storey shophouse for 639 2010 Bandar Baru Sungai Buloh 13.03.2087 restaurant 47000 Sungai Buloh (Building age: 22 years) Lot C1-091 Leasehold expiring 4,108 Concourse level of 1,466 2010 Kompleks Galaxy Ampang 20.10.2084 shopping centre for restaurant Jalan Dagang 5 (Building age: 8 years) Taman Dagang 68000 Ampang Lot PT 5665 Leasehold expiring 5,000 Vacant land for restaurant 3,959 2010 Pekan Puchong Perdana 28.05.2108 Daerah Petaling Blok B, Jalan Prima 5/5 Freehold 5,968 4-storey shopoffi ce 4,181 2010 Persiaran Prima Utama (Building age: 9 years) Taman Puchong Prima 47100 Puchong 31,027 W.P. KUALA LUMPUR Lot 14083 Leasehold expiring 8,052 Single-storey building for 6,660 2010 Jalan Kuchai Lama 08.02.2064 restaurant 58200 Kuala Lumpur (Building age: 6 years) 437 Jalan Ipoh Freehold 13,294 5-storey corner lot commercial 3,969 2010 51200 Kuala Lumpur (Building age: 29 years) building for restaurant and staff training 140 Jalan Raja Laut Freehold 6,437 4-storey intermediate 2,488 2010 50350 Kuala Lumpur (Building age: 39 years) shophouse for restaurant and staff hostel Lot PT 16805 Leasehold expiring 11,000 Double-storey building for 10,933 2010 Jalan Prima 1 28.04.2096 restaurants Metro Prima (Building age: 11 years) Off Jalan Kepong 52100 Kuala Lumpur Lot PT 6878 Leasehold expiring 11,768 Single-storey building for 12,738 2010 Jalan 8/27A Wangsa Maju 19.04.2083 restaurants 53300 Kuala Lumpur (Building age: 9 years) No. 23 & 24 Jalan 54 Leasehold expiring 13,587 2 adjoining units of 4-storey 3,619 2010 Desa Jaya Kepong 08.03.2081 shophouse for restaurant 52100 Kepong (Building age: 29 years) 40,407 annual report 2011 | 289 Kulim (Malaysia) Berhad (23370-V)
Net Book Value @ Year of 31.12.2011 Acquisition/ Tenure Sq. Ft. Description RM’000 Revaluation
QSR BRANDS BHD COMMERCIAL PROPERTIES (continued)
NEGERI SEMBILAN
26 Jalan Dato’ Sheikh Ahmad Freehold 3,000 Double-storey corner 812 2010 70000 Seremban (Building age: 27 years) shophouse for retail outlet and staff hostel
20 & 21 Jalan Dato’ Sheikh Ahmad Freehold 7,812 2 adjoining units of 2,136 2010 70000 Seremban (Building age: 31 years) 4-storey shophouse for restaurant and hostel
24 & 26 Jalan Bunga Raya 7 Freehold 5,456 2 units of a double-storey 498 2010 Pusat Perniagaan Senawang (Building age: 17 years) shophouse for restaurant Taman Tasik Jaya 70400 Senawang
1 Jalan Mahajaya Leasehold expiring 9,164 3-storey corner shophouse 1,126 2010 Kawasan Penambakan Laut 31.01.2085 for restaurant and staff Bandar Port Dickson (Building age: 15 years) hostel 71009 Negeri Sembilan
Lot Nos PT 8241 to 8249 & 8262 Freehold 119,946 Vacant land (for shoplot 3,400 2010 Mukim Rantau and commercial complex) Daerah Seremban
PT 12172, Jalan BBN 1/1F Freehold 5,386 3-storey shophouse for 423 2010 Putra Point (Building age: 15 years) restaurant Bandar Baru Nilai 71800 Nilai
Lot 3363 Mukim Rasah Freehold 43,906 Vacant commercial land 2,343 2011 District of Seremban Negeri Sembilan
10,738
MELAKA
9 Jalan PPM 9 Leasehold expiring 5,818 4-storey intermediate 621 2010 Plaza Pandan Malim 09.06.2095 shophouse for restaurant 75250 Melaka (Building age: 14 years) and staff hostel
555 Plaza Melaka Freehold 9,990 4½-storey corner 1,182 2010 Jalan Hang Tuah (Building age: 25 years) shophouse with mezzanine 75300 Melaka fl oor for restaurant
PM 222, Lot No. 4260 Leasehold expiring 42,851 Vacant land for restaurants 3,123 2010 Mukim Bukit Katil 14.09.2077 Daerah Melaka Tengah
No. 37 Jalan BBP1 Leasehold expiring 1,389 Ground fl oor of a 2-storey 381 2011 Taman Batu Berendam Putra 28.06.2108 shopoffi ce for restaurant 75350 Batu Berendam, Melaka (Building age: 9 years)
5,307 Kulim (Malaysia) Berhad (23370-V) 290 | annual report 2011
PROPERTIES OF THE GROUP IN MALAYSIA (continued)
Net Book Value @ Year of 31.12.2011 Acquisition/ Tenure Sq. Ft. Description RM’000 Revaluation
QSR BRANDS BHD COMMERCIAL PROPERTIES (continued) JOHOR 86 Jalan Dedap 4 Freehold 1,540 Double-storey shophouse for 544 2010 Taman Johor Jaya (Building age: 29 years) restaurant 81100 Johor Bahru 11 Jalan Sri Perkasa 2/1 Leasehold expiring 4,620 3-storey intermediate shophouse 371 2010 Taman Tampoi Utama 13.04.2094 for restaurant and staff hostel 81200 Johor Bahru (Building age: 15 years) 1 & 1-1 Jalan Niaga Leasehold expiring 2,926 Corner unit of double-storey 869 2010 Pusat Perniagaan Jalan Mawai 14.05.2085 shophouse for restaurant 81900 Kota Tinggi (Building age: 12 years) HS(D) 367670 PTD 104984 Freehold 75,229 Vacant commercial land 4,100 2010 Damansara Aliff 2 Mukim Tebrau Johor Bahru Lot 590 & Lot 591 Freehold 45,000 Vacant land for restaurant 8,400 2010 PTD 171459, Tmn Perling Mukim Pulai 81200 Johor No. 1 & 1A Jalan Resam 13 Freehold 6,987 3-storey corner shophouse 853 2010 Taman Bukit Tiram (Building age: 2 years) No. 3, 3A & 3B Freehold 4,620 3-storey intermediate shophouse 528 2010 Jalan Resam 13 (Building age: 2 years) Taman Bukit Tiram No. 43 Jalan Sejambak 14 Leasehold expiring 3,080 Vacant land for restaurant 509 2011 Taman Bukit Dahlia 30.06.2103 81700 Pasir Gudang, Johor No. 2 Jalan Bandar 1 Leasehold expiring 5,280 3-storey shopoffi ce for restaurant 669 2011 Pusat Bandar Baru Ayer Hitam 16.07.2101 86100 Ayer Hitam, Johor (Building age: 1 year) No. 1 Jalan Bandar 1 Leasehold expiring 9,936 3-storey shopoffi ce for restaurant 1,279 2011 Pusat Bandar Baru Ayer Hitam 16.07.2101 86100 Ayer Hitam, Johor (Building age: 1 year) Part of PTD 84134 Freehold 2 Vacant commercial land 5,904 2011 Bandar Dato’ Onn acres Johor Bahru Part of C9 Freehold 41,295 Single-storey building for KFC and 6,171 2011 Taman Damansara Aliff (Building age: 1 year) Pizza Hut restaurants Tampoi, Johor Bahru 30,197 TERENGGANU 10 Persiaran Melor Leasehold expiring 3,300 Double-storey intermediate 406 2010 Kijal Beach Resort 25.11.2101 shophouse for restaurant 24100 Kijal (Building age: 17 years) 406 PAHANG Retail 1 & 2 Ground Floor Leasehold expiring 2,878 2 contiguous parcels of ground 1,146 2010 Bangunan Baru UMNO Pekan 29.08.2106 fl oor retail lots within a 6-storey 26600 Pekan (Building age: 7 years) commercial complex 1,146 annual report 2011 | 291 Kulim (Malaysia) Berhad (23370-V)
Net Book Value @ Year of 31.12.2011 Acquisition/ Tenure Sq. Ft. Description RM’000 Revaluation QSR BRANDS BHD COMMERCIAL PROPERTIES (continued) SABAH Lot 25 Block 3 Leasehold expiring 5,710 3-storey corner shophouse 1,345 2010 Bornion Centre 15.05.2915 for restaurant and hostel Jalan Kolam (Building age: 27 years) 88300 Kota Kinabalu 1,345 SINGAPORE 18 Yung Ho Road Leasehold expiring 2,912 Purpose-built single-storey 5,294 2010 Singapore 618591 16.12.2036 building for restaurant (Building age: 36 years) 5,294 BRUNEI EDR BD 44812 Lot 51759 Freehold 0.494 Vacant land for restaurant 1,122 2011 Kampong Sengkurong acres Mukim Sengkurong, Brunei 1,122 INDUSTRIAL PROPERTIES PULAU PINANG
2718 Jalan Seladang Alma Freehold 47,376 Single-storey factory with 3,744 2010 14000 Bukit Mertajam (Buidling age: 23 years) double-storey offi ce block for processing plant
29 & 31 Lorong IKS Freehold 5,960 2 adjoining units of a 1,359 2010 Juru 3, IKS Juru (Buidling age: 15 years) 1½-storey semi-detached 14100 Simpang Ampat factories for commissary Seberang Perai Selatan and warehouse
Lot 1136, Mukim 602 Freehold 8.231 Vacant land for processing 8,909 2011 Seberang Perai Tengah acres plant Pulau Pinang 14,012 SELANGOR Lot 7 Jalan 51A/223 Leasehold expiring 10,883 Single-storey building with 2,551 2010 46675 Petaling Jaya 27.04.2065 a double-storey offi ce block (Building age: 46 years) Lot 5 Jalan 51A/223 Leasehold expiring 27,930 Single-storey detached 7,256 2010 46675 Petaling Jaya 18.11.2067 factory with 4-storey offi ce (Building age: 24 years) block Lot 20153 Leasehold expiring 124,031 Land and factory buildings 39,511 2010 Jalan Pelabuhan Utara 17.12.2086 for primary processing and 42000 Pelabuhan Klang (Building age: 25 years) further processing plants 17, 19 & 21 Freehold 169,200 Industrial complex 39,062 2010 Jalan Pemaju U1/15 (Building age: 14 years) Seksyen U1 HICOM-Glenmarie Industrial Park 40150 Shah Alam Kulim (Malaysia) Berhad (23370-V) 292 | annual report 2011
PROPERTIES OF THE GROUP IN MALAYSIA (continued)
Net Book Value @ Year of 31.12.2011 Acquisition/ Tenure Sq. Ft. Description RM’000 Revaluation
QSR BRANDS BHD INDUSTRIAL PROPERTIES (continued) SELANGOR (continued) Lot 166 Freehold 205,603 Vacant land for future 21,600 2010 Jalan Pemaju U1/15 expansion of industrial Seksyen U1 complex HICOM-Glenmarie Industrial Park 40150 Shah Alam 1, 3 & 6 Lorong Gerudi 1 Leasehold expiring 312,594 Single and double-storey 71,929 2010 Off Jalan Pelabuhan Utara 15.03.2087 warehouse buildings and 47000 Pelabuhan Klang (Building age: 17 years) 4-storey offi ce building 181,909 KEDAH Mukim of Sungai Petani/ Freehold 45,900 Vacant industrial/residential 13,124 2010 Sungai Pasir square land, residential and District of Kedah metres commercial properties 13,124 JOHOR PLO 398 Leasehold expiring 24,057 Land and factory buildings 2,149 2010 Kilang Siapbina PKENJ 18.04.2050 for contract manufacturing Jalan Perak (Building age: 21 years) and warehouse Kawasan Perindustrian Pasir Gudang 81770 Pasir Gudang 2,149 SABAH
Lot 43A Karamunsing Warehouse Leasehold expiring 11,832 3-storey corner warehouse 2,103 2010 88000 Kota Kinabalu 22.01.2901 and offi ce (Building age: 26 years)
Lot 5 Lorong Tembaga Tiga Leasehold expiring 18,287 1½-storey semi-detached 1,469 2010 Kawasan MIEL KKIP Selatan 29.05.2101 warehouse Kota Kinabalu Industrial Park Menggatal (Building age: 11 years) 88450 Kota Kinabalu
3,572 annual report 2011 | 293 Kulim (Malaysia) Berhad (23370-V)
Net Book Value @ Year of 31.12.2011 Acquisition/ Tenure Sq. Ft. Description RM’000 Revaluation
QSR BRANDS BHD RESIDENTIAL PROPERTIES
W.P. KUALA LUMPUR
90 Pinggir Zaaba Freehold 5,388 Double-storey detached 2,978 2010 Taman Tun Dr Ismail (Building age: 20 years) house 60000 Kuala Lumpur
2,978
NEGERI SEMBILAN
Unit Nos 1D, 1E, 1F, 1G & 2D Leasehold expiring 3,251 5 units of condominium for 953 2010 Marina Bay Admiral Cove 27.07.2094 staff training and recreation 71000 Port Dickson (Building age: 14 years)
953
PAHANG
Unit No. 3556 Block B Freehold 1,399 Condominium for staff 318 2010 Awana Golf & Country Resort (Building age: 24 years) training and recreation 69000 Genting Highlands
Unit No. A7-22 (P) Freehold 2,386 Condominium for staff 299 2010 Amber Court Villa D’Genting Resort (Building age: 17 years) training and recreation 69000 Genting Highlands
Unit No. B1-22 (P) Freehold 2,429 Condominium for staff 304 2010 Amber Court Villa D’Genting Resort (Building age: 17 years) training and recreation 69000 Genting Highlands
Unit No. B1-16 Level 16 Freehold 1,214 Condominium for staff 141 2010 Amber Court Villa D’Genting Resort (Building age: 17 years) training and recreation 69000 Genting Highlands
1,062
TOTAL – FOODS AND RESTAURANTS 524,924 Kulim (Malaysia) Berhad (23370-V) 294 | annual report 2011
PROPERTIES OF THE GROUP IN MALAYSIA (continued)
Net Book Hectares/ Value @ Year of ’000 31.12.2011 Acquisition/ Tenure Sq. Ft. Description RM’000 Revaluation SINDORA BERHAD Sindora Timber Complex 60 years lease expiring on 2.56/ Industrial land and building 120 2000 Lot 1384 Industrial Area Phase 1 24.11.2059 Bandar Tenggara (Building age: 12 years) 81000 Kulai, Johor 60 years lease expiring on /2,344 Industrial land and building 6,880 1983 30.01.2041 for offi ce and factory (Building age: 29 years) 60 years lease expiring on /5 Factory building 41 1986 30.01.2041 (Building age: 26 years)
No. 1, Jalan Temenggong 10 Leasehold expiring on /6 1 unit of double-storey 53 1987 Bandar Tenggara 18.04.2085 bungalow (staff residence) 81000 Kulai, Johor (Building age: 25 years)
No. 6, 6A, 6B, 37, 37A, 37B, 41, 41A, Freehold /8 4 units of 3-storey 3,360 1982 41B (Building age: 30 years) shophouses Jalan Perang, Taman Pelangi 80000 Johor Bahru, Johor
No. 17, Jalan Resam Leasehold 0.5699/ 1 unit of double-storey 583 1990 Green Plains, Taman Bukit Tiram (Building age: 22 years) bungalow (staff residence) 81800 Ulu Tiram, Johor
11,037
PRO OFFICE SOLUTIONS SDN BHD
Wisma Pro Offi ce Freehold /22.8 Offi ce building 4,256 2005 No. 6, Jalan SBC 6 (Building age: 7 years) Taman Sri Batu Caves 68100 Batu Caves, Selangor
4,256
E.A. TECHNIQUE (M) SDN BHD
Setiawangsa Business Suites Freehold /6.402 Offi ce building 1,535 2006 Unit C-3A-3A (Building age: 6 years) No. 2, Jalan Setiawangsa II Taman Setiawangsa 54200 Kuala Lumpur
1,535
TOTAL – INTRAPRENEUR VENTURES 16,828 annual report 2011 | 295 Kulim (Malaysia) Berhad (23370-V) PROPERTIES OF THE GROUP IN PAPUA NEW GUINEA
Net Book Mature Value @ Hectares 31.12.2011 Year of Tenure Description 31.12.2011 K’000 Acquisition
NEW BRITAIN PALM OIL LIMITED
MOSA GROUP
Bebere 1,958 5,656 1968-1990, 2005 Kumbango Mature Oil Palm and 2,323 6,781 1972-1985, 2005 Freehold Togulo Development Costs 1,320 8,501 1979-1985, 2005 Dami and Waisisi 907 1,989 1969-2000, 2005
6,508 22,927
NUMUNDO GROUP
Numundo 1,617 3,487 1996-2001, 2005 Haella Mature Oil Palm and 2,941 8,864 1999-2001, 2005 Freehold Garu Development Costs 2,562 3,602 1998-2000 Navarai 687 3,465 1980-1988
7,807 19,418
KAPIURA GROUP
Kautu Freehold 2,614 16,604 1986-2000 Kaurausu Freehold 1,350 5,338 1996-1999 Mature Oil Palm and Bilomi Freehold Development Costs 2,590 18,150 1995-1999 Malilimi Freehold 1,974 11,810 1983-1998 Moroa Leasehold 807 2,305 2003 Rigula Leasehold 2,520 15,260 2005
11,855 69,467
TALASEA GROUP
Lotogam 204 1,156 2002 Natupi 163 746 2003 Mature Oil Palm and Volupai Leasehold 1,060 7,050 2004-2005 Development Costs Gororu 66 2,504 2008 Lolokoru 2,033 23,255 2005
3,526 34,711
KULU-DAGI GROUP
Dalaivu Mature Oil Palm and 2,058 6,903 2003 Leasehold Sapuri Development Costs 1,773 10,122 2004-2005
3,831 17,025
Total – New Britain Palm Oil Limited 33,527 163,548 Kulim (Malaysia) Berhad (23370-V) 296 | annual report 2011
PROPERTIES OF THE GROUP IN PAPUA NEW GUINEA (continued)
Net Book Mature Value @ Hectares 31.12.2011 Year of Tenure Description 31.12.2011 K’000 Acquisition
RAMU AGRI-INDUSTRIES LIMITED
Gusap Leasehold Mature Oil Palm and 3,687 18,177 2008 Dumpu Leasehold Development Costs 2,477 12,212 2008
Total – Ramu Agri-Industries Limited 6,164 30,389
KULA PALM OIL LIMITED
Higaturu Leasehold 8,237 21,640 2010 Mature Oil Palm and Milne Bay Leasehold 9,844 39,633 2010 Development Costs Poliamba Leasehold 5,319 4,621 2010
Total – Kula Palm Oil Limited 23,400 65,894
GRAND TOTAL – PAPUA NEW GUINEA 63,091 259,831
PROPERTIES OF THE GROUP IN THE SOLOMON ISLANDS
Net Book Mature Value @ Hectares 31.12.2011 Year of Tenure Description 31.12.2011 K’000 Acquisition
GUADALCANAL PLAINS PALM OIL LIMITED
Tetere 1,413 3,662 2004 Mature Oil Palm and Ngalimbiu Leasehold 1,538 5,588 2004 Development Costs Mbalisuna 2,396 10,696 2004
GRAND TOTAL – SOLOMON ISLANDS 5,347 19,946 annual report 2011 | 297 Kulim (Malaysia) Berhad (23370-V) NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Thirty Seventh (37th) Annual General Meeting of Kulim (Malaysia) Berhad will be held at Lecture Hall 1 & 2, Level 1, KFCH International College, Johor Bahru Campus, No. 1, Jalan Dato’ Onn 1, Bandar Dato’ Onn, Johor Bahru, Johor, Malaysia on Tuesday, 26 June 2012 at 12:00 noon, for the following purposes:
ORDINARY BUSINESS 1. To receive and adopt the Directors’ and Auditors’ Reports and Audited Financial Statements in respect of the year Resolution 1 ended 31 December 2011.
2. To re-elect the following Directors who retire in accordance with the Company’s Articles of Association: (i) Datin Paduka Siti Sa’diah Sh Bakir Resolution 2 (ii) Datuk Haron Siraj Resolution 3 (iii) Zulkifl i Ibrahim Resolution 4 (iv) Datuk Ahmad Zaki Zahid Resolution 5 (v) Leung Kok Keong Resolution 6 (vi) Natasha Kamaluddin Resolution 7 (vii) Wan Mohd Firdaus Wan Mohd Fuaad Resolution 8
3. To consider, and if thought fi t, to pass the following resolution pursuant to Section 129(6) of the Companies Act, 1965 Resolution 9 (“Act”);
“ THAT Tan Sri Dato’ Seri Arshad Ayub, who is over the age of seventy (70) years, be hereby re-appointed as Director of the Company to hold offi ce until the next Annual General Meeting (“AGM”) of the Company.”
4. To approve the payment of Directors’ fees in respect of the fi nancial year ended 31 December 2011. Resolution 10
5. To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors to fix their Resolution 11 remuneration.
6. SPECIAL BUSINESS To consider and, if thought fi t, to pass the following resolutions: 6.1 Ordinary Resolution Authority to Allot and Issue Shares Pursuant to Section 132D of the Act Resolution 12 “ THAT pursuant to Section 132D of the Act, full authority be and is hereby given to the Directors to issue shares of the Company from time to time upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fi t provided that the aggregate number of shares to be issued pursuant to this resolution does not exceed ten percent (10%) of the issued share capital of the Company and that such authority shall continue in force until the conclusion of the next AGM of the Company, and that the Directors be and is hereby empowered to obtain the approval of the Bursa Malaysia Securities Berhad (“Bursa Securities”) for the listing and quotation for the new shares so issued.” (See Explanatory Note 1 on Special Business below)
Kulim (Malaysia) Berhad (23370-V) 298 | annual report 2011
NOTICE OF ANNUAL GENERAL MEETING (continued)
6.2 Ordinary Resolution Proposed Renewal of Shareholders’ Mandate to Enable the Company to Purchase up to 10% of its Issued and Resolution 13 Paid-up Share Capital (“Proposed Renewal of Share Buy-Back Authority”) “ THAT subject to the Act, rules, regulations and orders made pursuant to the Act, provisions of the Company’s Memorandum and Articles of Association and the Listing Requirements of Bursa Securities (“Listing Requirements”) and any other relevant authority, the Company be and is hereby authorised to purchase and/ or hold such amount of ordinary shares of RM0.25 each in the Company’s issued and paid-up share capital through Bursa Securities upon such terms and conditions as the Directors may deem fi t in the interest of the Company provided that:-
(a) the aggregate number of shares so purchased and/or held pursuant to this ordinary resolution (“Purchased Shares”) does not exceed ten percent (10%) of the total issued and paid-up share capital of the Company at any one time; and
(b) the maximum amount of funds to be allocated for the Purchased Shares shall not exceed the aggregate of the retained profi ts and/or share premium of the Company;
AND THAT the Directors be and are hereby authorised to decide at their discretion either to retain the Purchased Shares as treasury shares (as defi ned in Section 67A of the Act) and/or to cancel the Purchased Shares and/or to retain the Purchased Shares as treasury shares for distribution as share dividends to the shareholders of the Company and/or be resold through Bursa Securities in accordance with the relevant rules of Bursa Securities and/or cancelled subsequently and/or to retain part of the Purchased Shares as treasury shares and/or cancel the remainder and to deal with the Purchased Shares in such other manner as may be permitted by the Act, rules, regulations, guidelines, requirements and/or orders of Bursa Securities and any other relevant authorities for the time being in force;
AND THAT the Directors be and are hereby empowered to do all acts and things (including the opening and maintaining of a central depositories account(s) under the Securities Industry (Central Depositories) Act, 1991 and to take such steps and to enter into and execute all commitments, transactions, deeds, agreements, arrangements, undertakings, indemnities, transfers, assignments, and/or guarantees as they may deem fi t, necessary, expedient and/or appropriate in the best interest of the Company in order to implement, fi nalise and give full effect to the Proposed Renewal of the Share Buy-Back Authority with full powers to assent to any conditions, modifi cations, variations (if any) as may be imposed by the relevant authorities;
AND FURTHER THAT the authority conferred by this ordinary resolution shall be effective immediately upon passing of this ordinary resolution and shall continue in force until the conclusion of the next AGM of the Company or the expiry of the period within which the next AGM of the Company is required by law to be held (whichever is earlier), unless earlier revoked or varied by ordinary resolution of the shareholders of the Company in general meeting, but shall not prejudice the completion of purchase(s) by the Company before that aforesaid expiry date and in any event in accordance with provisions of the Listing Requirements and other relevant authorities.” (See Explanatory Note 2 on Special Business below) annual report 2011 | 299 Kulim (Malaysia) Berhad (23370-V)
6.3 Ordinary Resolution Proposed Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions (“RRPT”) of a Resolution 14 Revenue and/or Trading Nature and New Mandate for Additional RRPT of a Revenue and/or Trading Nature (“Proposed Shareholders’ Mandate for RRPT”) “ THAT authority be and is hereby given in line with Paragraph 10.09 of the Listing Requirements, for the Company, its subsidiaries or any of them to enter into any of the transactions falling within the types of the RRPT, particulars of which are set out in the Circular to Shareholders dated 1 June 2012 (“the Circular”), with the Related Parties as described in the Circular, provided that such transactions are of revenue and/or trading nature, which are necessary for the day-to-day operations of the Company and/or its subsidiaries, within the ordinary course of business of the Company and/or its subsidiaries, made on an arm’s length basis and on normal commercial terms which those generally available to the public and are not detrimental to the minority shareholders of the Company;
AND THAT such authority shall commence immediately upon the passing of this ordinary resolution until:-
(a) the conclusion of the next AGM of the Company following the general meeting at which the ordinary resolution for the Proposed Shareholders’ Mandate for RRPT is passed, at which time it shall lapse, unless the authority is renewed by a resolution passed at the next AGM; or
(b) the expiration of the period within which the next AGM after the date it is required by law to be held; or
(c) revoked or varied by ordinary resolution passed by the shareholders of the Company at a general meeting of the Company,
whichever occurs fi rst;
AND FURTHER THAT the Directors of the Company be authorised to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary or give effect to the Proposed Shareholders’ Mandate for RRPT.” (See Explanatory Note 3 on Special Business below)
6.4 Special Resolution Proposed Amendments to the Company’s Articles of Association Resolution 15 “ THAT the Articles of Association of the Company be and are hereby amended in the manner as set out in Section 4.1 of the Circular to Shareholders dated 1 June 2012;
AND THAT the Directors of the Company be and are hereby authorised to give effect to the said amendments, alteration, modifi cation and deletion to the Articles of Association of the Company as may be required by any relevant authorities as they deem fi t, necessary or expedient in order to give full effect to the Proposed Amendments to the Company’s Articles of Association.” (See Explanatory Note 4 on Special Business below)
7. To transact any other business of which due notice shall have been given.
BY ORDER OF THE BOARD
IDHAM JIHADI ABU BAKAR. ACIS (MAICSA 7007381) NURALIZA A. RAHMAN (LS 0008565) Company Secretaries
Johor Bahru, Johor 1 June 2012 Kulim (Malaysia) Berhad (23370-V) 300 | annual report 2011
NOTICE OF ANNUAL GENERAL MEETING (continued)
NOTES: Proxy 1. A member of the Company entitled to be present and vote at the Annual General Meeting may appoint a proxy or proxies to be present and vote instead of him. A proxy may but need not be a member of the Company.
2. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing or if the appointor is a corporation, under its common seal or signed by its attorney or by an offi cer on behalf of the corporation.
3. Where a member of the Company is an authorised nominee as defi ned under the Securities Industry (Central Depositories) Act, 1991, he may appoint at least one (1) proxy in respect of each securities account he holds with ordinary shares of the Company standing to the credit of the said securities account.
4. The instrument appointing a proxy, together with the power of attorney (if any) under which it is signed or a certifi ed copy thereof, shall be deposited at the registered offi ce of the Company at Suite 12B, Level 12, Menara Ansar, 65 Jalan Trus, 80000 Johor Bahru, Johor at least forty-eight (48) hours before the time appointed for holding the meeting or adjourned meeting at which the person named in such instrument proposes to vote; otherwise the person so named shall not be entitled to vote in respect thereof.
Explanatory Notes on Special Business: 1. Ordinary Resolution 12 – Proposed renewal of the authority for Directors to issue shares The proposed Ordinary Resolution 12 is proposed for the purpose of granting a renewed general mandate for issuance of shares by the Company under Section 132D of the Act. The Ordinary Resolution 12, if passed, will give the Directors of the Company authority to issue ordinary shares in the Company at any time in their absolute discretion without convening a General Meeting. The authorisation, unless revoked or varied by the Company at a General Meeting, will expire at the conclusion of the next AGM of the Company.
The Company had, at the 36th AGM held on 23 June 2011, obtained its shareholders’ approval for the general mandate for issuance of shares pursuant to Section 132D of the Companies Act, 1965 (“the Act”). The Company did not issue any new shares pursuant to this mandate obtained as at the date of this notice. The Ordinary Resolution 12 proposed under item 6.1 of the Agenda is a renewal of the general mandate for issuance of shares by the Company under Section 132D of the Act. At this juncture, there is no decision to issue new shares. If there should be a decision to issue new shares after the general mandate is obtained, an announcement will be made by the Company in respect of the purpose and utilisation of proceeds arising from such issue.
The general mandate if granted will provide fl exibility to the Company for any possible fund raising activities, including but not limited to further placing of shares, for the purpose of funding future investment project(s), working capital and/or acquisition(s).
2. Ordinary Resolution 13 – Proposed Renewal of the Share Buy-Back Authority Ordinary Resolution 13, if passed, will enable the Company to utilise any of its surplus fi nancial resources to purchase its own shares through Bursa Securities up to 10% of the issued and paid-up capital of the Company. This authority will, unless revoked or varied at a General Meeting, expire at the conclusion of the next AGM of the Company.
Further information on the Proposed Renewal of the Share Buy-Back Authority are set out in the Circular to Shareholders of the Company dated 1 June 2012, which is dispatched together with the Company’s Annual Report for the year ended 2011.
3. Ordinary Resolution 14 – Proposed Shareholders’ Mandate for RRPT The proposed Ordinary Resolution 14 if passed is primarily to authorise the Company and/or its unlisted subsidiaries to enter arrangements or transactions with Related Parties, particulars of which are set out in Section 3.2, 3.3 and 3.4 of the Circular to Shareholders dated 1 June 2012, which is dispatched together with the Company’s Annual Report for the year ended 2011, which are necessary for the day-to-day operations of the Group and are based on normal commercial terms that are not more favourable to the Related Parties than those generally made available to the public.
4. Special Resolution – Proposed Amendments to the Company’s Articles of Association The proposed Special Resolution/Resolution 15, if passed, will give authority to the Directors to amend the Company’s Articles of Association in order to be in line with the new Listing Requirements of Bursa Malaysia Securities Berhad, prevailing statutory and regulatory requirements, and to update the Articles of Association of the Company. Further explanatory notes on Resolution 15 are set out in the Circular to Shareholders dated 1 June 2012, which is dispatched together with the Company’s Annual Report for the year ended 2011. annual report 2011 | 301 Kulim (Malaysia) Berhad (23370-V) STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING
PURSUANT TO PARAGRAPH 8.28(2) OF THE LISTING REQUIREMENT OF THE BURSA MALAYSIA 1. Directors who are standing for re-election at the 37th Annual General Meeting are as follows: (i) Datin Paduka Siti Sa’diah Sh Bakir (ii) Datuk Haron Siraj (iii) Zulkifl i Ibrahim (iv) Datuk Ahmad Zaki Zahid (v) Leung Kok Keong (vi) Natasha Kamaluddin (vii) Wan Mohd Firdaus Wan Mohd Fuaad
Particulars of Directors seeking re-election at the Annual General Meeting are set out in the Directors’ Profi le appearing in pages 44 to 52 of the Annual Report.
2. The 36th Annual General Meeting of the Company was held at Bilik Permata 3, Level B2, The Puteri Pacifi c Hotel Johor Bahru, Jalan Abdullah Ibrahim, 80000 Johor Bahru, Johor, Malaysia on Thursday, 23 June 2011 at 12:00 noon.
3. A total of eight (8) Board meetings were held during the fi nancial year ended 31 December 2011. Details of attendance of Directors at Board meetings held during the fi nancial year ended 31 December 2011 are as follows:
Special Special Special Special BOD 265th BOD 266th BOD 267th BOD BOD BOD BOD 268th BOD 12.1.2011 10.2.2011 23.6.2011 5.8.2011 16.8.2011 4.11.2011 15.12.2011 22.12.2011 Kamaruzzaman Abu Kassim ✔✔✔✔✔✔✔✔ Ahamad Mohamad ✔✔✔✔✔✔✔✔ Tan Sri Dato’ Seri Arshad Ayub ✔✔✔✔✔✔✔✔ Kua Hwee Sim ✔✔✔✔✔✔✔✔ Wong Seng Lee ✔✔✔✔✔✔✔✔ Datin Paduka Siti Sa’diah Sh Bakir ✔✔✔✔✔✔✔✔ Zulkifl i Ibrahim –––✔✔✔✔✔ Datuk Ahmad Zaki Zahid ––––––✔✔ Datuk Haron Siraj ✔✔✔✔✔✔✔✔ Dr. Radzuan A. Rahman ✔✔✔✔✔✔✔✔ Rozan Mohd Sa’at ✔✔✔✔✔✔✔✔ Leung Kok Keong ––––––✔✔ Natasha Kamaluddin ––––––✔✔ Wan Mohd Firdaus Wan Mohd Fuaad ––––––✔✘
Notes: (i) Zulkifl i Ibrahim – appointed on 1.7.2011 (ii) Datuk Ahmad Zaki Zahid – appointed on 8.11.2011 (iii) Leung Kok Keong – appointed on 9.11.2011 (iv) Natasha Kamaluddin – appointed on 9.11.2011 (v) Wan Mohd Firdaus Wan Mohd Fuaad – appointed on 9.11.2011 Kulim (Malaysia) Berhad (23370-V) 302 | annual report 2011 STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING (continued)
Date of Meeting Board Meeting Time Venue
Bilik Sekijang 403, Level 4, Persada Johor International Convention Centre, Jalan Special BOD 12 January 2011 2:30 pm Abdullah Ibrahim, Johor Bahru
Bilik Sekijang 403, Level 4, Persada Johor International Convention Centre, Jalan BOD 265th 10 February 2011 9:30 am Abdullah Ibrahim, Johor Bahru
BOD 266th 23 June 2011 9:30 am Berlian Room, Level B2, The Puteri Pacifi c Hotel, Jalan Abdullah Ibrahim, Johor Bahru
BOD 267th 5 August 2011 9:30 am Offi ce of Kulim (Malaysia) Berhad, Ulu Tiram Estate, Ulu Tiram, Johor
Special BOD 16 August 2011 1:00 pm Meeting Room, Level 11, Menara JCorp, No. 249 Jalan Tun Razak, Kuala Lumpur
Special BOD 4 November 2011 11:00 am Meeting Room, Level 11, Menara JCorp, No. 249 Jalan Tun Razak, Kuala Lumpur
Special BOD 15 December 2011 2:30 pm Meeting Room, Level 17, Wisma KFC, No. 17 Jalan Sultan Ismail, Kuala Lumpur
Bilik Sekijang 403, Level 4, Persada Johor International Convention Centre, Jalan BOD 268th 22 December 2011 9:30 am Abdullah Ibrahim, Johor Bahru FORM OF PROXY No. of ordinary shares CDS account no.
I/We * (Full name and NRIC No. / Company No. in block letters) of (Full address in block letters) being a member(s) of KULIM (MALAYSIA) BERHAD hereby appoint
(Full name in block letters) of (Full address in block letters) or failing him/her (Full name in block letters) of (Full address in block letters) or failing him/her, the Chairman of the meeting as my/our proxy to vote for me/us* on my/our* behalf at the 37th Annual General Meeting of the Company to be held at Lecture Hall 1 & 2, Level 1, KFCH International College, Johor Bahru Campus, No. 1, Jalan Dato’ Onn 1, Bandar Dato’ Onn, Johor Bahru, Johor, Malaysia on Tuesday, 26 June 2012 at 12:00 noon and at any adjournment thereof in respect of my/our holdings of shares in the manner indicated below: Resolution Description For Against 1 To adopt the Directors’ and Auditors’ Reports and Audited Financial Statements 2011 2 To re-elect Director – Datin Paduka Siti Sa’diah Sh Bakir 3 To re-elect Director – Datuk Haron Siraj 4 To re-elect Director – Zulkifl i Ibrahim 5 To re-elect Director – Datuk Ahmad Zaki Zahid 6 To re-elect Director – Leung Kok Keong 7 To re-elect Director – Natasha Kamaluddin 8 To re-elect Director – Wan Mohd Firdaus Wan Mohd Fuaad 9 To re-appoint Director - Tan Sri Dato’ Seri Arshad Ayub 10 To approve payment of Directors’ fees 11 To re-appoint Messrs Ernst & Young as auditors 12 Authority to allot and issue shares 13 Proposed Renewal of Share Buy-Back 14 Proposed Shareholders’ Mandate for RRPT 15 Proposed Amendments of Company’s Articles of Association Any other business
(Please indicate with a (√) in the appropriate box whether you wish your vote to be cast for or against the resolution. In the absence of specifi c direction, your proxy will vote or abstain as he/she thinks fi t. However, if more than one proxy is appointed, please specify in the table below the number of shares represented by each proxy, failing which the appointment shall be invalid)
Proportion of shares held NOTE: Name of proxy 1: 1. A member of the Company entitled to be present and vote at the Annual General Meeting may appoint a proxy or proxies to be present and vote instead of him. A proxy may but need not be a member of the Name of proxy 2: Company. Total number 2. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly of shares held authorised in writing or if the appointor is a corporation, under its common seal or signed by its attorney or by an offi cer on behalf of the corporation. 3. Where a member of the Company is an authorised nominee as defi ned under the Securities Industry (Central Depositories) Act, 1991, he may appoint at least one (1) proxy in respect of each securities account he holds with ordinary shares of the Company standing to the credit of the said securities account. 4. The instrument appointing a proxy, together with the power of attorney (if any) under which it is signed Signature(s)/Common Seal of Shareholder(s) or a certifi ed copy thereof, shall be deposited at the registered offi ce of the Company at Suite 12B, Level 12, Menara Ansar, 65 Jalan Trus, 80000 Johor Bahru, Johor at least forty-eight (48) hours before the time appointed for holding the meeting or adjourned meeting at which the person named in such instrument Dated this day of 2012 proposes to vote; otherwise the person so named shall not be entitled to vote in respect thereof. STAMP The Secretary KULIM (MALAYSIA) BERHAD Suite 12B, Level 12 Menara Ansar 65 Jalan Trus 80000 Johor Bahru Johor, Malaysia