UNLOCKING VALUE RISE TO APEX
ANNUAL REPORT 6-MONTH FINANCIAL PERIOD ENDED 31 DECEMBER 2018 16th ANNUAL GENERAL MEETING (AGM) OF SIME DARBY PLANTATION BERHAD
VENUE: Grand Ballroom, First Floor, Sime Darby Convention Centre, 1A, Jalan Bukit Kiara 1, 60000 Kuala Lumpur, Malaysia
DATE: Thursday, 23 May 2019
TIME: 10.00 a.m.
Our Vision To be the Leading Integrated Global Palm Oil Player
Our Values Integrity Respect & Responsibility Enterprise Excellence
Cover Rationale ’RISE to APEX’ — the combination of a vigorous culture transformation and rigorous value creation programme — continues to be the rallying call to drive Sime Darby Plantation towards becoming a high-performance organisation. It remains as the ensuing theme for this 2nd Integrated Report, which accounts for our performance from July to December 2018 and chronicles our journey in unlocking value for our shareholders.
Annual Report // 6-Month Financial Period Ended 31 December 2018 OUR ORGANISATION Pages 2 to 11
• The APEX Journey 2017-2018 • Our Key Highlights • Who We Are • Our Corporate Information • Our Global Presence
CREATING VALUE Pages 12 to 23
• Our Approach to Sustainability • Managing Our Material Matters • Our Market Landscape • Our Strategic Plan • Our Value Creation Model
LETTER FROM OUR CHAIRMAN Pages 24 to 29
OUR STRATEGIC CONTEXT Pages 30 to 54
• Group Financial Performance • Human Capital Development • Management Discussion & Analysis • Our Total Quality Management ABOUT - Review of Operations - Operational Excellence THIS ENSURING SUSTAINABLE VALUES Pages 55 to 62 • Our Social Performance - Occupational Safety and Health Performance REPORT • Our Environmental Impact
HOW WE ARE GOVERNED Pages 63 to 110 THIS IS SIME DARBY PLANTATION BERHAD’S (SDP OR THE GROUP) 2nd • Our Board of Directors INTEGRATED REPORT; REPRESENTING • Our Leadership Team A COMPREHENSIVE AND CLEAR • Profile of Leadership Team ACCOUNT OF OUR FINANCIAL AND • Corporate Governance Overview Statement NON-FINANCIAL PERFORMANCE. • Governance & Audit Committee Report • Nomination & Remuneration Committee Report • Risk Management Committee Report • Sustainability Committee Report SDP’s global operations impact a wide range • Board Tender Committee Report of stakeholders, all of whom are important • Statement on Risk Management and Internal Control to us. With this report, we endeavour to • Statement of Responsibility by the Board of Directors communicate our progress and plans to achieve our vision of becoming the Leading Integrated Global Palm Oil Player, whilst FINANCIAL STATEMENTS Pages 111 to 326 creating long-term value for our shareholders.
This report covers the financial performance OTHER INFORMATION Pages 327 to 364 of the Group, as well as the social and environmental performance from 1 July 2018 • Notice of Annual General Meeting to 31 December 2018, unless otherwise stated. • Analysis of Shareholdings • Additional Compliance Information With emphasis on high standards of • Share Price Movement & Financial Calendar disclosure and transparency, the structure • Properties of the Group and broad-based contents of this report • Global Reporting Initiative (GRI) have been prepared in accordance with the • Notice to Proxies Under the Personal Data Protection Act 2010 Global Reporting Initiative (GRI) Standards: • Form of Proxy Core Option and guided by the International Integrated Reporting Council (IIRC) framework.
All financial statements have been prepared according to requirements of the Malaysia Companies Act 2016 and Malaysian Financial Reporting Standards (MFRS), and audited by our auditors, PricewaterhouseCoopers PLT.
Annual Report // 6-Month Financial Period Ended 31 December 2018 1 Our Organisation Sime Darby Plantation
THE APEX JOURNEY 2017-2018
EXECUTION OFFICE 2017 (EO) 2018 JAN MAR
EO was launched PRINCIPLES & • TRANSFORMATION OFFICE SDP’S EXECUTION FRAMEWORK ESTABLISHED ENGINE (FORMERLY KNOWN AS EO)
• LAUNCH OF PROJECT APEX PHASE 1 (PLANNING & DEVELOPMENT) 29 March
• IDEA GENERATION WORKSHOPS Sime Darby Oils
AUG JUL APR
• LAUNCH OF PROJECT APEX PHASE 2 • VALUE CREATION INITIATIVES • IDEA GENERATION WORKSHOPS (EXECUTION & DELIVERY) VALIDATION Upstream (Malaysia & Indonesia) 27 August EXECUTION • VALUE CREATION INCENTIVE • IDEA GENERATION WORKSHOP FRAMEWORK Solomon Islands
OHI & APEX VALUE SEP OCT CREATION
• LAUNCH OF “PLAY TO WIN” IN SDO • IDEA GENERATION WORKSHOP CAVO* ZWIJNDRECHT Papua New Guinea ENGAGEMENTS
DEC NOV SIME DARBY OILS UPSTREAM
• UPDATED VALUE CREATION INCENTIVE FRAMEWORK
• 16 IDEA GENERATION WORKSHOPS & BOOTCAMPS WELCOME • 1,570 IDEAS & INITIATIVES GENERATED 2019! Disciplined execution & rigour towards
UPSTREAM SIME DARBY CASH CONTROL R&D OILS TOWER
SPECIAL PROJECTS ORGANISATIONAL DIGITAL (Renewables & DEVELOPMENT & Integrated Economics) PEOPLE * CAVO: Chief Advisor & Value Officer
2 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Organisation
THE APEX JOURNEY 2017-2018
PERFORMANCE HEALTH AND CULTURE
ACCELERATING PERFORMANCE EXCELLENCE SUSTAINING PERFORMANCE EXCELLENCE
Measure Measure PATAMI # Organisational Health Index (OHI)
“How we deliver results” “How we sustain results”
VALUE CREATION INITIATIVES NNOVATION Generating value beyond business Challenging the status quo for as usual - seven (7) Workstreams transformational results
OPERATIONAL EXCELLENCE USTAINABILITY Continuous improvements to Highest standards and beyond reinforce results doubt credentials
TRANSFORMATION OFFICE Disciplined execution and rigour towards APEX by seven (7) Workstreams
SIME DARBY PLANTATION’S (SDP) programme aimed at accelerating the performance TRANSFORMATION JOURNEY of our core businesses through results-driven initiatives. APEX monitors and fast-tracks high RISE to APEX represents the transformational value, quick turnaround initiatives through a rallying call to drive performance through culture structured and vigorous execution process. The change to achieve SDP’s value creation aspirations. Transformation Office (TO) acts as the custodian of APEX to ensure effective planning, development In FP December 2018, we intensified our culture and execution; and timely delivery of value creation transformation journey with APEX, a value creation projects’ results.
# PATAMI: Profit After Tax and Minority Interest
Annual Report // 6-Month Financial Period Ended 31 December 2018 3 Our Organisation Sime Darby Plantation
THE APEX JOURNEY 2017-2018
The APEX journey has shown encouraging results A successful transformational programme focusing for the Group during FP December 2018. Idea on delivering results would not be complete without Generation Workshops were conducted across our an all encompassing culture transformation. With 91 initiatives have global operations where a total of 1,570 ideas were this realisation, SDP has, in the past three (3) years, successfully generated within the seven (7) Workstreams namely been nurturing the RISE to APEX culture among reached the Upstream, Sime Darby Oils, Cash Control Tower, all employees, to ensure the culture transformation implementation R&D, Special Projects (Integrated Economics and success. stage Renewables), Organisation (People) and Digital. From these ideas, a total of 522 initiatives have Throughout the RISE to APEX Value Creation, been carefully validated. periodic communication through roadshows, 14 engagement sessions and internal publications such initiatives Through disciplined execution and rigour across as APEXpedition, have been found to be effective in have been APEX, we have been able to build and sustain the engaging employees on regular basis. Through the commercialised momentum towards achieving the desired results. roadshows and engagement sessions, we recognise At present, 91 initiatives have successfully reached and celebrate employees' outstanding performance the implementation stage, while 14 initiatives have in delivering results for the Group. been commercialised.
SIME DARBY PLANTATION’S INNOVATION JOURNEY
To Be The Leading Innovator In The Palm Oil Industry To protect, sustain and leap SDP value growth
>2020 LEAD IN 2020 INNOVATION ACT WITH Exemplary Role Model 2019 INNOVATION BELIEVE IN Ingrain & Enforce 2018 INNOVATION EMBEDDING Upskill & Enhance INNOVATION Awareness & Platform
SDP strongly believes that transformational results can revenue growth and enhancing capabilities, while constantly only be achieved when status quos are challenged. On that reducing cost. We aim to achieve this through incremental believe, we adopt “Business Unusual” as a working concept step-by-step changes, and by making more breakthroughs to ensure we remain relevant and ahead of others. and transformative solutions towards a more future-proof plantation Group. We focus our energy on developing a sustainable innovation culture to ensure the organisation embraces a single purpose We believe that the knowledge and ability to innovate and – to protect, sustain and leap SDP's value growth, in our transform lie within us. Coupled with the recent advances in quest to make SDP the leading integrated global palm oil technology and digital resources, the combination provides a player. In this innovative culture, we foresee having the edge strong platform for change. in penetrating new markets, accelerating profitable top-line
4 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Organisation
THE APEX JOURNEY 2017-2018
THE RIGHT PLATFORM FOR A SUSTAINABLE Since March 2018, we have started conducting Idea INNOVATION CULTURE Generation Workshops throughout the organisation. These workshops which allowed our operational teams across The year 2018 was the year innovation became firmly the world to contribute to the value creation process, had embedded company-wide. At SDP, we encourage bottom-up managed to deliver some of the most creative ideas with discoveries. We provide our employees with an open and safe immediate value to the Group. environment, suitable for generating new ideas and creative thinking. The Innovation Portal which was launched in March Realising that knowledge is essential in promoting creative 2018, allows employees globally to share and submit new and thinking, we initiated a monthly publication called MindQuest breakthrough ideas related to the business, suggest process that provides employees with the trending innovation news or operational improvements, or even suggest new business within and outside the industry. Through MindQuest, ideas are models. With the introduction of this platform, employees shared and readers gained knowledge from the articles which are able to express their innovative ideas. Ideas that would include emerging technologies, know-how and ideas from otherwise go unnoticed or unexplored will now have a chance competitors and other industries. Knowledge and innovation to be presented to the management. Ideas from the Innovation intertwined further at SDP's firstInnovation Forum on Portal will subsequently be pitched to the Plantation Innovation 9 August 2018, which saw the presence of expert speakers Committee to be evaluated and ideas with value creation from our Scientific Advisory Committee. potential will be selected for implementation.
SIME DARBY PLANTATION’S RISE JOURNEY
RISE is our performance-driven culture transformation programme incorporating six (6) Winning Mindsets which propagates a culture of accountability.
Deliver Results Customer First Value Talent Build Trust Continuous Empowered We drive results. We put customer We value talent. We build trust. Improvement Decisions I exceed first. I am a team player I walk the talk We improve and We make empowered expectations I win with the innovate. decisions. customer I do better, every I am responsible and time proactive
Realising that sustaining performance is crucial to Following the OHI evaluation, engagement sessions across the organisation, we embarked on a comprehensive business segments were carried out to develop action plans Organisational Health Index (OHI) evaluation in July 2018. that would set the stepping stones to strengthen the health level of the organisation, which in turn will enhance the The health score provides a measure of the organisational performance of the Group. elements that drive the organisation’s performance. Amongst others, it indicates the ability of employees to adapt to the ever changing business landscape, vis-a-vis the various continuous improvement and innovation initiatives.
Annual Report // 6-Month Financial Period Ended 31 December 2018 5 Our Organisation Sime Darby Plantation
WHO WE ARE
SIME DARBY UPSTREAM OILS Total planted area of approximately 633,000 ha* Operations across 14 countries comprising production as well as the sales and marketing of oils and fats products, oleochemicals, biodiesel, and other palm oil
* As at 31 December 2018 including oil palm, rubber, sugarcane and grazing pasture derivatives
A strong proponent of responsible agriculture, Sime Darby The world’s largest producer Plantation (SDP) is a founding member of the Roundtable On Sustainable Palm Oil (RSPO), and about 97% of the palm oil of Certified Sustainable Palm produced from our plantations is Certified Sustainable Palm Oil (CSPO) with a production Oil (CSPO). capacity of 2.46 million MT. Formerly a part of multinational conglomerate, Sime Darby Berhad (SDB), SDP was listed on Bursa Malaysia on 30 November 2017 following a strategic decision by SDB to unlock value for its shareholders through the demerger of its plantation and property divisions thereby creating three (3) independent pure play entities. Today, with a market capitalisation of RM35.04 billion (as at 31 December 2018), a global operation across 15 countries and supported by a workforce of more than 95,000 employees, SDP is not only among the largest companies listed on Bursa Malaysia but also one of the most valuable plantation companies in the world.
6 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Organisation
WHO WE ARE
OTHER BUSINESSES R&D Leveraging the potential of related products Over 190 technocrats, scientists and technicians along the palm oil value chain to create a working together to improve every aspect of the portfolio of sustainable businesses business
SDP is involved in the full spectrum of the palm oil value Committed to operational excellence, innovation and chain. Under Upstream operations, the Group owns sustainability, SDP established R&D and Innovation Centres approximately one (1) million hectares of landbank across across the globe with over 190 technocrats, scientists and Malaysia, Indonesia, Liberia, Papua New Guinea (PNG) and technicians working together to improve every aspect of the Solomon Islands (SI), of which approximately 633,000 ha are agricultural value chain. This includes developing quality currently cultivated primarily with oil palm. Under this sector, planting materials and environmentally friendly fertilisers, the Group is also involved in rubber and sugarcane plantations enhancing systems and processes in cultivating, harvesting as well as cattle rearing. and milling as well as manufacturing high quality and traceable refined palm products. Our Sime Darby Oils operations include production of oils and fats, oleochemicals, biodiesel, and other palm oil derivatives, Additionally, SDP is also involved in various other businesses as well as sales and marketing office of these products in 14 that leverage on the potential of related products along the countries. SDP’s business philosophy in the manufacturing palm oil value chain. of a comprehensive range of palm oil-based products is to maintain the highest quality at all times. This ensures that the Group has an edge in our selling proposition while setting us apart from the competition.
Annual Report // 6-Month Financial Period Ended 31 December 2018 7 Our Organisation Sime Darby Plantation
OUR GLOBAL PRESENCE
World’s Largest UNITED KINGDOM Producer of Certified NETHERLANDS Sustainable USA Palm Oil (CSPO) GERMANY
Certifications
Malaysian Sustainable Palm Oil (MSPO)
Roundtable on Sustainable Palm Oil (RSPO) LIBERIA
SOUTH AFRICA Indonesian Sustainable Palm Oil (ISPO)
8 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Organisation
OUR GLOBAL PRESENCE
15 CHINA Countries
SOUTH KOREA
THAILAND JAPAN 633,000 ha Planted Area
250 Estates
73 Mills
PAPUA NEW GUINEA
SOLOMON ISLANDS 5 R&D Centres
11 Refineries
MALAYSIA
SINGAPORE 3 Innovation Centres INDONESIA
As at 31 December 2018
Annual Report // 6-Month Financial Period Ended 31 December 2018 9 Our Organisation Sime Darby Plantation
OUR KEY HIGHLIGHTS
14,779 14,369 6,543 4,455 2,536 559 16,000 5,000
14,000 4,000 12,000
10,000 3,000 8,000
6,000 2,000
4,000 1,000 2,000
0 0
FY JUNE 2017 FY JUNE 2018 FP DEC 2018 FY JUNE 2017 FY JUNE 2018 FP DEC 2018
PROFIT BEFORE INTEREST REVENUE (RM’Million) AND TAX (RM’Million)
3,507 1,727 244 28.2 12.6 3.7 (1)
5,000 30
25 4,000
20 3,000 15 2,000 10
1,000 5
0 0
FY JUNE 2017 FY JUNE 2018 FP DEC 2018 FY JUNE 2017 FY JUNE 2018 FP DEC 2018
NET EARNINGS (RM’Million) RETURN ON SHAREHOLDERS’ EQUITY (%)
19.44 20.51 11.25 9,784.05 10,232.38 5,556.31 25 11,000 10,000 20 9,000 8,000 7,000 15 6,000 5,000 10 4,000 3,000 5 2,000 1,000 0 0
FY JUNE 2017 FY JUNE 2018 FP DEC 2018 FY JUNE 2017 FY JUNE 2018 FP DEC 2018
(2) (2) FFB YIELD (MT per ha) FFB PRODUCTION (’000 MT)
(1) Annualised (2) FFB: Fresh Fruit Bunch
10 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Organisation
OUR CORPORATE INFORMATION As at 5 April 2019
BOARD OF DIRECTORS EXECUTIVE DEPUTY CHAIRMAN & SHARE REGISTRAR MANAGING DIRECTOR Tricor Investor & Issuing House 1 TAN SRI DATO’ TAN SRI DATO’ SERI Services Sdn Bhd A. GHANI OTHMAN MOHD BAKKE SALLEH (Company No. 11324-H) Non-Independent Non-Executive Chairman Office: SECRETARIES 2 TAN SRI DATO’ SERI Unit 32-01, Level 32, Tower A MOHD BAKKE SALLEH NORZILAH MEGAWATI ABDUL Vertical Business Suite Executive Deputy Chairman & RAHMAN Avenue 3, Bangsar South Managing Director (LS 0009247) No. 8, Jalan Kerinchi 3 TAN SRI DATUK DR MAZLINA MOHD ZAIN 59200 Kuala Lumpur, Malaysia. YUSOF BASIRAN (LS 0008287) Independent Non-Executive t +(603) 2783 9299 Director f +(603) 2783 9222 REGISTERED OFFICE 4 MUHAMMAD LUTFI e [email protected] Independent Non-Executive Level 10, Main Block Director Plantation Tower Customer Service Centre: No. 2, Jalan PJU 1A/7 Unit G-3, Ground Floor 5 DATUK ZAITON MOHD Ara Damansara Vertical Podium HASSAN Senior Independent Non-Executive 47301 Petaling Jaya Avenue 3, Bangsar South Director Selangor Darul Ehsan, Malaysia. No. 8, Jalan Kerinchi 59200 Kuala Lumpur, Malaysia. 6 DATO’ MOHD NIZAM t +(603) 7848 4000
ZAINORDIN f +(603) 7848 5360 Non-Independent Non-Executive FORM OF LEGAL ENTITY Director e communications@ simedarbyplantation.com Incorporated on 2 April 2004 as a 7 DATO’ MOHAMAD NASIR w www.simedarbyplantation.com private company limited by shares AB LATIF under the Companies Act, 1965 and Non-Independent Non-Executive converted into a public company Director AUDITORS limited by shares on 20 July 2017.
8 DATO’ HENRY SACKVILLE PricewaterhouseCoopers PLT BARLOW (LLP0014401-LCA & AF 1146) STOCK EXCHANGE LISTING Independent Non-Executive Chartered Accountants Director Listed on the Main Market of Bursa Level 10, 1 Sentral, Jalan Rakyat Malaysia Securities Berhad since Kuala Lumpur Sentral 9 ZAINAL ABIDIN JAMAL 30 November 2017. Non-Independent Non-Executive 50706 Kuala Lumpur, Malaysia. Director Stock Code : 5285 t +(603) 2173 1188 10 TAN TING MIN Stock Name : SIMEPLT f +(603) 2173 1288 Independent Non-Executive Director PLACE OF INCORPORATION AND DOMICILE 11 LOU LEONG KOK Malaysia Independent Non-Executive Director
Annual Report // 6-Month Financial Period Ended 31 December 2018 11 Creating Value Sime Darby Plantation
OUR APPROACH TO SUSTAINABILITY
As the world’s largest producer of Certified Sustainable Palm Oil (CSPO), we are committed to implementing responsible agricultural practices whilst balancing a wide range of stakeholder expectations. Our sustainability approach is in line with the United Nations Sustainable Development Goals (UN SDGs) and is guided by our sustainability purpose to contribute to a better society, minimise environmental harm and deliver sustainable development.
CONTRIBUTE TO A MINIMISE DELIVER SUSTAINABLE BETTER SOCIETY ENVIRONMENTAL HARM DEVELOPMENT
Our sustainability performance report has been integrated into and complements our Responsible Agriculture Charter (RAC) this Annual Report and summarises our progress around key and Human Rights Charter (HRC), covering the aspect of sustainability issues we face. A more detailed report of our Prosperity in delivering sustainable development. sustainability performance can be read in our Supplementary Progress Report on Sustainability which is available on our The RAC communicates our commitments to responsible website at www.simedarbyplantation.com. environmental, social and governance practices whilst the HRC conveys how we aspire to implement respect for human rights This year, we focus our reporting on our recently launched in line with the United Nations Guiding Principles on Business Innovation and Productivity Charter (IPC) which articulates and Human Rights (UNGPs). We monitor, verify and report on our aspirations across the value chain in achieving prosperity, our performance against commitments made in these charters via enabling high levels of productivity, in delivering via internal systems, policies and procedures. sustainable development. The IPC is the third of our charters
FLAWLESSLY IMPLEMENT SUSTAINABILITY STANDARDS We also strive to embed a culture of innovation and continuous improvement through our Operational Excellence Our practices across our operations follow Good Agricultural and Quality Management programmes. In February 2018, and Best Management Practices. We are committed to we launched our Operational Excellence and Innovation flawlessly implementing sustainability standards. These Business Management Strategy 2.0 (OEIBMS 2.0), which include international standards such as the Roundtable on will see Sime Darby Plantation (SDP) continue to enhance Sustainable Palm Oil (RSPO) and Rainforest Alliance (RA), as productivity towards a target of RM550 million in Lean Six well as national mandated standards such as the Malaysian Sigma (LSS)-derived cumulative benefits by FY2022. Sustainable Palm Oil (MSPO) and Indonesian Sustainable Palm Oil (ISPO) in the countries where we operate. LEADERSHIP IN DEVELOPMENT OF NEW STANDARDS AND APPROACHES One of our key priorities is the safety and health of all our workers. We continuously enhance our approaches and We are proactively going beyond certification to meet the procedures to ensure workers come to work safely, conduct increased expectations of our stakeholders. This is done their work safely and go home safely. through participation in multiple thought-leadership and collaborative platforms. One such platform is the High Carbon Stock Approach (HCSA) that develops tools for corporates to implement their no-deforestation commitments.
12 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Creating Value
OUR APPROACH TO SUSTAINABILITY
We continue to be an active member of the RSPO, most recently as part of the Working Group that further strengthens the RSPO Principles and Criteria for the production of sustainable palm oil.
Our leadership in responsible palm oil production and advancement of The world’s largest producer of Certified sustainable practices was recognised by the Rainforest Alliance (RA), which Sustainable Palm Oil (CSPO) with a presented New Britain Palm Oil Ltd (NBPOL) with the ‘Sustainable Pathfinder production capacity of 2,464,175 million Award.’ This is the first time that such an award was given to a company in (MT) per annum. the palm oil sector.
INCLUSION OF STAKEHOLDERS AND COMMUNITIES
We believe in engaging and collaborating with our stakeholders across our operations. Our key stakeholders include our peers, customers and civil Operational Excellence and Innovation societies with whom we collaborate to resolve complex issues via collective Business Management Strategy 2.0 action. Such examples include the Fire Free Alliance to combat regional (OEIBMS 2.0) developed with a set fire and haze issues; the Palm Oil & NGO (PONGO) Alliance which aims to target of RM550 million by 2022 to effectively manage human-wildlife conflict in plantations; and the Decent further embed a culture of continuous Rural Living Initiative, a pre-competitive collaborative platform with large improvement. influential growers, aimed at tackling complex human rights and social challenges facing the agricultural sector in rural settings.
MANAGE SUPPLY CHAIN SUSTAINABILITY RISKS
Responsible Agriculture Charter (RAC) Our business is highly dependent on having a sustainable supply chain. articulates our commitments to For the year under review, our global supply chain is 98% traceable to responsible environmental, social and the mill. Our Open Palm Traceability Dashboard available at http://www. governance practices. simedarbyplantation.com/sustainability/open-palm-traceability-dashboard provides full transparency of our supply chain and records actions we are taking in ensuring it remains sustainable. It now includes a complete grievance register. To further manage the sustainability of our supply chain, we are developing an initiative that will further enhance and strengthen our approach to implementing responsible agricultural practices throughout our Human Rights Charter (HRC) articulates supply chain and contribute towards meeting, if not exceeding, expectations our commitment to respect human rights of our stakeholders around sustainability. This will be launched by 2019. in line with the United Nations Guiding Principles on Business and Human Rights. We are also partnering with our stakeholders to manage sustainability risks within our supply chain by identifying potential environmental and social risks associated with third-party suppliers. Our Responsible Sourcing Guidelines (RSG) have programmes that assist third-party suppliers including smallholders, to uplift their practices to be in line with our sustainability requirements and to eventually attain relevant certifications such as the Innovation and Productivity Charter RSPO, MSPO and ISPO. (IPC) articulates our aspirations to enable higher productivity across the value chain to deliver sustainable prosperity. LEVERAGE ON SUSTAINABILITY TO CREATE VALUE
We believe our commitment to sustainability across our value chain will enable us to create value within our organisation and our diverse stakeholders. Through our initiatives and efforts, we will be able to leverage on our unique position to further develop responsible agricultural practices Participation in thought leadership within the industry. platforms, e.g. High Carbon Stock Approach, Fire Free Alliance, PONGO Summary of our progress made in implementing our sustainability commitments throughout Alliance and Decent Rural Living Initiative. this FP December 2018 can be found on pages 55 to 62 of this report. For more details on our sustainability efforts, please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com.
Annual Report // 6-Month Financial Period Ended 31 December 2018 13 Creating Value Sime Darby Plantation
OUR MARKET LANDSCAPE
GLOBAL TREND & MARKET OUTLOOK
Supply and Demand
GLOBAL VEGETABLE OIL DEMAND & SUPPLY VS POPULATION Million MT Billion 350 10.0
8.6 300 8.2 7.8 Demand 7.6 7.6 8.0
250 272 270 Supply
242 6.0 200 241 214 214 199 198 190 150 189 Population (RHS) 4.0
100
2.0 Demand/Capita (kg) 50 25.1 26.0 27.5 29.5 31.5 0 0
2017 2018 2020 2025 2030
Source: LMC Oilseeds & Oils Report 2018, United Nations, USDA
Demand for vegetable oils in both the developing and developed world continues to grow, driven largely by rapidly expanding populations as well as an increase in per capita intake especially in China, India, European Union, United States and Indonesia.
Outlook of Vegetable Oil Consumption in Major Markets
% 50 TOTAL FOOD DEMAND FOR VEGETABLE OILS IN LEADING CONSUMERS
China
40 India
EU 30
USA
20 Indonesia
10
0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Source: LMC Oilseeds & Oils Report 2018
For vegetable oil (food use), India and China together account for over a third of total food oil consumption today. This is up from a share of less than 30% in 2000 of which 20% of the consumption was palm oil. By 2030, their combined share will have climbed close to 40% of which 30% of the consumption is palm oil, making these two (2) markets fundamental to the sector’s development.
Globally, palm oil is the largest consumed vegetable oil making up 35% of total vegetable oil consumption. This is followed by soybean oil (30%) and rapeseed oil (15%). Global dependence on palm oil is expected to rise in 2019, particularly with higher import needs from India and China.
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OUR MARKET LANDSCAPE
Outlook of Palm Oil Supply
Million MT PALM OIL SUPPLY FORECAST 60
Indonesia
50 Malaysia
40 Rest of the World
30
20
10
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Source: LMC Oilseeds & Oils Report 2018
YOY GROWTH IN OIL PALM HARVESTED AREA % 25 Indonesia
Malaysia 20
15
10
5
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: USDA & MPOB
Despite the slowdown in plantings due to moratoriums and other expansion challenges, palm oil has consistently contributed to around 35% of total vegetable oil supply over the past few years. This is expected to remain over the coming years. Malaysia and Indonesia will remain as key producers of palm oil, supplying around 80% of total palm oil output by 2030. The focus going forward will be on improving productivity and efficiency to improve yields.
Annual Report // 6-Month Financial Period Ended 31 December 2018 15 Creating Value Sime Darby Plantation
OUR MARKET LANDSCAPE
Increasing Uncertainty in Market Conditions
Economic growth rates have become less predictable, with increasing volatility in commodity prices and foreign exchange rates as markets become more interconnected.
Based on a low Brent crude oil price scenario at USD40 per barrel from 2020 onwards, the vegetable oil price outlook is as follows:
USD/MT
2,000
Palm Oil 1,800
Palm Kernel Oil 1,600
Soybean Oil 1,400 Rapeseed Oil
1,200 Sunflower Oil
1,000 Coconut Oil
800 Brent Crude
600
400
200
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Source: LMC Oilseeds & Oils Report 2018
Crude palm oil (CPO) prices are also partially influenced by unpredictable extreme weather patterns which has become more frequent over the past few years. The current outlook for the potential development of an El Nino in 2019 could curb CPO production and lend support to prices in the short term.
Other factors such as the movement of the ringgit, the revision of biodiesel mandates in Malaysia and Indonesia, tax regulations in major consuming countries and competition from other edible oils are also likely to influence the market prices of CPO and other palm products.
SIME DARBY PLANTATION’S KEY ACTIONS
SDP has always been proactive in adapting 1• We are well-positioned 2• We develop long-term our strategies to harness opportunities in fast growing and key strategies that capitalise available while mitigating threats that arise strategic markets. on the underlying growth from the drivers of future change. trajectory of emerging market populations.
16 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Creating Value
OUR MARKET LANDSCAPE
Increasing Awareness of Responsible Practices
CERTIFIED SUSTAINABLE PALM OIL PRODUCTION AREA (HA)
Ha 3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: RSPO, January 2019
MSPO CERTIFICATION AS OF 31 JANUARY 2019
Certified Area Certified Mills 690 1,463,773 135 7,365 Units Ha Units Capacity (MT/Hour)
Source: MPOCC, January 2019
With increasing awareness on global issues such as climate change and human rights, there is greater expectation and demand by stakeholders for organisations to operate in an environmentally, socially and economically responsible manner. The agricultural sector, particularly the palm oil industry, has continued to be under intense scrutiny by a wide range of stakeholders including customers, governments, investors and civil society organisations who demand the adoption and implementation of sustainable practices. More and more palm oil companies are taking the initiative to comply with recognised certification standards e.g. RSPO, MSPO and ISPO.
3• We pursue sustainability in a way that creates value, meeting the 4• We develop robust systems and expectations of our wide range of stakeholders: processes for more effective execution - Flawlessly implement standards, e.g. RSPO, MSPO, ISPO, of productivity improvements and RA, Responsible Agriculture Charter, Human Rights Charter operational excellence initiatives. - Lead in the development of new approaches, e.g. High Carbon Stock Approach (HCSA) - Mitigate sustainability risks within our supply chain
Annual Report // 6-Month Financial Period Ended 31 December 2018 17 Creating Value Sime Darby Plantation
OUR VALUE CREATION MODEL
As a fully integrated palm oil Group, our operations are diversified within the palm oil industry. This allows the Group to mitigate volatilities in segment margins and maximise value by de-commoditising our crude palm oil (CPO) into high-value differentiated products that garner higher margins.
OUR COMPETITIVE World’s Largest Palm Oil Plantation Company Leadership in Sustainability ADVANTAGE by Planted Area Taking a leadership position in the sustainable Proven track record with over 100 years of production of palm oil. experience in the plantation industry.
OUR KEY >> UPSTREAM RESOURCES INPUTS
Access to capital Brands
Landbank spreads across Seed strategic geographical Production locations People
Intellectual property, experience, knowledge and expertise within the Technical Skills industry, patents and best practices
Oil Palm Estate Mills - Assets: technologies, Nursery Management CPO & PK innovations and brand Innovation Production/ Coconut value Products Rubber Products Oil & Meal Sugar Products Production Beef Products
Talent and a highly skilled and experienced workforce Geographical Representation Rubber/ Smallholders Sugarcane/ Aggregation Cattle
Palm Fibres, Continuous engagement Fronds/Trunks Sludge Oil, POME, with stakeholders Strong Financial EFB, PKE Position
Waste to Sustainability efforts Wealth
Compost * POME : Palm Oil Mill Effluent * EFB : Empty Fruit Bunch * PKE : Palm Kernel Expeller Gasification/ * PFAD : Palm Fatty Acid Destillates Biogas
MATERIAL MATTERS WHICH ALIGN
Operational Performance People Management Macroeconomic Conditions
18 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Creating Value
OUR VALUE CREATION MODEL
Our ‘Waste-to-Wealth’ initiatives convert co-products into applications such as animal nutrition and feed from palm kernel expellers as well as tocotrienols from palm fatty acid distillates. Our value creation model reflects this agility and is formulated to better withstand an ever-changing business landscape, whilst maximising returns.
Performance & Innovation Driven Culture Value Chain Integration Wide & Diverse Geographical Reach Develop talent to propel SDP into becoming Fully integrated operations across the • Upstream operations in five (5) a high performance organisation. value chain with economies of scale. countries. • Sime Darby Oils operations spread across 14 countries.
HOW WE SIME DARBY OILS >> CREATE HOW WE SHARE THE OUTPUTS VALUE VALUE WE CREATE
Palm Oil Products SHAREHOLDER CREATE INVESTORS Cooking Oil VALUE Superior financial - Total shareholder returns. Specialty Oils and Fats returns through - Responsible investment. Refined Palm Kernel Oil (PKO) QUALITY operational excellence - Syariah compliant. Spreads PRODUCTS and high performance Shortenings standards. LOCAL COMMUNITIES Infant Formula SERVICE - Improvement in the livelihood of our EXCELLENCE Dairy Fat Replacers CUSTOMISE employees. De-commoditising - Mutual growth and development SUSTAINABLE sustainably produced of local communities via provision DEVELOPMENT palm products. of employment, technical training, smallholder schemes and community INNOVATE development projects (focused on Ongoing transformation education, healthcare, food security, Bulk efforts to establish a water and sanitation). sustainable innovation - Development of a sustainable palm Refineries/ Customised Oleochemicals Bulking Refineries ecosystem which oil supply chain that contributes Facilities/ improves productivity, to national and local economic Logistics optimises efficiency development while balancing of processes, and traditional needs and environmental enhances quality of protection. products and services. CUSTOMERS CULTIVATE - Preferred supplier of green palm Non-Food Biodiesel Cultivate skilled products and quality food ingredients. workforce and develop - Customisation of products to fit innovative work culture. specific needs. - Focus on value added/customised CONTRIBUTE products. Committed to ensuring socio-economic EMPLOYEES developments, - Cultivation of winning mindsets. environmental and - Continuous capability building via Trading & Bulk Sales carbon management structured development programmes PFAD Aggregation of CPO in line with our growth for technical/leadership competency. strategy. - Enhance quality of life through provision of a safe and conducive work/life environment. Biodiesel GOVERNMENT & SOCIETY - Develop positive relationships with authorities and local communities Tocotrienols to gain support for business By-product development. - Support the industry’s biodiesel and Animal Feed other green initiatives.
OUR VALUE CREATION MODEL
Sustainability Health and Safety Performance Financial Capital Governance
Annual Report // 6-Month Financial Period Ended 31 December 2018 19 Creating Value Sime Darby Plantation
MANAGING OUR MATERIAL MATTERS
Sime Darby Plantation (SDP) acknowledges the criticality of understanding material matters in enhancing our inherent value to our stakeholders. SDP believes that sufficient mitigation plans are currently being employed, constantly reviewed and closely monitored to mitigate any potential impacts on our performance and/or reputation.
Material Matters/Risks Affected Stakeholders
OPERATIONAL PERFORMANCE • Investors • Customers Productivity & Efficiency Improvements • Suppliers/Business Partners - Variations in yield levels due to age profile and other factors. • Partners • Employees Disruption to Production due to External Factors - Volatile weather patterns, natural disasters, etc. - Pest and disease outbreaks.
Quality and Safety of Products
PEOPLE MANAGEMENT • Employees - Availability of skilled and adequate manpower. • Investors - Increase in minimum wage. - Succession management.
MACROECONOMIC CONDITIONS • Investors - Fluctuations in commodity and raw material prices. • Customers - Trade wars and protectionist policies e.g. import tariffs and taxes. • Suppliers/Business Partners - Legal and regulatory changes. • Partners - Adverse forex movements. • Employees
SOCIAL AND ENVIRONMENTAL IMPACT • Investors - Reputational risks arising from real or perceived concerns around • Customers issues such as the environment, human rights, labour rights and • Suppliers/Business Partners community standards within our operations and throughout our • Civil Society Organisations/NGOs supply chain. • Employees • Society/Communities • Government/Authorities/Regulators
OCCUPATIONAL SAFETY & HEALTH PERFORMANCE • Investors - Fatalities, injuries, accidents and illnesses of our employees, their • Customers families, contractors and customers. • Employees • Civil Society Organisations/NGOs • Government/Authorities/Regulators
CAPITAL MANAGEMENT • Investors - Credit rating matrix, debt covenants, debt equity ratio. • Suppliers/Business Partners • Employees
20 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Creating Value
MANAGING OUR MATERIAL MATTERS
Mitigation Strategies
- Strategy execution in an effective manner. • Systematic replanting programme to ensure optimal output in the long-term. • Dedicated performance monitoring units to monitor operational performance. • Technical support to our Upstream and Sime Darby Oils businesses by advisors to ensure continuous operational excellence. • Focus on innovation to improve productivity, optimise efficiency of processes, and enhance quality of products and services. - Robust planning to optimise harvesting and crop recovery during wet weather conditions. - Irrigation mechanisms deployed during dry weather conditions. - Research & Development for high-yielding and infection-resistant oil palm breeds as well as methods to manage diseases. - Commitment to the Innovation & Productivity Charter (IPC), which states our aspirations across the value chain in achieving prosperity by enabling high levels of productivity in delivering sustainable development. - Ensuring robust safety and quality checks and adherence to food safety standards.
- Sourcing of workers from a number of countries to reduce dependency on one (1) source country. - Supervisory and technical training programmes for executives & non-executives, e.g. Staff and Supervisor Enhancement Programme, Harvesting Skills Training for plantation workers. - Mechanisation and productivity enhancement initiatives to reduce dependence on labour. - Robust development programmes to fill capability gaps in sustaining long-term performance.
- Fully integrated business model, hedging mechanisms and diverse geographical presence to diversify earnings risk from the volatility of commodity prices, additional restrictions imposed by other countries and adverse forex movements. - Enhancing margins via greater focus on high value customised and niche products. - Proactive monitoring of changes in macroeconomic landscape and development of appropriate response mechanisms.
- Flawlessly implement sustainability standards such as the RSPO, MSPO, ISPO. - Go beyond certification via commitments in the Responsible Agriculture Charter (RAC), Human Rights Charter (HRC) and IPC, in line with stakeholder expectations. - Manage supply chain risks by improving traceability and engagement with suppliers. - Participate in development of new standards and approaches, e.g. High Carbon Stock Approach. - Engagement and inclusion of stakeholders with collaborations, e.g. PONGO Alliance, Fire Free Alliance.
- Excellent implementation of Occupational Safety and Health (OSH) Systems and Standards. - Continuous improvement of our OSH systems with a goal of achieving Zero Harm. - Increase awareness and accountability by implementing campaigns such as iCARE. - Develop a proactive safety and health culture by promoting concern reporting. - Implement targeted intervention programmes to tackle critical issues and locations.
- Disciplined approach in capital allocation and cash flow management. - Optimise our capital structure to ensure competitive cost of capital which includes balancing debt and equity levels by putting in place appropriate dividend and financing policies. - Maintain strong financial position for ready access to capital market.
Annual Report // 6-Month Financial Period Ended 31 December 2018 21 Creating Value Sime Darby Plantation
OUR STRATEGIC PLAN
OUR VISION: Strategic Objectives To be the Leading Integrated Global 01 Driving operational Palm Oil Player excellence in our Upstream operations Sime Darby Plantation (SDP) is a forward-looking organisation focused on creating long-term value, emphasising on growth and 02 competitive strategies which Serving our customers’ evolving needs through will be achieved through: Sime Darby Oils
03 Maximising returns across the palm oil value chain by leveraging on our integrated business model
22 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Creating Value
OUR STRATEGIC PLAN
Progress Priorities for Highlights 2019
• Replanting with high yielding planting materials to improve • Scale up preparation of GenomeSelectTM materials age profile and yields. for replanting.
• Implementation of innovative irrigation and water • Commercialise and roll out irrigation plans. management system to drive better yields. • Model Plantations to rapidly scale Best Practices • Expansion of mechanisation, automation and digitisation of the Plantation of the Future: to drive initiatives and identification of new innovative tools to productivity and efficiency. improve productivity, efficiency and reduce cost. • Cost reduction initiatives. • Full reinforcement of the Upstream operations restructuring exercise to initiate culture change and a more entrepreneurial mindset.
• Higher premiums from CSPO through increased focus on • Greater focus on customised, sustainable and the physical sale of CSPO. traceable products.
• Increased sale of customised products for better margins. • Continuous efforts and focus on high margin customised products. • Premium quality oil production and higher sales margins of refined products. • Develop strategic partnerships to grow customer base and market reach. • Increased purchase of external oils to improve refinery utilisation. • Continuous efforts to increase purchase of external oils to improve refinery utilisation. • Higher margins from trading for bulk refineries. • Improve logistics.
• Efficient supply chain into target markets and traceable • Optimise supply chain to ensure seamless supply chain for customers. connectivity.
• Enhanced trading around the asset. • Intensify trading around the assets.
• Strategic partnerships to address gaps. • Disciplined portfolio management across the value chain. • Rationalise portfolios across the value chain. • Integrate all data points throughout SDP and • Actively pursuing digital strategy growth. implement data analytics to enhance efficiency and productivity across the value chain.
Annual Report // 6-Month Financial Period Ended 31 December 2018 23 Letter From Our Chairman Sime Darby Plantation
LETTER FROM OUR CHAIRMAN
Notwithstanding the difficult market conditions in the financial period under review, the Group continued to record satisfactory performance for our shareholders. The Group also remained committed in our efforts to unlock and deliver value to our shareholders during the FP December 2018.
TAN SRI DATO’ A. GHANI OTHMAN - Chairman
DEAR VALUED SHAREHOLDERS,
I am pleased to present to you our 2nd annual report which accounts for our performance for the financial period from 1 July to 31 December 2018 (FP December 2018). In line with the Malaysian Code on Corporate Governance (2017), this report continues our journey in adopting the Integrated Reporting guidelines to provide greater transparency in the reporting of our strategies, goals and performance.
24 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Letter From Our Chairman
LETTER FROM OUR CHAIRMAN
The decision to shift the Group’s financial year-end The Group also remained committed in our efforts to from 30 June to 31 December has resulted in a unlock and deliver value to our shareholders during 6-month transition period from 1 July to 31 December the FP December 2018. These efforts were executed 2018 and necessitated the preparation of a one-time, through operational excellence and value creation 6-month transitional financial statement for FP initiatives, which were supported by innovation December 2018. As you read this statement, and a culture of high performance. The Group's our new financial year 2019 would have already commitment is reflected in our choice to retain the commenced from 1 January 2019 to 31 December theme “Unlocking Value. RISE to APEX” for this 2019. Thereafter, our subsequent financial years will report, similar to that of our maiden annual report. continue to coincide with the calendar year. The combination of RISE as a vigorous culture The unfavourable business environment we transformation programme, and APEX, a value experienced throughout our previous financial creation programme, continued to be the rallying call year ended 30 June 2018, persisted to impact the throughout the period under review to drive SDP performance of Sime Darby Plantation Berhad (SDP towards becoming a high-performance organisation. or the Group) in FP December 2018. The lower With this blueprint in place, as well as our strong prices of crude palm oil (CPO) and palm kernel (PK) fundamentals, we are determined to deliver more arising from pressures of the United States – China sustainable value to all stakeholders whilst pursuing trade war, relentless negative sentiment against palm our vision to be the leading integrated global palm oil from Europe, as well as high inventory levels oil player. and weaker export demand from major consuming countries, were the key challenges faced by the palm FINANCIAL PERFORMANCE oil industry throughout this period. For FP December 2018, the Group registered a Notwithstanding the difficult market conditions total revenue of RM6,543 million and profit before in the financial period under review, the Group tax (PBT) of RM457 million on the back of a sharp continued to record satisfactory performance for our decline in average CPO and PK prices realised, shareholders. mitigated by continued earnings improvement from our Downstream operations.
TAN SRI DATO’ A. GHANI OTHMAN - Chairman The combination of RISE as a vigorous culture transformation programme, and APEX, a value creation programme, continued to be the rallying call throughout FP December 2018 to drive
Transformation Office Young Leaders play an important role in rallying employees SDP towards becoming a high- towards the APEX goal performance organisation.
Annual Report // 6-Month Financial Period Ended 31 December 2018 25 Letter From Our Chairman Sime Darby Plantation
LETTER FROM OUR CHAIRMAN
Earnings were supported by productivity improvements in CORPORATE GOVERNANCE our Upstream operations, where we recorded a 2% growth in fresh fruit bunch (FFB) production, better oil extraction rate At SDP, we strongly uphold the principles set out in the (OER) and lower costs compared to the corresponding period Malaysian Code on Corporate Governance (MCCG) 2017. in the previous year. The Group reported a net profit of RM244 Throughout the years, we have been persistent in ensuring million, comprising a recurring net profit of RM230 million and that the Group’s business and operations strictly adhere to the a non-recurring net profit of RM14 million. philosophy of good corporate governance by embracing ethical behaviour, accountability, transparency and sustainability to As a testament to our strength and credibility, I am pleased to produce long-term value to our stakeholders. note that during FP December 2018, the Group continued to be recognised by the Malaysian Rating Corporation Bhd’s (MARC) Through corporate governance, the Board promotes and corporate credit rating at AAA with a stable outlook, as well protects the interests of the Group and its stakeholders. Fitch’s Long-Term Foreign-Currency Issuer Default Rating at We strive to demonstrate good corporate citizenship as BBB+ with a stable outlook. we acknowledge that economic, environmental and social responsibilities are integral to the Group’s performance and Please refer to the Group Financial Review section on page 112 of the sustainability. Annual Report for a detailed discussion on our financial performance.
To demonstrate the transparency and accountability of our DIVIDEND leadership, the Board and Management team of SDP had, on 27 February 2019, signed the Malaysian Anti-Corruption A final single tier dividend of 1.7 sen per share for FP Commission’s (MACC) Corruption Free Pledge, in order to December 2018 has been approved by the Board and a total strengthen our stance against corruption. Various campaigns payout of approximately RM117 million will be made on have also been introduced during the period under review to 21 May 2019. This represents a dividend payout ratio of 51% heighten awareness on our Code of Business Conduct (COBC) out of the recurring consolidated profit attributable to the among employees. owners of the Group.
Read more about the Group’s approach to governance in the Corporate Governance section on page 75 of the Annual Report.
Oil palm trees at our West Estate in Carey Island, Malaysia
26 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Letter From Our Chairman
LETTER FROM OUR CHAIRMAN
RISK MANAGEMENT AND INTERNAL CONTROLS
The Group is committed to managing all risks in a proactive and effective manner, which requires high quality risk analysis to support management decisions within the organisation. A common approach to risk analysis and management is adopted and is enshrined in SDP’s Risk Management Standard and Framework. The focus of risk management activities is to ensure that internal risks are appropriately managed as well as to proactively identify and manage, where possible, external risks that can impact the achievement of the Group’s strategies and objectives.
In addition, SDP is committed to safeguarding the interests of all stakeholders in times of disaster and/or emergency. Therefore, Business Continuity Management is critical to ensure that the Group is able to continue operations with minimal impact to stakeholders in the event of a disruption. During FP December 2018, the Board of Directors approved PT Pulau Laut Refinery in Pulau Laut, Indonesia SDP’s Business Continuity Standard that provides the overarching framework and guiding principles for the ongoing development of adequate business continuity procedures. SUSTAINABILITY COMMITMENTS
To further augment our business conduct and practices During the period under review, we launched our Innovation befitting our new identity as a listed pure play entity, we have and Productivity Charter (IPC) with the aim of further also instituted enhancements to the Group’s regulatory and expanding our sustainability commitments. This is to develop legislation compliance programme. This includes reporting our production capabilities without compromising our format, content, frequency and accountability, as well as sustainability purpose thus allowing us to contribute to a better carrying out an overall revision of our Group Policies and society and minimise environmental harm. The IPC articulates Authorities (GPA) to better address reporting and disclosures. our aspirations across the value chain to achieve prosperity through high levels of productivity and deliver sustainable The risk management framework and approach is further described in the development. This charter complements the pledges we Statement on Risk Management and Internal Control section on page 104 of the Annual Report. made in the Responsible Agriculture Charter (RAC) and the Human Rights Charter (HRC) to holistically implement leading STAKEHOLDER ENGAGEMENT responsible agricultural practices across our global operations.
Our continuous engagements with stakeholders such as The Group’s efforts in taking the leadership in sustainability investors, policymakers, peers and non-governmental and responsible practices have not gone unnoticed by our organisations, are of utmost importance to the Group, allowing stakeholders as we became the recipient of several awards us to align our strategy with their expectations whilst keeping and recognitions during the period under review. These ourselves ahead of the curve. included ‘The Best CR Initiative’ award at The Edge Billion Ringgit Club 2018; the Best Sustainable Palm Oil Leader award We maintain a systematic and robust schedule of engagements at the Europa Awards for Sustainability 2018; and five (5) with our stakeholders through various platforms to discuss major awards at the Sustainable Business Awards Malaysia matters important to the Group, industry, country and 2018, including the Overall Winner award. community. Material issues relating to the Group’s financial and operational performance, strategy, environmental and We continue to make progress in implementing leading social performance, as well as sustainable development, are sustainability standards across our operations, which include discussed at length through the various committees of the certifying our operations to standards such as the Roundtable Board and acted upon by our Leadership team. on Sustainable Palm Oil (RSPO), the Malaysian Sustainable Palm Oil (MSPO) and the Indonesian Sustainable Palm Oil Please refer to the Materiality and Stakeholder Engagement sections on (ISPO). pages 20 to 21 of the Annual Report for further information.
Annual Report // 6-Month Financial Period Ended 31 December 2018 27 Letter From Our Chairman Sime Darby Plantation
LETTER FROM OUR CHAIRMAN
In support of the Sustainable Development Goals (Goal three development areas – water management, replanting and 17 – Partnerships for the Goals), we continue to go beyond financial management. To inculcate diversity, we developed certification by constantly developing partnerships and a coaching programme to equip our women leaders with the participating in thought-leadership platforms with our required leadership and technical skills. This programme stakeholders such as the High Carbon Stock Approach will help to prepare them for higher level positions within (HCSA), Fire Free Alliance (FFA) and the PONGO Alliance, to our Upstream business. This is exemplified by the numerous name a few. Another collaboration which took-off during FP female estate and mill assistant managers within our December 2018 was with Nestlé, where we piloted a project operations as well as our first female mill manager, who has that will help eliminate human and labour rights abuses in our been making headlines in the media. supply chain through a highly enhanced helpline. We believe that partnerships like these are the way forward towards Organisational health, aimed at accelerating and sustaining responsible agricultural practices in line with our stakeholders’ performance excellence, continued to gain momentum through expectations. engagement and focus group sessions with employees throughout our business segments globally. Ranging across Staying true to the principle of transparency and welcoming five (5) countries, over 40 employee engagement sessions constructive feedback from our stakeholders, we also believe have been carried out with the core objective of identifying that the next frontier of our leadership in sustainability would action plans to elevate management practices that are include full traceability of our supply chain. I am pleased to crucial to the strategy of various departments or operating share that the Group has been working diligently to develop units. These action plans became the “blueprint” for SDP, as what we hope would be a ground-breaking initiative on our we embark on executing a combination of specialised and supply chain traceability to be revealed in 2019. This new also cross-functional action plans, targeting towards better initiative will not only solidify the credibility of our responsible organisational health and culture across the organisation. practices, but more importantly, contribute towards further raising the sustainability standards of our entire supply chain Furthermore, the insights gained from various review sessions and the palm oil industry in general. with leaders and employees indicated the importance of appropriate, effective and continuous feedback. In addressing Please refer to the Sustainability section on page 55 of the Annual Report this issue, a Performance Feedback and Coaching Training for further details on our progress around sustainability. Programme was launched to equip managers with the necessary skills to provide effective feedback to their OUR PEOPLE subordinates. This did not only create a positive work environment from frequent recognition and appreciation SDP is where it is today because of its dynamic employees. for outstanding performance, but also enabled constructive We remain focused on our endeavours to develop, unlock and discussion on areas for development and growth. grow capabilities. In the period under review, we implemented structured development plans such as upskilling technical Read more about the Group’s culture in the Our People section on page 47 of competencies within our Upstream business, focusing on the Annual Report.
STRATEGY AND OUR FUTURE
We will continue to make meaningful strides in our growth strategies across our work streams. Our Upstream operations will remain focused on improvements in productivity and operational efficiencies through progressive replanting using high-yielding planting materials, water management and mechanisation, as well as cost reduction via labour rationalisation to better manage the manpower ratio, and cheaper fertiliser.
Our Downstream operations will also continue to sustain its focus on customised products with higher margins and delivering innovative as well as future-focused solutions. In March 2019, the Group rebranded its entire Downstream The barn owl or Tyto alba serves as a biological control in our estates to operations to Sime Darby Oils (SDO). SDO’s new tagline of keep rodent population in check ‘Realising Possibilities, Together’ reflects our Downstream
28 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Letter From Our Chairman
LETTER FROM OUR CHAIRMAN
business’ philosophy to be a trusted partner in creating quality products with best-in-class oils and fats to enable sustainable living, now and into the future.
As we move into the new financial year 2019, the Group will continue to focus on innovation through digitisation, advanced research and development, product customisation as well as operational efficiency. This will drive transformational ideas throughout the organisation as well as encourage value creation and strengthen operational excellence. In addition, our aspirations will continue to be guided by the Group’s commitment to lead the industry and operate in a responsible and sustainable manner.
ACKNOWLEDGEMENT
On behalf of the Board, I would like to express my appreciation to all our valued stakeholders for your continued trust and support for the Group. I would also like to thank my fellow directors for the exceptional service and value that they have brought to the Group during the last six (6) months.
My heartfelt gratitude also goes out to the Leadership team and all employees under the Group for their unending support and continuous excellence. I hope we will bring this steadfast determination and perseverance into the next financial year as we strive for greater accomplishments in creating value and delivering sustainable results.
As we transform and aspire to be a leading integrated global palm oil player, I am confident that SDP has the resolve to continuously progress and grow amidst the current challenging business landscape.
Tan Sri Dato’ A. Ghani Othman Chairman
Sime Darby Oils Zwijndrecht Refinery, Netherlands
Annual Report // 6-Month Financial Period Ended 31 December 2018 29 Our Strategic Context Sime Darby Plantation
GROUP FINANCIAL PERFORMANCE
CHANGE IN THE FINANCIAL YEAR END
The Board of Directors has on 22 February 2018 approved the change in the financial year end of the Group from 30 June to 31 December, which was implemented after the close of the financial year ended 30 June 2018.
The audited financial statements for 31 December 2018 is the first set of financial statements issued subsequent to the change in the financial year end and thus, results and cash flows reflect the 6 months ended 31 December 2018 (FP December 2018).
For more equitable and meaningful review, financial results of the Group for the six-month period ended 31 December 2018 are compared against the results of the corresponding period of the previous year, the unaudited six months ended 31 December 2017 (FP December 2017).
REVIEW OF OPERATIONS
The Group operations faced a challenging economic FP Dec FP Dec (RM’ million) 2018 2017* VAR% environment during the 6-month financial period ended 31 December 2018 (FP December 2018), on Revenue 6,543 7,626 (14) the back of prevailing low crude palm oil (CPO) and Recurring Profit Before Interest and palm kernel (PK) prices which continued to dampen Tax 545 1,185 (54) the industry. Non-Recurring Transactions 14 772 (98) Profit Before Interest and Tax 559 1,957 (71) Nevertheless, despite the challenges, the Group Finance Income 8 17 (53) registered commendable performance in its recurring operations in the financial period under review. Finance Costs (110) (98) (12) The Group’s fresh fruit bunch (FFB) production Profit Before Tax 457 1,876 (76) improved by 2% to 5.56 million MT, as compared to Tax Expense (145) (340) 57 FP December 2017 and oil extraction rate (OER) was Profit After Tax 312 1,536 (80) higher at 21.17% (FP December 2017: 20.96%). In Perpetual Sukuk (62) (63) 2 addition, increased contribution by the Sime Darby Oils segment, as well as our continuous efforts on Non-Controlling Interests (6) (25) 76 cost controls and increasing operational efficiencies Profit Attributable to Owners of have partially cushioned the adverse impact arising the Company 244 1,448 (83) from the weak market prices. * Unaudited.
Revenue
Upstream Upstream Upstream Total Sime Darby Total Malaysia Indonesia PNG/SI Upstream Oils Group RM’000
12,000
10,000
8,000
6,000
4,000
2,000
0 FP Dec FP Dec FP Dec FP Dec FP Dec FP Dec FP Dec FP Dec FP Dec FP Dec FP Dec FP Dec 2018 2017* 2018 2017* 2018 2017* 2018 2017* 2018 2017* 2018 2017*
* Unaudited. Inter-segment External
30 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Strategic Context
GROUP FINANCIAL PERFORMANCE
Group revenue for the six months ended 31 December 2018 was lower by 14% compared to the corresponding period of the previous year, attributable to a 26% lower average CPO realised price of RM1,974 per MT (FP December 2017: RM2,672 per MT), a 38% lower average PK realised price of RM1,479 per MT (FP December 2017: RM2,374 per MT), partially mitigated by the 2% higher FFB production of 5.56 million MT (FP December 2017: 5.46 million MT).
Profit Before Interest & Tax (PBIT)
Upstream Upstream Upstream Upstream Total Sime Darby Other Recurring Non-recurring Malaysia Indonesia PNG/SI Liberia Upstream Oils Operations PBIT Items
(RM million)
2,000
1,500
1,000
500
0
(500) FP Dec 2018 FP Dec 2017
For the financial period ended 31 December 2018, the Group reported a PBIT of RM559 million, compared to RM1,957 million for the corresponding period of the previous year. The decline was largely due to the significantly lower non-recurring PBIT as compared to FP December 2017, as well as lower recurring PBIT.
The Group reported net non-recurring gains of RM14 million in the current period, comprising primarily of gains on sale of a subsidiary in Vietnam, which compensated for the impact of impairment charges of our long term assets in Liberia. In FP December 2017, the Group recorded net non-recurring gains of RM772 million from sale of land to a related party and write-back of contribution to Yayasan Sime Darby.
The current period recurring PBIT of RM545 million was 54% lower than RM1,185 million recorded in FP December 2017, wholly due to weaker average CPO and PK prices realised. Improved operational statistics of the Upstream segments and continued earnings improvement from its Sime Darby Oils operations partially mitigated the impact of lower CPO and PK prices. Comparison of the recurring PBIT between FP December 2018 and the corresponding period of the previous year as follows.
Recurring PBIT RM’ million
FP December 2017 Recurring Profits 1,185 Lower CPO & PK Prices in FP December 2018 as Compared to FP December 2017 (1,007) 178 Net Positive Impact on Profits Arising from Operational and Other Factors 367 FP December 2018 Recurring Profits 545
Annual Report // 6-Month Financial Period Ended 31 December 2018 31 Our Strategic Context Sime Darby Plantation
GROUP FINANCIAL PERFORMANCE
Upstream
The total recurring PBIT of the Group’s Upstream operations fell by 62% to RM385 million in the six-month period ended 31 December 2018, from RM1,013 million registered in the same period last year, wholly attributable to the sharp decline in the CPO and PK prices by 26% and 38% respectively in the current period. The adverse price impact was partially mitigated by a 2% year-on-year rise in FFB production.
CPO Price Realised (RM per MT) FFB Production (MT’000) FP December FP December Var. FP December FP December Var. Segment 2018 2017 % 2018 2017 %
Upstream Malaysia 2,072 2,717 (24) 2,798 3,248 (14) Upstream Indonesia 1,712 2,580 (34) 1,713 1,435 19 Upstream PNG/SI 2,213 2,701 (18) 994 746 33 Upstream Liberia 1,874 2,243 (16) 51 29 76 Total 1,974 2,672 (26) 5,556 5,458 2
PBIT of Upstream Malaysia declined by 58% to RM301 million higher sales volumes and better margins. This compensated for the period under review. The decline in PBIT was mainly the lower profits from customised businesses in Asia Pacific attributable to the lower average CPO and PK prices realised (“APAC”) and Europe, Middle East and Africa (“EMEA”) (which declined by 24% and 35%, respectively) as well as which suffered from slower demand and declining margins lower FFB production (which declined by 14%). OER for FP from certain specialty products. December 2018 improved to 20.67% as compared to 20.21% recorded in FP December 2017. Other Operations
Upstream Indonesia reported a PBIT of RM68 million, Other operations reported a PBIT of RM14 million as significantly lower than FP December 2017 of RM261 million, compared to RM38 million in the corresponding period of the due to lower average realised prices of CPO (declined by previous year. The lower share of losses from associates and 34%) and PK (declined by 43%). The adverse impact of joint ventures in the current period partially compensated lower prices was partially mitigated by the 19% increase in the decline in profits due to the recognition of RM39 million FFB production during the period under review. one-off dividend income received from an investment in the previous year. PBIT of RM57 million recorded by Upstream PNG/SI was 26% lower at RM77 million achieved in the previous year Finance Cost corresponding period, due to the lower average CPO price realised which declined by 18% year-on-year. Nevertheless, Finance costs incurred during the current period of RM110 the improvement in FFB production of 33% as compared million were 12% higher than FP December 2017, due to the to FP December 2017 has partially cushioned the adverse increase in borrowings arising from the financing related to impact from lower prices. the acquisition of Markham Farming Company Ltd in August 2018 and the increase funding for working capital required in Upstream Liberia operations reported a loss of RM41 million, FP December 2018 attributable to the low prevailing market which marginally lower than a loss of RM43 million in FP prices. December 2017. Although the segment recorded lower CPO realised prices, the higher FFB production in the current Taxation period which was in line with the increased maturity of the planted area curtailed the full impact of the lower CPO prices. The effective tax for the financial period ended 31 December 2018 is 31.8%, higher than the statutory tax rate primarily Sime Darby Oils due to deferred tax assets not recognised in respect of tax losses and deductible temporary differences for certain Sime Darby Oils operations registered a PBIT of RM146 loss-making subsidiaries mainly in Indonesia, Liberia and million, 9% higher than FP December 2017 of RM134 million. Netherlands totaling RM40.8 million. Bulk businesses showed improved results, contributed by
32 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Strategic Context
GROUP FINANCIAL PERFORMANCE
Net Earnings GROUP CASH FLOW
The Group reported a net profit of RM244 million for the FP FP December FP December December 2018, comprising a recurring net profit of RM230 RM’million 2018 2017* million and a non-recurring net profit of RM14 million. In comparison with the net profit for the corresponding period in Revenue 6,543 7,626 the previous year of RM1,448 million, the decline was largely EBITDA – Total 1,168 2,506 due to the non-recurring net profit of RM749 million recorded EBITDA – Recurring 1,154 1,734 in the previous year related to the gain on sale of land to Operating Cash Flow 847 1,178 a related company and a one-off writeback of donation to Capital Expenditure (801) (642) Yayasan Sime Darby. Investments (228) (24) Earnings per share for FP December 2018 was similarly Proceeds from Disposals 111 439 lower at 3.6 sen per share, as compared to 21.3 sen per Net Interest Received/ share for FP December 2017. (Finance Cost) (109) (91) Free cash flow (180) 860 Return on Shareholder’s Equity (ROE)(1) * Unaudited. FP December FP December % 2018 2017* Lower operating cashflow of RM847 million, 28% lower than FP December 2017 largely attributable to the lower As Reported 3.7 20.7 profits generated by the operations given lower CPO prices, Excluding Non-Recurring had posed greater challenges in reducing the Group’s debt. Earnings 3.5 10.0 However, the Group continued with its deleveraging initiatives
* Unaudited. which include asset monetisation and capital management (1) All ratios are annualised. which partially cushioned the shortfall in operating cashflow.
GROUP BORROWINGS POSITION ASSET MONETISATION
December June The asset monetisation exercise serves the objective of RM’million 2018 2018 unlocking value and realising cash from under performing assets or assets which have achieved its value potential. Total Borrowings 7,297 6,489 Bank Balances, Deposits and During the period under review, the Group realised proceeds Cash 491 363 from disposals which include sale of a mill in Johor, Malaysia Equity 15,746 16,314 and the Group’s entire 51% shareholding in Golden Hope Debt/Equity 46.3% 39.8% Nha-Be, a subsidiary in Vietnam.
In addition to these disposals and as part of the asset The Group’s borrowings as at 31 December 2018 increased monetisation exercise, the Group is in the midst of divesting to RM7.3 billion from RM6.5 billion reported at the end of amongst other the following assets which have been the previous financial year ended 30 June 2018 (FY 30 classified as assets held for sale: June 2018), attributable to financing for the acquisition of Markham Farming Company Limited during the period as • The entire 100% shareholding in PT Mitra Austral well as a net drawdown of RM384 million to finance the Sejahtera, a subsidiary in Indonesia; Group’s working capital. • The entire 95% shareholding in PT Indo Sukses Lestari Makmur, a subsidiary which has a rubber development in Indonesia.
Annual Report // 6-Month Financial Period Ended 31 December 2018 33 Our Strategic Context Sime Darby Plantation
GROUP FINANCIAL PERFORMANCE
DIVIDENDS Value Added
In line with the Group’s policy of distributing not FP December FY June less than 50% of the consolidated recurring net (RM’000) 2018 2018 earnings as dividends to its shareholders, the Board of Directors of the Group has approved a final Turnover 6,542,548 14,368,888 dividend of 1.7 sen per share with respect to the Direct & Indirect Costs (4,288,490) (9,725,354) 6-month financial period ended 31 December 2018. Value Added from Operations 2,254,058 4,643,534 The dividend will be paid in cash on 21 May 2019.
Other Operating Income 997,850 DIVIDEND REINVESTMENT PLAN 155,620 Other Gains/(Losses) 42,423 (52,667) During the Extraordinary General Meeting held Share of Results of Joint Ventures 1,591 (22,855) on 21 November 2018, the shareholders of the Share of Results of Associates 1,568 (13,932) Company approved the establishment of the Dividend Reinvestment Plan that provides the Finance Income 8,473 24,433 shareholders of the Company with an option to Total Value Added 2,463,733 5,576,363 elect to reinvest their dividend in new ordinary shares of the Company ("DRP"). The Board of Directors of the Company has the authority to Value Distributed determine whether the DRP shall apply to a particular dividend distribution. FP December FY June (RM’000) 2018 2018
The Group’s first DRP exercise was applied to Employees 1,294,676 2,442,638 the final dividend and the special final dividend for the financial year ended 30 June 2018, with acceptance of 54.0% of the total dividend payout. Government & Society 151,874 523,292 The acceptance rate would have been higher if not for the sharp decline in SDP’s share price to below Providers of Capital the DRP exercise price of RM4.85 per share in Dividends 204,025 238,029 the weeks leading to the notice of election (NOE) Finance Costs 122,228 218,588 submission date of 26 December 2018. Non-Controlling Interests 5,626 33,624 VALUE DISTRIBUTION Perpetual Sukuk 62,661 124,300 394,540 614,541 The value that the Group creates for its stakeholders can either be in the form of financial returns or in non-financial or intangible forms. Reinvestment and Future Growth 622,643 1,995,892 Total Value Distributed 2,463,733 5,576,363 The Statement of Value Added illustrates how the Group’s performance supports its ability to deliver Note: 1 Tax and CSR expenses. financial value to its stakeholders. 2 Gross finance costs.
The financial value in the statement is based on the Profit before Finance Costs, Corporate Social Responsibility (CSR) expenses, Tax, Depreciation & Amortisation and Staff Cost.
34 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Strategic Context
GROUP FINANCIAL PERFORMANCE
5-YEAR FINANCIAL HIGHLIGHTS
GROUP FY 30 June FP 31 December FINANCIAL YEAR/PERIOD ENDED (RM’000) 2015 (1) 2016 (1) 2017 2018 2018(2)
FINANCIAL RESULTS Revenue 10,304,041 11,946,464 14,779,381 14,368,888 6,542,548 Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) 2,335,604 2,383,825 5,702,007 3,689,624 1,167,664 Profit Before Interest and Tax 1,537,600 1,259,369 4,455,335 2,535,977 558,559 Profit Before Tax 1,315,923 839,039 4,030,963 2,376,950 457,047 Profit After Tax 1,031,446 1,002,935 3,551,910 1,885,403 311,795 Perpetual Sukuk - - (2,724) (124,300) (62,661) Non-Controlling Interests (34,333) (35,756) (42,087) (33,624) (5,626) Profit Attributable to Owners of the Company 997,113 967,179 3,507,099 1,727,479 243,508
FINANCIAL POSITION Share Capital 600,000 600,000 600,000 1,100,000 1,100,000 Reserves 8,305,212 8,992,178 11,858,084 12,574,687 12,018,449 Shareholders’ Equity 8,905,212 9,592,178 12,458,084 13,674,687 13,118,449 Perpetual Sukuk - - 2,231,384 2,230,717 2,231,398 Non-Controlling Interests 560,841 454,959 433,887 408,398 396,078 Total Equity 9,466,053 10,047,137 15,123,355 16,313,802 15,745,925 Borrowings 4,776,704 5,522,365 7,737,927 6,489,398 7,296,914 Liabilities Associated with Assets Held for Sale - - 15,395 45,993 21,133 Other Liabilities 13,248,443 12,867,607 6,578,200 4,642,482 5,562,330 Total Equity and Liabilities 27,491,200 28,437,109 29,454,877 27,491,675 28,626,302 Non-Current Assets 22,040,542 23,732,635 23,794,526 22,517,962 23,583,606 Current Assets Excluding Cash 4,337,531 4,064,272 4,763,309 4,391,511 4,426,979 Assets Held for Sale 10,712 3,862 183,594 218,964 124,675 Cash 1,102,415 636,340 713,448 363,238 491,042 Total Assets 27,491,200 28,437,109 29,454,877 27,491,675 28,626,302
FINANCIAL RATIOS Operating Margin (%) 15.2 10.6 30.7 17.9 8.5 Return on Shareholders’ Equity (%) 11.2 10.1 28.2 12.6 3.7(5) Debt/Equity (%) 50.5 55.0 51.2 39.8 46.3 Debt/EBITDA (times) 2.0 2.3 1.4 1.8 3.1(5)
SHARE INFORMATION Basic Earnings Per Share (sen)(3) 14.9 14.4 52.2 25.5 3.6 Net Assets Per Share Attributable to Owners of the Company (RM) 1.3 1.4 1.8 2.0 1.9 Net Dividend Per Share (sen) 100(4) 116.7(4) 150.0(4) 17.5 1.7
Note: 1 Restated following the first-time adoption of the MFRS framework and early adoption of MFRS 15. 2 A six-month financial period. 3 The weighted average numbers of ordinary shares in issue for the financial year ended (FY) 30 June 2015 to FY 30 June 2017 have been adjusted for 1 : 11.19 share split. 4 Number of ordinary shares in issue of 600,000,000 as at 30 June 2015, 30 June 2016 and 30 June 2017. 5 Ratio is annualised.
Annual Report // 6-Month Financial Period Ended 31 December 2018 35 Our Strategic Context Sime Darby Plantation
MANAGEMENT DISCUSSION & ANALYSIS
During FP December 2018, the palm oil industry remained volatile on the back of a challenging economic landscape due to the political trade war between China and the United States of America, as well as greater volatility in the foreign exchange markets. These uncertainties were further exacerbated by the European Union’s proposed ban on the use of palm oil in biodiesel, as well as high inventory levels and weaker export demand from major consuming countries, which in turn impacted crude palm oil (CPO) prices. Despite these tough conditions, SDP still recorded a profit before tax (PBT) of RM457 million for the period under review and a net profit of RM244 million, after tax and minority interest.
Sime Darby Plantation’s (SDP) greater agility as a pure play Moving forward in FY2019, while the Group’s Upstream operations entity enabled the Group to mitigate these market driven continue to focus on operational excellence to improve efficiency volatilities whilst demonstrating our commitment to creating and productivity, our Downstream business will play an important sustainable value for our shareholders. With the introduction of role to bolster the Group’s financial performance amidst the volatile RISE to APEX – the culture transformation initiative and value commodity prices. Following a rebranding exercise in March 2019, creation programme - the Group is confident of its capability the Group’s entire Downstream business is now represented by a to continue unlocking and creating greater sustainable values single entity named Sime Darby Oils (SDO) to realise the full potential for shareholders. Our culture transformation, RISE, which of SDP as a trusted brand for its sustainability credentials and incorporates six (6) Winning Mindsets, continued to propagate a superior product qualities. Throughout FP December 2018, the Group culture of accountability to strengthen the organisational health continued to seek opportunities to diversify our operations within the and drive the performance of the Group. Meanwhile, under the palm oil value chain. This was done to maximise value and explore custody of the Transformation Office, the APEX journey has opportunities to enlarge the income stream for Upstream, SDO and thus far shown encouraging results for the Group. From the the Group’s other businesses. A key highlight is SDP’s acquisition of Idea Generation Workshops conducted across SDP’s global Markham Farming Company Limited (MFCL) in Papua New Guinea, operations, a total of 1,570 ideas were generated within seven which proved to be a boost to our Upstream and Downstream sectors. (7) workstreams; namely - Upstream, Sime Darby Oils, Cash Through the acquisition, SDP now owns two (2) copra mills that have Control Tower, R&D, Special Projects (Renewables & Integrated a total combined throughput capacity of 55,000 MT per annum. This Economics), Organisational Development & People and Digital. Out will enable SDP to expand our lauric oils business into coconut oil of these ideas, 522 initiatives have been validated. production. SDP’s total operating area also increased by about 6,000 ha, of which 4,000 ha is planted with oil palm.
A total of 1,570 ideas generated within seven (7) workstreams
UPSTREAM SIME DARBY CASH CONTROL R&D SPECIAL ORGANISATIONAL DIGITAL OILS TOWER PROJECTS DEVELOPMENT & (Renewables PEOPLE & Integrated Economics)
A panoramic view of Elphil Estate, Malaysia
36 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Strategic Context
MANAGEMENT DISCUSSION & ANALYSIS
BUSINESS REVIEW SDO’s tagline, ‘Realising Possibilities, Together’, reflects its philosophy of collaborating with its partners to produce Profit before During FP December 2018, the Group’s Upstream quality and enriching products as well as ensuring tax business contributed 71% of the Group’s total recurring sustainable living for consumers. With our extensive RM457 PBIT despite significant volatility in CPO prices and the network and global footprint, SDO strives to be the most million palm oil market. Revenue decreased 16% compared to the accessible supplier of oils and fats by focusing on: previous year due to the decline in actual realised selling prices of CPO and PK by 26% and 38% respectively. Quality – Delivered through the highest Net Profit However, this was mitigated by our Upstream operations’ standards of operational excellence, resulting improvement in production cost by 0.6%, as well as in optimum cost efficiencies, quality, quantity RM244 higher yield and oil extraction rate (OER) by 3% and 1% million and timing respectively compared to previous corresponding period. Sustainability – Commitment to sustainability, The Group’s Upstream business focuses on oil palm, as well as fully traceable and segregated The Group rubber and sugar plantations while the secondary supply chain; being a good corporate citizen in operates activities are cattle rearing for meat production and copra all our environmental and social practices 250 mills for coconut oil production. The Group operates 250 estates and estates and 73 mills in five (5) countries, with oil palm Integration – Secured supply of feedstock in being our main plantation business covering 603,145 ha an efficient and fully-integrated value chain mills 73 of planted area in Malaysia, Indonesia, PNG, Solomon in five (5) Islands (SI) and Liberia. In addition to oil palm, the Group countries also owns 14,725 ha of rubber estates in Malaysia, Innovation – Anticipate the world’s oils & fats’ Indonesia and Liberia; 5,613 ha of sugarcane plantations needs with innovation and R&D and 9,560 ha of grazing pasture in PNG.
As the world’s largest producer of Certified Sustainable Several SDO's business units have received recognition Palm Oil (CSPO), 97% of the Group’s Strategic Operating and awards from customers as well as the government Units (SOUs) are certified under the Roundtable on for their efforts in driving continuous improvement and Sustainable Palm Oil (RSPO). Meanwhile, 100% of excellence: the Group’s SOUs in Malaysia are certified under the Malaysian Sustainable Palm Oil (MSPO) and 96% of Morakot Refinery (Thailand): the Group’s SOUs in Indonesia are certified under the The Thailand Corporate Excellence 2018 Indonesian Sustainable Palm Oil (ISPO). by Thailand Management Association and the Excellence Supplier 2018 by Central SDO contributed 27% of the Group’s total recurring PBIT Restaurants Group (CRG). for the period under review. The business recorded continued growth in profits from its Asia Pacific Pulau Laut Refinery (Indonesia): operations. This was highly attributable to increased The Gold Achievement Award in 2018 by sales volume and better margins from both the bulk and the 7th Indonesia Operational Excellence customised products businesses. Amidst a volatile palm Conference; the ACE Award 2018 for oil market throughout the year, the stronger trading and Best Impact on Transformation by Global bulk performance was largely due to increased margins Organisational Excellence Congress in Abu and higher aggregation in our refinery in Indonesia. This Dhabi; and the Zero Accident Award in 2018 has compensated the lower profit contribution from our from the South Kalimantan Governor for customised products businesses in Europe, Middle East operational safety (accumulating 1,880,940 and Africa, which were impacted by lower demand. man-hours work without any accidents from January 2014).
Annual Report // 6-Month Financial Period Ended 31 December 2018 37 Our Strategic Context Sime Darby Plantation
MANAGEMENT DISCUSSION & ANALYSIS
OPERATIONS REVIEW
During FP December 2018, our Upstream operations focused on continuous improvement to increase productivity and efficiency through replanting high yielding planting materials, effective water management practices, and enhanced mechanisation and digitisation.
The Group also embarked on an asset rationalisation initiative which include disposing or swapping non- performing or non-strategic assets to maximise value. In October 2018, the Group disposed of Bintang Mill in Johor, Malaysia as part of this asset rationalisation exercise. The aforementioned acquisition of MFCL in August 2018 added 4,000 ha of oil palm planted area to the Group and marked our presence in the copra business.
Our Upstream operations also recorded an improvement CPO storage tanks at one of our mills in yield and OER performance compared to the same period last year. This was driven by continuous operational improvements such as fertiliser application, to our business by increasing mill utilisation which water management, crop quality improvement initiatives indirectly benefitted our refineries and kernel crushing and other best agricultural management practices. operations. Upstream operations recorded a 3% yield improvement, mainly due to the improvements made by operations in SDO plays a key role in helping the Group overcoming SDO manages Indonesia and PNG/SI, while the 1% OER improvement headwinds. With an extensive global network of facilities and operates was mainly recorded by operations in Malaysia. in eight (8) countries (Malaysia, China, Netherlands, 11 refineries United Kingdom, South Africa, Thailand, Indonesia with a total capacity of Apart from yield and OER improvements, SDP also and Papua New Guinea), SDO’s operations oversees continued to find new ways to improve efficiency and the trading, manufacturing and sales and marketing 3.8 million per productivity along the palm oil value chain. Through of oils and fats products, palm oil-based biodiesel, MT year and a our Outside Crop Purchased (OCP) business, we have nutraceuticals and other derivatives. Under this core total bulking strengthened our competitiveness via collaborations with business, SDO manages and operates 11 refineries with installation independent smallholders, as well as external private a total capacity of 3.8 million MT per year and a total capacity of and government growers. OCP has contributed positively bulking installation capacity of 300,000 MT. 300,000 MT
An aerial view of our New Britain Palm Oil Estate, Papua New Guinea
38 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Strategic Context
MANAGEMENT DISCUSSION & ANALYSIS
Amidst the volatility of commodity prices, SDO completed a total These initiatives will include significant focus on the introduction of of 167 Lean Six Sigma projects during the period under review digital innovation in all aspects of our business. focusing mainly on manufacturing efficiencies. In Upstream, we are committed to increasing our drive to leverage Facility development in SDO is integral to ensure it has the proper on technology to enhance analytics, improve processes and infrastructure to function well. The Group is carrying out three (3) increase productivity to further create value. key projects under these initiatives. The biodiesel plant expansion is progressing well and is due for completion in April 2019. SDO will continue to strive for an excellent Refinery Performance A segregated bonded storage facility at SDO’s PT Pulau Laut Index (RPI), which measures the overall performance of the Refinery (formerly known as PT Golden Hope Nusantara) is on business units, through full asset utilisation and enhancing process track and has started operation. SDO’s Langat Refinery (formerly efficiency while strengthening safety and health at work. known as Jomalina Refinery) has started its capacity expansion in November 2018. SDO will also continue to add value to our products and increase our competitiveness locally and internationally through efficient To further improve profit margins, SDO continues to focus on trading, marketing and logistics management, as well as developing customer solutions and speciality products. collaborating with Upstream. We are also working towards growing our trading activities by further enhancing our risk management OUTLOOK AND PROSPECTS system to ensure a more holistic management of the sector’s financial exposure. Moving forward, the management team will be guided by the three (3) specific growth and competitive strategies encapsulated in We will also work towards becoming a digitally-enriched integrated our five-year (5) strategy blueprint, namely to drive operational global palm oil company. Our current focus areas for digital excellence in Upstream operations; to serve our customers’ initiatives cut across both Upstream and SDO operations. Once evolving needs through SDO; and to maximise returns across our succeed, they will be replicated in phases throughout the Group. palm oil value chain by leveraging on our integrated business model. Our culture transformation journey through “RISE to APEX” will SDP will continue to embrace “Business Unusual”, a working further drive performance to achieve the Group’s value creation concept to ensure that it remains relevant and ahead of its aspirations while the Transformation Office will continue to monitor, competitors. By focusing our energy on developing a sustainable track and ensure effective execution of our strategies. innovation culture, we aspire to ensure the organisation embraces a single purpose — to protect, sustain and leap the growth of SDP’s In FY2019, the management will consistently look at continuous value towards making SDP the leading integrated global palm oil improvement initiatives to improve work processes, with the aim of player. improving operational excellence, efficiency, productivity and cost.
The Mini Tractor Grabber (MTG) is one of the mechanisation initiatives that has long been implemented in SDP
Annual Report // 6-Month Financial Period Ended 31 December 2018 39 Our Strategic Context Sime Darby Plantation
MANAGEMENT DISCUSSION & ANALYSIS
2.5-Year Operational Review
FY2017 (July 16 - June 17) FY2018 (July 17 - June 18) FY2018 (July 18 - December 18) Malaysia Indonesia PNG & SI Liberia Total Malaysia Indonesia PNG & SI Liberia Total Malaysia Indonesia PNG & SI Liberia Total FFB Production (in MT) 5,293,071 2,671,576 1,792,361 27,038 9,784,046 5,822,150 2,614,615 1,731,006 64,611 10,232,382 2,798,425 1,712,521 994,214 51,154 5,556,314
OP Hectarage (in ha) • Mature hectares 254,703 162,480 75,607 9,305 502,095 252,055 158,180 77,500 9,701 497,436 244,963 158,791 79,126 9,975 492,854 • Immature hectares 49,103 39,821 10,616 1,097 100,637 48,972 43,040 9,804 741 102,557 55,767 42,282 11,955 288 110,292 • Total planted hectares 303,806 202,301 86,223 10,402 602,732 301,027 201,220 87,304 10,442 599,993 300,730 201,072 91,081 10,263 603,145
Yield per Hectare (in MT/ha) 20.76 16.03 23.88 4.04 19.44 23.13 16.40 22.36 6.78 20.51 11.40 10.72 12.59 5.13 11.25
FFB Processed (in MT) • Own 5,293,068 2,669,115 1,792,361 27,038 9,781,582 5,822,123 2,614,615 1,731,006 64,611 10,232,354 2,798,425 1,712,521 994,214 51,154 5,556,314 • Outside 544,180 728,156 581,782 3,348 1,857,466 1,133,700 705,801 537,008 10,726 2,387,235 508,669 489,052 287,786 1,281 1,286,788 • Total 5,837,248 3,397,271 2,374,143 30,386 11,639,048 6,955,823 3,320,416 2,268,014 75,337 12,619,589 3,307,094 2,201,573 1,282,000 52,435 6,843,102
Mill Production • Crude Palm Oil (in MT) 1,200,041 723,724 548,526 5,691 2,477,982 1,418,945 710,207 508,263 15,520 2,652,935 683,678 465,306 288,677 11,042 1,448,703 • Palm Kernel (in MT) 289,120 158,810 136,048 181 584,159 356,930 159,529 130,437 2,989 649,886 171,670 105,759 75,405 3,156 355,991 • Oil Extraction Rate (%) 20.56 21.30 23.10 18.73 21.29 20.40 21.39 22.41 20.60 21.02 20.67 21.14 22.52 21.06 21.17 • Kernel Extraction Rate (%) 4.95 4.67 5.73 2.48 5.02 5.13 4.80 5.75 3.97 5.15 5.19 4.80 5.88 6.02 5.20
Rubber • Planted hectare (in ha) 11,514 1,718 N/A 107 13,339 12,674 1,924 N/A 107 14,705 12,680 1,924 N/A 121 14,725 • Rubber production (in ’000kg) 7,690 N/A N/A N/A 7,690 6,512 N/A N/A N/A 6,512 4,038,335 N/A N/A N/A 4,038,335 • Yield per Hectare (kg/ha) 1,845 N/A N/A N/A 1,845 1,318 N/A N/A N/A 1,318 770 N/A N/A N/A 770
Sugarcane • Planted hectare (in ha) N/A N/A 5,613 N/A 5,613 N/A N/A 5,613 N/A 5,613 N/A N/A 5,613 N/A 5,613 • Cane yield (MT/ha) N/A N/A 67.01 N/A 67.01 N/A N/A 52.59 N/A 52.59 N/A N/A 50.69 N/A 50.69
Beef Production • Total herd (in heads) N/A N/A 24,803 N/A 24,803 N/A N/A 26,013 N/A 26,013 N/A N/A 23,527 N/A 23,527 • Average deadweight (kg/head) N/A N/A 261 N/A 261 N/A N/A 268 N/A 268 N/A N/A 260 N/A 260 Total Landbank/Concession 344,783 283,376 141,293 220,000 989,452 343,445 299,278 140,373 220,000 1,003,096 343,251 299,255 146,463 220,000 1,008,969
40 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Strategic Context
MANAGEMENT DISCUSSION & ANALYSIS
2.5-Year Operational Review
FY2017 (July 16 - June 17) FY2018 (July 17 - June 18) FY2018 (July 18 - December 18) Malaysia Indonesia PNG & SI Liberia Total Malaysia Indonesia PNG & SI Liberia Total Malaysia Indonesia PNG & SI Liberia Total FFB Production (in MT) 5,293,071 2,671,576 1,792,361 27,038 9,784,046 5,822,150 2,614,615 1,731,006 64,611 10,232,382 2,798,425 1,712,521 994,214 51,154 5,556,314
OP Hectarage (in ha) • Mature hectares 254,703 162,480 75,607 9,305 502,095 252,055 158,180 77,500 9,701 497,436 244,963 158,791 79,126 9,975 492,854 • Immature hectares 49,103 39,821 10,616 1,097 100,637 48,972 43,040 9,804 741 102,557 55,767 42,282 11,955 288 110,292 • Total planted hectares 303,806 202,301 86,223 10,402 602,732 301,027 201,220 87,304 10,442 599,993 300,730 201,072 91,081 10,263 603,145
Yield per Hectare (in MT/ha) 20.76 16.03 23.88 4.04 19.44 23.13 16.40 22.36 6.78 20.51 11.40 10.72 12.59 5.13 11.25
FFB Processed (in MT) • Own 5,293,068 2,669,115 1,792,361 27,038 9,781,582 5,822,123 2,614,615 1,731,006 64,611 10,232,354 2,798,425 1,712,521 994,214 51,154 5,556,314 • Outside 544,180 728,156 581,782 3,348 1,857,466 1,133,700 705,801 537,008 10,726 2,387,235 508,669 489,052 287,786 1,281 1,286,788 • Total 5,837,248 3,397,271 2,374,143 30,386 11,639,048 6,955,823 3,320,416 2,268,014 75,337 12,619,589 3,307,094 2,201,573 1,282,000 52,435 6,843,102
Mill Production • Crude Palm Oil (in MT) 1,200,041 723,724 548,526 5,691 2,477,982 1,418,945 710,207 508,263 15,520 2,652,935 683,678 465,306 288,677 11,042 1,448,703 • Palm Kernel (in MT) 289,120 158,810 136,048 181 584,159 356,930 159,529 130,437 2,989 649,886 171,670 105,759 75,405 3,156 355,991 • Oil Extraction Rate (%) 20.56 21.30 23.10 18.73 21.29 20.40 21.39 22.41 20.60 21.02 20.67 21.14 22.52 21.06 21.17 • Kernel Extraction Rate (%) 4.95 4.67 5.73 2.48 5.02 5.13 4.80 5.75 3.97 5.15 5.19 4.80 5.88 6.02 5.20
Rubber • Planted hectare (in ha) 11,514 1,718 N/A 107 13,339 12,674 1,924 N/A 107 14,705 12,680 1,924 N/A 121 14,725 • Rubber production (in ’000kg) 7,690 N/A N/A N/A 7,690 6,512 N/A N/A N/A 6,512 4,038,335 N/A N/A N/A 4,038,335 • Yield per Hectare (kg/ha) 1,845 N/A N/A N/A 1,845 1,318 N/A N/A N/A 1,318 770 N/A N/A N/A 770
Sugarcane • Planted hectare (in ha) N/A N/A 5,613 N/A 5,613 N/A N/A 5,613 N/A 5,613 N/A N/A 5,613 N/A 5,613 • Cane yield (MT/ha) N/A N/A 67.01 N/A 67.01 N/A N/A 52.59 N/A 52.59 N/A N/A 50.69 N/A 50.69
Beef Production • Total herd (in heads) N/A N/A 24,803 N/A 24,803 N/A N/A 26,013 N/A 26,013 N/A N/A 23,527 N/A 23,527 • Average deadweight (kg/head) N/A N/A 261 N/A 261 N/A N/A 268 N/A 268 N/A N/A 260 N/A 260 Total Landbank/Concession 344,783 283,376 141,293 220,000 989,452 343,445 299,278 140,373 220,000 1,003,096 343,251 299,255 146,463 220,000 1,008,969
Annual Report // 6-Month Financial Period Ended 31 December 2018 41 Our Strategic Context Sime Darby Plantation
MANAGEMENT DISCUSSION & ANALYSIS
STRATEGY
Upstream
Progressive Replanting – High Yielding Material – Human Capital Capacity Replanting programme at an Planting of GenomeSelect™ to Building – average of 4% to 5% to improve improve oil yield by up to 15% Strengthen and equip the the Group's average palm age. compared to current commercial organisation with the right offering, Calix 600. competencies and capacity to drive performance, sustainable transformation and continuous operational excellence.
Water Irrigation – Mechanisation – Workers Rationalisation – To mitigate the adverse effects Expansion of mechanisation A 5-year exercise to get the best of potential El-Nino phenomenon area particularly for infield FFB workers ratio in the field. Upstream on production performance collection to improve operational Malaysia and Indonesia have using the best irrigation efficiencies. shown positive results from this methods. exercise.
Asset Rationalisation – Fertiliser Cost Reduction – Lean Six Sigma – Evaluation of assets that are Opting for a cheaper fertiliser In Financial Period Ended not giving the maximum value alternative i.e. converting from December 2018: to Upstream. Disposal of Compound to Straight fertiliser Upstream Malaysia completed non-performing and under- without compromising on the a total of 322 Lean Six Sigma performing assets. nutrient contents. The Indonesian projects. region will be the main beneficiary of this initiative. Upstream Indonesia completed a total of 212 Lean Six Sigma projects.
Continued focus on innovation to improve productivity and efficiency – Introducing innovation in operational processes to reduce manpower, increase productivity and quality i.e. semi-mechanised manuring through a modified version of the Badang (mechanical buffalo) and mobile loose fruit collection and cleaning machine.
Sime Darby Oils (SDO)
Global Trading As the asset managers of SDP’s bulk palm oil refineries, the Global Trading team is responsible for the distribution of the Group’s CPO and PK to our refineries and third parties, sourcing of feedstock from internal and external sources and the sales of bulk refined products from Malaysia and Indonesia. The team continuously adds value to our bulk products and increases our competitiveness locally and in our destination markets through efficient trading, marketing and logistics management, as well as collaborations with Upstream.
Customised Products In line with SDO’s strategy to focus on customised products with higher margins, the Regional Heads and Customer Solutions Team (CST) are collaborating with our Innovation Centres to introduce and market new product offerings to existing and potential customers globally.
Using the centre-led approach, SDO mandates the Regional Heads of Asia Pacific, Africa and Europe to formulate their own go-to-market strategies and drive tactics to increase sales and market share in both the business-to- business (B2B) and business-to-customer (B2C) segments in their respective regions.
42 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Strategic Context
MANAGEMENT DISCUSSION & ANALYSIS
Sime Darby Oils Langat Refinery, Banting, Malaysia
Sime Darby Oils (SDO) Refinery and Crushing Plant
Bulk Refineries Kernel Crushing Plants (KCP) • SDO Port Klang Refinery (Nuri Refinery) and SDO • Two (2) in Malaysia (Carey Island KCP, Selangor and Bintulu (SD Austral) in Malaysia, Sarawak), • SDO Pulau Laut Refinery (PT GH Nusantara) in • Two (2) in Indonesia (Pemantang KCP, Kalimantan Indonesia, Tengah and Rantau KCP, Kalimantan Selatan), • SDO Kimbe Refinery (Kumbango) in PNG. • Five (5) in PNG and one (1) in the Solomon Islands.
Customised Refineries Soya Crushing Plant • SDO Langat Refinery (Jomalina Refinery) and SDO • SDO Nonthaburi in Thailand. Pasir Gudang Refinery (Kempas Refinery) in Malaysia, • SDO Morakot in Thailand, Copra Mills • SDO Zwijndrecht Refinery (SD Unimills) in the • Buka (Buka CCP) and Madang (Madang CCP) in Papua Netherlands, New Guinea PNG. • SDO South Africa Refinery (SD Hudson & Knight - The recent acquisition of Markham Farming Refinery) and SDO Liverpool Refinery (New Britain Oils Company Limited (MFCL) in Papua New Liverpool) in the United Kingdom (UK). Guinea PNG which have a total combined copra throughput capacity of 55,000 MT per annum will Biodiesel enable SDO to expand our lauric oils business into • SDO Biodiesel Malaysia (production capacity of about coconut oil production. 60,000 MT per annum).
Annual Report // 6-Month Financial Period Ended 31 December 2018 43 Our Strategic Context Sime Darby Plantation
MANAGEMENT DISCUSSION & ANALYSIS
OTHER BUSINESSES
The Group constantly explores new opportunities along the palm oil value chain to generate new income sources for its Upstream and Sime Darby Oils businesses. The implementation of sustainable businesses has spurred our Renewables business to consider utilising feedstocks within the value chain to enhance green technology initiatives such as biomass, biogas and the production of organic fertilisers.
In line with the Group’s commitment to proactively reduce carbon emissions and complying with potential future legislations, SDP is operating several biogas plants for feed-in-tariff, captive power 5 3 Research & Innovative and flaring. The Group has completed a total of nine (9) biogas Development Centres plants – five (5) in Malaysia, two (2) in Indonesia and two (2) in (R&D) Centres PNG. SDP is also planning to develop several more biogas plants at strategic locations throughout our operations over the next five (5) years. SDP is also proactively exploring other various methane avoidance technologies that can potentially generate cheaper power and steam for our palm oil mills as well as to effectively manage waste.
The nature of our business makes it easy to produce organic fertilisers. Composting converts palm oil milling by-products such as EFBs, POME, decanter cakes and boiler ash into organic fertilisers. SDP is currently marketing our organic fertilisers under the brand Flemington. Our products are divided into three (3) More than categories and can be used for palm related applications, cash crops as well as turfing and landscaping. The Flemington products 1 can be found at the online shopping platform www.Lazada.com.my, Genetic 190 through our distributors, or directly purchased from SDP. Testing Facility Scientists and Technicians Our agribusiness segment also sells RSPO-compliant rat bait and markets agricultural products such as cover crop seeds, Since 2016, we have been planting GenomeSelect™ palms, which fertilisers and planting material seeds to other plantation were developed by SDP’s scientists. Commercial planting of companies and corporations, government agencies and high-yielding GenomeSelect™ materials continued with a further smallholders via a network of local distributors. 500 ha planting in three (3) locations in Selangor and Perak, Malaysia. A larger area will be planted in 2019 and efforts to Research & Development reach full replanting scale in 2022 are on track. GenomeSelect™ fields planted in 2016 are showing very encouraging oil yield Sime Darby Plantation has been at the forefront of agricultural results to date and these palms are expected to produce 15% research and development since the early 1900’s. The Group has more oil than the previous generation of planting materials. well-established facilities in five (5) countries; five (5) Research Additional semi-commercial scale planting of dwarf palm & Development (R&D) centres, in Malaysia, Indonesia and PNG; materials was completed in Johor to provide detailed proof three (3) Innovation Centres, in Malaysia, the Netherlands and of value for commercial planting in the future. These shorter South Africa; and one (1) genetic testing facility in Malaysia. materials can increase harvesting efficiency from maturity These centres of research and innovation are empowered by onwards. more than 190 scientists and technicians, who are developing better seedlings and systems to enhance plantation yields, Meanwhile, the Dami Oil Palm Research Station (OPRS) in PNG reinventing the milling process for improved production and has been working on SuperFamily™ cultivars with improved oil designing new technologies to bolster Sime Darby Oils activity. extraction rates and bunch numbers.
44 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Strategic Context
MANAGEMENT DISCUSSION & ANALYSIS
Several agronomic trials conducted by the research Going forward, in FY2019, R&D will continue to focus on the three (3) key team have brought about refinement and new strategies of yield/productivity improvement, increasing revenue streams approaches in fertiliser management leading to higher and developing sustainable practices. economic returns while reducing environmental load. Similarly, there have been efforts to optimise the use R&D will continue to focus on the three (3) Key Strategies of green fertiliser to enhance soil health for sustainable production. Semi-dwarf planting materials are being evaluated for high planting density, which will offer Increasing Developing longer economic life and greater early returns. Inroads Yield/Productivity Revenue Sustainable are being made in early pest and disease detection Improvement using advanced remote sensing and non-invasive Streams Practices technologies.
A key strategy to enhance productivity and efficiency in our estates is to increase the use of mechanised Further progress on the following initiatives can be expected: solutions. Towards this end, machines to assist in more efficient fresh fruit bunch (FFB) evacuation • Developing and commercialising new secondary oil palm traits to have been tested in the field and is in the process of improve harvesting efficiency, climate change tolerance and disease being scaled up. resistance. • Research into new ways to understand and improve palm oil quality is An initiative in palm oil milling to improve the oil also ongoing and being tested in commercial-scale feasibility studies. extraction process is being focused on the application • Developing new methods to improve fertiliser uptake efficiency and of a biocatalyst and an inorganic surfactant. These yields on poorer soils. initiatives have the potential to increase the OER by • Embarking on Agriculture 4.0 and Nutrient Efficient Genotypes to allow 0.5% based on the evaluations in two mills. for sustainable use of resources and to improve productivity. • Progress in various agronomic trials that support continuous The six-month period saw five (5) new quality improvement of best practices and agronomic efficiencies in our consumer products developed by the Innovation Centre estates. (IC) in Malaysia, which were subsequently launched in • Continued development and deployment of mechanisation solutions. Asia. The IC also provides extensive technical support • Large-scale deployment of new precision agriculture tools is targeted and services to internal and external customers. in the coming year. Additionally, work will progress in developing Efforts are currently under way to phase out the models for plant health and nutrition. trans-fats from our product offerings. • Alternative palm oil extracting method and a waste oil recovery programme that will generate additional value and support our target of In addressing customer's concern on zero discharge from our mills. 3-Monochloropropanediol (3-MCPD) and glycidyl esters • Construction of an R&D experimental station for the development of (GE), research focus has been zeroed in reducing future palm oil milling, equipped with facilities that will enable the these contaminants. R&D is now able to recommend measurement of all processing parameters. measures to ensure the levels of 3-MCPD and GE in • Reformulation of trans-fats into trans-free fats without sacrificing products meet the requirements of the authorities and product functionality and performance towards generating of healthy customers in all our countries of operations. product lines.
Our R&D Lab, an ISO accredited internal laboratory, carried out over 201,000 analysis valued at RM4.53 million for the Group, providing an estimated savings of RM0.62 million. The lab has continued to develop new rapid methods and expand its lab automation and robotics to cover soil, water and food safety tests to increase its throughput. The lab also expanded its scope of accreditation and has more than 150 tests accredited to ISO 17025.
Annual Report // 6-Month Financial Period Ended 31 December 2018 45 Our Strategic Context Sime Darby Plantation
MANAGEMENT DISCUSSION & ANALYSIS
Digital Initiatives
SDP operationalised a Digital Strategy team under the Chief Advisory and Value Creation office in 2018. The main objective of this team is to incubate and nurture digital-related ideas in line with the vision of making SDP a digitally-integrated global palm oil company. The focus of the Digital Strategy team during FP December 2018 is to identify the key pain-points and relevant digital use cases to address those pain points. Currently, there are a number of digital initiatives piloted by the Digital Strategy team which cuts across both Upstream and Sime Darby Oils operations. If successful, these pilot initiatives will be replicated in phases throughout the Group. Our current focus areas are as follows:
ESTATES MANUFACTURING TRADING & MARKETING HEAD OFFICE End-Game: End-Game: End-Game: End-Game: Precision Proactive Optimal Pricing, Timing, Lean & Efficient Agriculture Maintenance Customers HQ Functions
FOCUS AREAS
Predictive Analytics: Intelligent Maintenance & Data Analytics, Monitoring & Enhance Performance Trading and Risk Management Automation Reporting Management, Yield & OER
Automation & Mechanisation Reporting & Optimisation Supply Chain Efficiency Decision Making Support
Sustainability, Safety & Safety & Health Sustainability & Traceability Working Capital Management Health
• Our estates are also digitalising various systems for greater ease and efficiency in managing operations. In this regard, our precision agriculture programme has developed satellite imaging-based methods for conducting routine surveying work and identifying problematic areas. Additionally, our water management project utilising remote sensing, hydrology and hydraulic approaches has proven successful in assisting estate management in making decision on water related issues. At the same time, data collection, calibration and validation for pest and disease detection are on going and preliminary results are promising.
• Meanwhile, drone imagery has become operational in PNG to enable more accurate palm count and to assist in identifying underperforming areas within management units.
• New sensors have been developed and are being tested to enable process control and feedback in mills towards higher OER and quality. Construction of an Experimental R&D Station with a five (5) tonne/hour conventional mini mill has been initiated at KKS Tennamaram, Selangor, Malaysia.
CONCLUSION
SDP is positive about the new financial year based on our efforts and initiatives to increase productivity and efficiency, which are already bearing fruit. We will continue to focus on operational excellence in our Upstream operations, and leverage on the rebranding of Downstream as SDO to increase the segment’s profit contribution towards the Group and enhance SDP’s integrated business model.
The Group believes the new financial year will indeed be an exciting phase in unlocking sustainable value and reinforcing the Group’s aspirations.
46 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Strategic Context
MANAGEMENT DISCUSSION & ANALYSIS HUMAN CAPITAL DEVELOPMENT
CULTURE AND HEALTH TRANSFORMATION
It has been more than a year since we first charted our own course as a pure-play entity. Our transformation journey, anchored on our commitment to strengthen and sustain performance excellence, continues to gain momentum.
RISE to APEX, our call to action that focuses on driving value creation and sustaining it through Organisational Health, progressed from measuring the current state of our health via the Organisational Health Index (OHI) to holding engagement sessions with employees from all business segments globally to influence optimal health. These sessions focused on identifying management practices that are crucial to the success of the department’s or Group’s strategy and developing action plans for areas that needed improvements.
The engagement sessions resulted in a better understanding of the concept of Organisational Health, its importance in sustaining performance and development of plans focused on actions and behaviours that influence optimal health. True to our culture of accountability, the senior management team affirmed their commitment to this initiative by championing the rollouts to identify action plans for their departments or operating units.
The chart below illustrates the three-stage approach that the organisation has undertaken and will focus on in its culture and health transformation - Measure, Focus and Act and Embed.
ORGANISATIONAL HEALTH JOURNEY 2019 ONWARDS OCT 2018 JULY Act and Embed 2018 Monitoring and Focus consistency in follow Action planning with focus through to ensure efforts are Measure on actions and behaviours embedded throughout the to influence optimal Organisational Health baseline organisation organisational health identification
Employees attending the OHI roll-out at Higaturu Oil Palms in New Britain Palm Oil Limited A facilitated group discussion to develop result-based action plans
Annual Report // 6-Month Financial Period Ended 31 December 2018 47 Our Strategic Context Sime Darby Plantation
MANAGEMENT DISCUSSION & ANALYSIS HUMAN CAPITAL DEVELOPMENT
More than 40 employee engagement sessions were carried out across five (5) countries with the intention of identifying and developing action plans to improve management practices that are crucial to the strategy of the department or operating unit. The responses gathered from these sessions are thematised into three (3) key areas as outlined in the chart below:
PRIORITISED ACTIONS TO ARRIVE AT DESIRED ORGANISATIONAL CULTURE AND HEALTH TO DRIVE BUSINESS RESULTS
Business Driven People Interventions
• Inspire employees through encouragement, guidance and recognition. Leadership • Empower through communication, consultation and delegation. & Culture • Build positive environment characterised by team harmony and care for Development employees’ welfare.
• Articulate clear strategy and translate into specific goals. Strong • Drive accountability through clear objectives and explicit performance targets. Performance • Reward and recognise employees to motivate and encourage high Management performance.
• Build employees’ knowledge and skills to effectively adapt to changes in Innovation external environment. & Knowledge • Provide career and development opportunities that motivate employees. Management • Encourage and harness new ideas necessary to remain competitive advantage.
FY2019 and Forward Priorities
To ensure proper monitoring of action plans, our focus will be on applying a simple yet structured monitoring approach, via the WAVE system. This automated tracking system will be implemented to track the progress and achievement of the action plans, where business segments will input their status update on a monthly basis and driven by the respective business units. Periodic reporting of the completion and effectiveness of these action plans will be escalated to the Plantation Management Committee for any systemic variations that require intervention and approval at top management level.
The effectiveness of the action plans will be reviewed through a “Pulse Survey” that focuses on assessing the impact of the initiatives against the targeted management practice scores. This bi-annual survey, which will be rolled out in June 2019, will provide a snapshot of SDP’s health, whilst allowing for business segments to review and refine their action plans to achieve the desired results.
48 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Strategic Context
MANAGEMENT DISCUSSION & ANALYSIS HUMAN CAPITAL DEVELOPMENT
LEADERSHIP DEVELOPMENT
Leadership development is one of the top priorities within our organisation. We acknowledge that to deliver value in today’s competitive and volatile environment, it is important to develop leaders with the necessary capabilities and competencies to enable them to execute the strategies of the organisation. Such leaders will need to be adept at dealing with the mounting complexities of a disruptive world, while maintaining a bold and forward-thinking perspective for their organisation. SDP focuses on three fundamental capability pillars in growing our talents into such leadership profile:
Cross-Functional Enterprise Diversity Leadership Representation Sound Technical Capabilities Management Capabilities
Sound Technical Capabilities
Piloting with our Upstream operations, a capability building initiative was undertaken to equip our estate and mill managers with the fundamental operational capabilities and competencies that are core to their operational responsibilities. The pilot project’s objective was to ensure that the estate and mill managers’ knowledge, skills and proficiencies are thoroughly assessed against the baseline technical capabilities and competencies curriculum. Necessary areas of development are then identified and launched to grow these managers to the required level of capability.
In conducting this exercise, the areas of water management and Field visit at Chersonese Estate replanting were identified as the first developmental priority for the Upstream operation-wide development initiative. 50 managers from various regions within the Malaysian operations benefited from this development intervention, which commenced in December 2018.
Cross-Functional Enterprise Management Capabilities
Aside from solid technical capabilities and skills mastery, dynamic leaders must possess the critical enterprise management capabilities that transition them from “operational leaders” to “business leaders”.
Similarly, the “assess, identify and develop” approach from the technical capabilities section revealed that Financial Management was a critical enterprise competency that Upstream operation managers will require in maintaining operational effectiveness in a cross- functional business leadership position. Specifically customised for The Regional CEOs attending the Financial Management Training industry and job level context, the Chartered Institute of Management Session at Plantation Tower, Ara Damansara, Malaysia Accountants (CIMA) & Incorporated Society of Planters (ISP), designed and delivered a Financial Management training session for the Regional Chief Executive Officers (RCEOs) and managers. The training session is primarily aimed at improving their knowledge and understanding on the financial aspects of their operations.
Annual Report // 6-Month Financial Period Ended 31 December 2018 49 Our Strategic Context Sime Darby Plantation
MANAGEMENT DISCUSSION & ANALYSIS HUMAN CAPITAL DEVELOPMENT
Diversity Leadership Representation
SDP acknowledges the importance of strengthening our leadership pipeline in view of gender diversity. Starting with the Upstream leadership, a pilot development programme was mooted to improve the gender diversity within this particular leadership pool.
To this end, the first Female Manager Development Programme was introduced with the objective of enabling the women leaders’ growth, both in leadership and technical context, supporting them in their developmental journey and career. SDP’s own top female management accepted the challenge and Female managers and assistant managers in Upstream Malaysia operations are championed this year-long programme, acting as given recognition mentors for the participants of the programme.
FY2019 and Forward Priorities
Our focus in FY2019 is to review and implement customised development programmes for the other business segments (i.e. Sime Darby Oils, Research & Development), focusing first on enhancing leadership and technical capabilities. With that in mind, the following initiatives, amongst others, will be introduced in FY2019.
Global Graduate Programme (GGP)
With the organisation’s focus on expanding the Sime Darby Oils operations, it is imperative that a pipeline of future leaders is created. We are developing a programme that aims to build future leaders, anchored in the areas of commercial and manufacturing. The Global Graduate Programme is designed to provide a structured and unique platform that will expose Sime Darby Oils core talent to various business segments with opportunities to be rotated globally.
This programme will cover both technical and personal effectiveness while providing real world experiences with mentorship opportunities. This would not only increase the agility and flexibility of talents in dealing with new world challenges but would also be a first step in preparing a succession pipeline.
Accelerated Skill Enhancement through Knowledge Sharing (ASK)
This programme is an initiative to accelerate operational capabilities through hands-on and experiential learning methodology to improve yield enhancement in Minamas, Indonesia. External senior planters will coach and share successful best practices and their nuanced experiences on the relevant technical areas to the selected participants. This programme is expected to be implemented in 2019.
50 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Strategic Context
MANAGEMENT DISCUSSION & ANALYSIS HUMAN CAPITAL DEVELOPMENT
STRONG PERFORMANCE MANAGEMENT
Conversation to Inspire Performance Two pilot sessions were rolled out to 40 estate and mill managers and senior managers across our Upstream Performance Management has been identified as a key operations in Malaysia and Indonesia. Anchored around the component to organisational health and culture. Aside from a new Culture and Health Transformation, the focus of the pilot sound and relevant Performance Management philosophy and sessions (one for Upstream Malaysia and Upstream Indonesia accompanying framework, the awareness and integration of respectively) revolved around improving conversation skills, the philosophy into the organisation are critical for effective building effective relationships within teams, best practices Performance Management. As SDP continues to compete in in giving developmental feedback and guide for managing a global market, it is critical that our people managers are common coaching challenges. equipped with the right skillsets and are able to manage a high-performing team with an open and constructive culture.
In driving this initiative, a Performance Feedback and Coaching Training Programme was launched to develop our managers in the area of people development, focusing on capabilities to provide effective feedback to their employees and to encourage frequent and meaningful performance dialogues. This initiative not only creates a positive work environment due to the frequent recognition and appreciation for outstanding performance, but also highlights the importance of enabling constructive discussion about areas A Performance Feedback & Coaching Training programme to enable constructive discussion about areas of development and growth of development and growth.
Pilot training session for Upstream Managers centred around Culture & Health transformation
FY2019 and Forward Priorities
To further strengthen our Performance Management system, this programme will be extended to employees who are in managerial positions and above in Malaysia, Indonesia and Thailand to further inculcate an open culture of providing frequent and constructive feedback and recognition.
Annual Report // 6-Month Financial Period Ended 31 December 2018 51 Our Strategic Context Sime Darby Plantation
MANAGEMENT DISCUSSION & ANALYSIS OUR TOTAL QUALITY MANAGEMENT
In October 2018, we launched the Innovation and Productivity Charter (IPC) to represent our commitment to maximising stakeholders’ experience by delivering sustainable prosperity across the value chain. Our IPC marks the third of our charters which will be delivered predominantly through quality management and operational excellence. The focus for our Upstream operations is to achieve a fresh fruit bunch (FFB) yield of 23 MT/ha and 23% oil extraction rate (OER) by 2023. The focus for our Sime Darby Oils Operations is to strive to ensure continuous Best-in-Class processes and cost management practices which will ensure higher productivity and price competitiveness. This section focuses on key initiatives that we have delivered through total quality management.
QUALITY MANAGEMENT
Our SCRA Q+ (Structured Crop Recovery Assessment with Quality and other relevant indicators) programme aims to further realise our commitment to achieving high FFB yield and OER by increasing the efficiency of harvesting and evacuation of crops, maximising crop quality, reducing oil losses and ensuring mill efficiency.
THE EVOLUTION OF SCRA Q+ IN SIME DARBY PLANTATION
• Normal individual assessment • Assessment Criteria: Infield UCLF, UHB, HBL, Platform UCLF SCRA Q+ • *SFA System - Dec’11 – Peninsular - Apr’12 – East Malaysia
• Started Sept’10 SCRA • Normal individual assessment • Criteria: *UCLF, *UHB, *HBL, *UCLF/CP • Group assessment (SOU basis) • Manual SFA • Started Jul’17 for both Peninsular and East Malaysia • Assessment Criteria: • Group assessment - SCRA: Crop Recovery, Crop • Assessment started: Quality & Freshness - May’14 – Peninsular - *SORA: 10 assessment Field areas including mill losses Assessment - Nov’14 – East Malaysia • *SFA System - Rubber: Quality & Hygiene • Assessment Criteria: Assessment - Crop Recovery - Field Husbandry (Observation)
*SFA System: Structured Field Assessment System *UHB: Unharvested Bunch *UCLF/CP: Uncollected Loose Fruit per Collection Point *UCLF: Uncollected Loose Fruit *HBL: Harvested Bunch Left *SORA: Structured Oil Recovery Assessment
The competencies and skills of our people are the main contributors to the success of the SCRA Q+ programme. To date, the assessment team comprises six (6) lead assessors for SCRA and four (4) lead assessors for SORA, and is assisted by 53 FFB Graders (certified by the Malaysian Palm Oil Board).
In the period under review, we further deployed the SCRA Q+ programme at Ramu Agri Industries Limited (RAIL) in NBPOL, Papua New Guinea (PNG) and Sime Darby Plantation Liberia (SDPL), Liberia and will continue to expand the programme at all our operations in Indonesia and PNG.
52 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Our Strategic Context
MANAGEMENT DISCUSSION & ANALYSIS OUR TOTAL QUALITY MANAGEMENT
OPERATIONAL EXCELLENCE
Our Operational Excellence and Innovation Business Management Strategy (OEIBMS) 2.0 through Lean Six Sigma focuses on continuous improvement processes and performance across our businesses by developing our people with Lean Six Sigma competency. In the financial period ended December 2018, we successfully completed 723 projects on revenue generation, cost savings, cost avoidance and other non-financial indicators such as safety, water, waste and carbon emissions.
TOTAL NUMBER OF PROJECTS COMPLETED IN FINANCIAL PERIOD ENDED DEC 2018
11 322 11
Upstream Malaysia Upstream Indonesia Downstream Procurement 167 R&D
212
Our success to date is attributed to our pool of talented people. Our Champion workshops which targeted managers and senior leadership have trained 240 champions. Throughout 2018, we have produced five (5) certified master black belts, 13 ASQ certified black belts, 56 black belt internal consultants and 1,068 practitioners.
OPERATIONAL EXCELLENCE PRACTITIONERS ACROSS THE GROUP
240 5 13 56 1,068 Champions Certified Master ASQ Certified Black Belt Practitioners Trained Black Belts Black Belts Internal Consultants Trained Trained
Annual Report // 6-Month Financial Period Ended 31 December 2018 53 Our Strategic Context Sime Darby Plantation
MANAGEMENT DISCUSSION & ANALYSIS OUR TOTAL QUALITY MANAGEMENT
In January 2019, our internal “War on Waste” programme was awarded the “Most Innovative Approach to Driving Culture Change” at the OPEX Business Transformation World Summit 2019 in Orlando, USA. This culture change programme was established in late 2015 and is now in its third instalment, successfully generating over 5,000 projects from 223 operating units (66%) across our operations and support services in FP December 2018. The fourth edition of the War on Waste (WOW 4.0) programme will see the introduction of the “Clone Protocol” framework - a platform to capture successful projects and replicate them throughout the business.
WAR ON WASTE PARTICIPATION RATE BY OPERATING UNIT
80%
66% 60% 55% 50% 40%
20% 16%
WOW 1.0 WOW 2.0 WOW 3.0 WOW 4.0 WOW 5.0 FY2016 FY2017 FY2018 FY2019 FY2020
Actual Target
In applying LSS methodology across our value chain, we deployed the 5S system in our working environment. In the FP December 2018, we have internally certified a total of two (2) operating units from our Upstream Indonesia’s Kalimantan Selatan & Sebamban (KSS) and Riau Utara & Aceh (RUA) regions, and re-certified a total of five (5) operating units from our Upstream Malaysia’s Northern and Sabah regions.
For more details of our Total Quality Management efforts, please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com
SDP won the “Most Innovative Approach to Driving Culture Change” award at the OPEX Business Transformation World Summit 2019 in Orlando, USA for the Group’s War on Waste (WoW) programme
54 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Ensuring Sustainable Values
OUR SOCIAL PERFORMANCE
The implementation of the Innovation and Productivity Charter (IPC) aims to improve productivity of not only our operations but also our workforce. We will therefore continue to focus on improving the way we manage the safety and health of our workforce and on how we deliver on our responsibility to respect human rights throughout our business operations.
OUR WORKFORCE STATISTICS AS AT 31 DECEMBER 2018 95,537 Dec 2017 2.66%
UPSTREAM SIME DARBY R&D HEAD OFFICE AGRI BIO & OILS RENEWABLES
92,057 1,790 1,085 515 90
% 19% 42.2 Female
GENDER 81% 30.0% Male 23.0%
3,398 Executive 2.4% 1.4% 1.0% 12,805 POSITION Non-Executive 79,334 Worker Malaysia Indonesia Papua New Liberia Solomon Islands Guinea
RESPECTING HUMAN RIGHTS
For the period under review, we continued our efforts in operationalising our commitments to our Human Rights Charter (HRC) which is in line with the United Nations Guiding Principles (UNGP) on Business and Human Rights. Through due diligence processes, we identified a number of salient issues and are currently developing mitigation measures and improvement plans to address them. For the full HRC, please visit our website at www.simedarbyplantation.com. Some of these issues are highlighted in this report. Further details on initiatives impacting our people and our communities is encapsulated in our “Supplementary Progress Report on Sustainability 2018” which is available on our website at www.simedarbyplantation. com. Our progress report on human rights is also enclosed in our Modern Slavery and Human Trafficking Statement FY2018 (July – December).
Annual Report // 6-Month Financial Period Ended 31 December 2018 55 Ensuring Sustainable Values Sime Darby Plantation
OUR SOCIAL PERFORMANCE
ERADICATING EXPLOITATION In addition, SDP ensures workers are provided with decent living and working conditions through productivity-based Currently, Sime Darby Plantation (SDP) has a total staff strength income incentives as well as various free and subsidised of 95,537, with over 80% of workers in fields, mills and refineries benefits. These include, among others, free accommodation, across the globe. Within the Upstream sector in Malaysia, over potable water, supply of rice, subsidised electricity, free medical 24,000 workers are migrant labourers mostly from Indonesia, India, treatment for employees and their immediate dependants, as Bangladesh and Nepal. well as various amenities such as school bus transport for employees’ children and recreational facilities.
BREAKDOWN OF MIGRANT WORKERS IN MALAYSIA BY IMPROVING GRIEVANCE MECHANISM COUNTRY OF ORIGIN AS AT DECEMBER 2018 In November 2018, we collaborated with Nestlé and ELEVATE on 5% 6% 2% a programme to provide an independent third party helpline for our workers in Malaysia. The goal of the helpline is to provide 23% Indonesian an effective avenue for workers to report on working conditions, Indian recruitment, safety and other issues that may affect them Bangladeshi directly or indirectly via a technology-enabled communication
Nepalese channel. More information can be found in SDP’s Modern
Others Slavery and Human Trafficking Statement FY2018 (July – December). 64% Freedom of Association
We continue to monitor and evaluate our migrant workers Number of recruitment procedures in Malaysia. As far as possible, recruitment employees is conducted directly by our own teams in the countries of origin. In Number of covered under these countries, all briefing materials and contracts are translated Collective Collective into the relevant local languages to ensure potential workers Country Agreements Agreements understand and accept their positions voluntarily. Malaysia 10 28,380 Indonesia 37 29,878 We work closely with our partners in the workers’ countries of origin to understand various administrative costs incurred Papua New Guinea 1 21,609 by them. Throughout the recruitment process, we ensure all South Africa 1 68 potential candidates understand that SDP does not impose a Netherlands 1 194 recruitment fee. Liberia 1 2,169 Vietnam 1 232 In our efforts to eradicate exploitation, we continued to monitor the handover of passports to our migrant workers in 124 estates Table: Breakdown of collective agreements and number of workers covered under the and 34 mills in Malaysia. This initiative is aligned with our agreements as at December 2018 commitment of ‘not withholding passports’ to ensure that our workers are given freedom of movement. Newly hired workers In localities where formal unions do not exist, comparable are also reminded to ensure they are in possession of their means of representation are created, such as joint consultative identification documents prior to leaving their country of origin councils and other similar platforms for workers to raise their during our recruitment sessions. concerns and safeguard their rights. Our goal is to ensure our workers, including non-union members (approximately 30% of ENSURING FAVOURABLE WORKING CONDITIONS the workforce) have proper channels to air their grievances.
In September 2018, SDP rolled out an initiative three (3) months ahead of the Malaysian government’s minimum wage enforcement to ensure a fair wage rate for workers in our Malaysian operations. The national Malaysian minimum wage for the period under review was RM1,000 per month for workers in Peninsular Malaysia and RM920 per month in East Malaysia.
56 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Ensuring Sustainable Values
OUR SOCIAL PERFORMANCE
ELIMINATING VIOLENCE AND SEXUAL HARASSMENT
For the period under review, SDP collaborated with Women’s Aid Organisation (WAO) and Yayasan Sime Darby (YSD) on gender- based issues through empowerment programmes on the ground, which helped respondents to better understand, identify, respond and manage social issues at the estate level, specifically sexual harassment and domestic violence.
Seven (7) sessions have been conducted across four (4) regions in Peninsular Malaysia. More than 200 participants made up of gender committee members, auxiliary police as well as hospital and medical assistants attended the two-day workshops. Key outcomes from the workshops include recommendations on action plans, for greater awareness on these issues within our operations.
One of the seven gender-empowerment programmes conducted in FP December 2018
The foundation has been laid for a management response and accountability framework at the plantation level, which is survivor-friendly and progressive in terms of women and children’s human rights standards. This should be replicated with higher management as well as making this workshop a staple, alongside conducting a refresher session once every six (6) months.
Women’s Aid Organisation (WAO) Malaysia
We aim to complete the roll out of the programme in Sarawak and Sabah by 2019. The Gender Committees in our plantations have been empowered to monitor and evaluate outcomes of the programme. Upon completion, a more focused and targeted set of trainings will be developed to equip key functions, to prevent and eliminate gender-based violence in our plantations.
For more details on our Social Performance efforts, please refer to our “Supplementary Progress Report on Sustainability 2018” and our Sime Darby Plantation Modern Slavery and Human Trafficking Statement FY2018 (July to December) which can be found on our website at www.simedarbyplantation.com
Annual Report // 6-Month Financial Period Ended 31 December 2018 57 Ensuring Sustainable Values Sime Darby Plantation
OUR SOCIAL PERFORMANCE
OCCUPATIONAL SAFETY AND HEALTH PERFORMANCE LOST TIME INJURY & LOST TIME The Group regrets to report four (4) fatalities or Class 1 INJURY FREQUENCY RATE accidents during the period under review and a Fatality Rate (FAR) of 3.3 (3.3 fatalities for every 100 million hours 45% reduction worked). This is a 10% increase from the previous year. 23.7 The causes of these fatalities were work-related transport 6,000 25.0 (2), machinery (1) and contact with hot substance (1). The 19.7 5,903 20.0 accidents occurred in Papua New Guinea (2), Indonesia (1) 4,000 4,685 and Malaysia (1). 12.8 13.0 15.0
10.0 2,000 2,943
OCCUPATIONAL FATALITIES 5.0 1,562 0 0.0 FY15/16 FY16/17 FY17/18 FP2018 3 4 Upstream Malaysia SDP LTI Cases SDP LTIFR 1 Upstream Indonesia 2 1 NBPOL 3 1 2 1 Overall, there has been a 45% reduction in accident rates
FY16/17 FY17/18 FP2018 since FY2016. These statistics will serve as a reminder for us to continue ensuring the safety and health of our employees at work.
During this reporting period, four (4) accidents resulted KEY INTERVENTION PROGRAMMES in permanent disability injuries. These Class 2 accidents were also recorded in Papua New Guinea (1) and Malaysia In 2018, we launched our latest initiative dedicated to ensuring (3) and were due to machinery (3) and electrocution while the safety and health of our employees, contractors and visitors harvesting (1). With such an unfortunate number of cases, under the banner of iCARE (Intervention, Communication, the Group is determined to continue with mitigation efforts Accountability, Risk Mitigation and Excellence). such as safety programmes to keep our workers safe. Training programmes are organised to inculcate the culture During the review period, the Group recorded a Loss Time of responsibility and accountability in our operating units. Injury Frequency Rate (LTIFR) of 13.0, (13 injuries per million The trainings include long-term programmes such as the hours worked). This marks a 2% increase compared to the Building Estate Sustainability and Transformation (BEST) previous year. programmes, Cadet Planters and Cadet Engineers, as well as short-term programmes such as Ergonomics & Manual The Group also recorded a total of 6,243 lost days within Handling and Safe Chemical Handling. Basic Occupational the financial period under review, with Total Recordable First Aiders (BOFA) training is also conducted to equip Severity Rate (TRSR) of 52.0 (52 lost days for every million employees with life-saving first aid knowledge. During hours worked). This marks a 36% reduction compared to the the period under review, a total of 260 employees from previous year. our operating units within Malaysia were certified as occupational first aiders. In addition to programmes designed to tackle unsafe acts, we also continue to improve our approach to eradicate unsafe conditions.
58 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Ensuring Sustainable Values
OUR SOCIAL PERFORMANCE
Various assessment programmes have been introduced During the period under review, 35 OUs received the OSH to ensure significant risks are mitigated. These include Award from the Malaysia Society of Occupational Safety HIRAC (Hazard Identification, Risk Assessment and Risk & Health (MSOSH) in various categories such as Gold Control), HAZOP (Hazard and Operability Study) and CHRA Merit (2), Gold (28) and Silver (5), as well as the Highest (Chemical Health Risk Assessment). We strive to prevent Participation Award for the third consecutive year. In major accidents by identifying unsafe conditions and unsafe Indonesia, 21 of our estates and mills received the National acts and ensuring monitoring through the SIME card (Spot, Zero Accident Award from the Indonesian authorities. Intervene, Modify, Execute) initiative and PIIRO (Preventing Incidents by Identifying Hazards, Reporting Near Misses LEGAL COMPLIANCE and Observing & Recognising Positive Safety Behaviour) initiative. For the review period, the Group recorded a total During the period under review, the Group maintained full of 60,318 SIME cards, equivalent to the number of potential compliance to OSH legal requirements when it recorded zero accidents which were successfully prevented. This was a (0) case of non-compliance to OSH legal requirements. 65% increase compared to the corresponding period in the previous year. For more details on our Occupational Safety & Health efforts, please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com
A Mini Tractor Grabber (MTG) complete with safety bar and cage
Annual Report // 6-Month Financial Period Ended 31 December 2018 59 Ensuring Sustainable Values Sime Darby Plantation
OUR ENVIRONMENTAL IMPACT
The commitments and initiatives laid out in our Innovation and Productivity Charter (IPC) is aligned with our long-term goal to reduce our physical footprint, use more renewable resources and recycled material, optimising our ability to produce more in meeting the increasing needs of a growing global population. In our efforts to minimise environmental harm, we are guided by our Responsible Agriculture Charter (RAC), which lays down our commitment in “No Deforestation and No Development on Peatland”. Beyond regulatory requirements, we also strive to minimise our carbon footprint, protect biodiversity in our landscapes, and ensure responsible waste and water management.
DEFORESTATION LINKED TO MAJOR AGRICULTURAL COMMODITIES
TOTAL FOREST LOSS, 1990 – 2008 (MILLION HECTARES) AVERAGE ANNUAL FOREST LOSS, 2001 – 2011 (MILLION HECTARES) Livestock Livestock
Beef and other Beef ruminant products 13%
Pig and poultry Exports Crops Crops Soybean 44% Exports Soy Palm Oil Maize 40% Exports Palm Oil Wood production Wood products 33% Exports Rice Sugarcane 0 1 2 3 Rubber Million hectares/year
= 1 million ha Production Export
Source: Climate Focus calculations based on European Commission, 2013 Source: Henders et al., 2015
The main commodities driving deforestation, from the analysis of Climate Focus based on two (2) different data sources. Climate Focus has concluded that the more important a commodity is, the less likely that a company will have pledged to eliminate the deforestation that it’s causing. The report is featured in the “Progress on the New York Declaration on Forests - Goal 2 Assessment Report & Update on Goals 1-10.”
CARBON AND ENERGY BREAKDOWN OF GHG EMISSIONS IN 2018 2018 Performance 0.7% 40.5% This year, we continue to collect and calculate emissions for 1.4% our palm oil and rubber operations throughout the calendar year 1.9% 2.1% 2018 using the RSPO PalmGHG calculator version 3 and the 3.1% GHG Protocol accounting standard. We used the RSPO PalmGHG calculator to measure emissions from land use change (LUC) 6.2% due to replanting and new planting activities. The operational emissions data was collected and calculated in accordance with 6.7% the GHG Protocol accounting standard.
From 1 January to 31 December 2018, our absolute Greenhouse 37.5% Gas (GHG) footprint was around 4.89 million tonnes of carbon dioxide equivalent (tCO2-e). Our analysis shows that emissions Land Use Change Electricity Generation Effluent Treatment Machineries (Heavy Machineries, from land use change (LUC) represent around 40.5% of our total Agricultural Machineries & Other Boilers GHG footprint, while emissions from palm oil effluent treatment Stationary Machineries Fertilisers (POME) accounts for 37.5%. However, it should be noted that Transport (Controlled Vehicles) Purchased Electricity emissions from previous LUC continue to be included in our Purchased Steam emissions calculations today. A detailed breakdown of our GHG *Numbers may not add up to 100% due to rounding up of figures emissions is illustrated in the graph on the right:
60 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Ensuring Sustainable Values
OUR ENVIRONMENTAL IMPACT
In 2018, we achieved an emissions intensity of 1.09 tCO2-e/t CPO (tonnes of carbon dioxide equivalent ANNUAL GHG EMISSIONS INTENSITY TREND per volume of production (tCO2e/t CPO), which (Includes data from Liberia and NBPOL from 2015 onwards) represented a 5% increase from the baseline figure. 1.06 1.02 1.20 1.13 1.09 In consideration of the current challenging business environment, and with less than two (2) more years to meet our original target of 40% emissions reduction from the baseline level of 2009, we have concluded that a revision of the entire carbon reduction strategy for our upstream operations was necessary. As such, during the period under review, the Group has decided to extend the target date to achieve the desired emissions reduction level 2009 2015 2016 2017 2018 by another 10 years, setting a more realistic and (baseline) achievable target year date of 2030, from the initial Emissions Intensity Target = 0.64 tCO2-e/ CPO produced commitment of year 2020.
We consumed 30 million gigajoules (GJ) of energy in 2018, marking a decrease of 14% from the previous year. This was mainly due to lower energy demand from our NBPOL operations. Most of the energy used by boilers are still from renewable sources such as biomass (palm kernel shell and fibre), which contributed to 84% of SDP’s overall energy needs. This initiative has avoided approximately 1.8 million tCO2-e of emissions had diesel been used instead.
ENERGY BREAKDOWN BY SOURCE
3% Electricity
Medium 1% fuel oil 84% Non-Renewable Sources 16% 7% Diesel Renewables
5% Natural gas
Carbon Reduction & Renewable Energy Initiatives
As of 2018, we operate nine (9) biogas facilities within Malaysia, Indonesia and PNG. These include five (5) facilities at our palm oil mills in Malaysia, two (2) plants at our kernel crushing plants in Indonesia and two (2) in NBPOL, PNG. These biogas facilities contributed to an 8% reduction in GHG emissions.
Annual Report // 6-Month Financial Period Ended 31 December 2018 61 Ensuring Sustainable Values Sime Darby Plantation
OUR ENVIRONMENTAL IMPACT
In 2018, the two (2) biogas facilities in Malaysia - Flemington No. of fire detected by biogas facility in Bagan Datuk, Perak, generated 7,986 MWh while Location satellites the Hadapan biogas facility in Kulai, Johor, generated 6,984 MWh – which contributed to the renewable energy mix in the national grid. Malaysia 2 In addition, the Tennamaram, Merotai and West Oil Mills in Malaysia Indonesia 596 commenced methane flaring in 2017, while the two (2) kernel Liberia 1 crushing plants in Indonesia - Pemantang and Rantau - commenced Papua New Guinea 7 methane flaring in 2018. Overall 606
In NBPOL, the Mosa biogas facility supplies 900 kW to the Table: Fires detected by satellite (Jul-Dec 2018) PNG power grid and has another 1.6 mW available for Group operations and housing compounds. The Kumbango biogas Based on the data, Indonesia recorded the largest number of facility is mostly dedicated to powering the refinery where 900 potential fires. Out of the 606 fires, on-the-ground verification kW directly replaces diesel generated power. Power is also confirmed that 94% were actual fires. From these, 559 fires directly supplied to their boilers, which is equivalent to 1.6 mW occurred outside of our estate boundaries. Indonesia is located in gas. This equates to a saving of approximately 15,000 litres of near the equator and has high humidity condition, which means diesel per day. naturally-occurring land fires are very rare. Upon investigations, majority of these fires were caused by the local community BIODIVERSITY conducting land clearing for farming practices such as paddy- planting, especially in Kalimantan and Sumatra. Tree planting has been one of our biggest conservation efforts, aiming at preserving endangered plant species and creating In Indonesia, we strive hard to develop prevention systems wildlife corridors that are critical to various animal species. In on the ground to control land fires. To date, we have 72 total, we have set aside 39,997 ha of High Conservation Value watchtowers that are 15 metres high to enhance our surveillance (HCV) areas for conservation across our global operations. in strategic locations throughout our Indonesian estates. Simultaneously, we also implemented community-based fire In Malaysia, we have successfully planted 1,367,901 trees over prevention programmes in collaboration with local universities 10 years, which is part of a bigger programme with Yayasan to ensure our prevention efforts begin at the field/village level. Sime Darby (YSD) and the Forest Research Institute Malaysia Since the programme’s inception in 2015, local communities in (FRIM). This achievement comprises four (4) projects – the Sime high risk areas have become more aware about ways to conduct Darby Plant-A-Tree (SDPAT) programme; the reforestation and land preparation without slash and burn activities and implement rehabilitation of Orang Utan habitats in Northern Ulu Segama composting practices. with the Sabah Forestry Department; the Kinabatangan RiLeaf Project with Nestlé Malaysia; and the peat swamp protection and rehabilitation project in the Raja Musa Forest Reserve with Global Environment Centre (GEC). NO. OF FIRES DETECTED BY SATELLITE IN INDONESIA (JUL-DEC2018) Since 2014, 69,911 trees have also been planted on 426.5 ha in 500 450 444 PNG. In West New Britain, we are working with a local school 400 and an environmental NGO to restore 86 ha of mangrove forest 350 and planted 10,914 saplings of Rhizophora sp. and Bruguiera sp. 300 sourced from a community-based nursery. 250 200 150 92 FIRE AND HAZE 100 32 50 23 1 4 0 Since the launch of the Sime Darby Hotspot Alert Dashboard in Jul 2018 Aug 2018 Sep 2018 Oct 2018 Nov 2018 Dec 2018 2015, we have been actively monitoring and managing fire and haze issues within SDP’s operational areas. For the period under review, data from MODIS, VIIRS, and NOAA satellites detected a For more details on our Environmental Performance efforts, which also total of 604 fire hotspots. include environmental management, water and waste, please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com
62 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation How We Are Governed
HOW WE ARE GOVERNED
64 Our Board of Directors 70 Our Leadership Team 72 Profile of Leadership Team 75 Corporate Governance Overview Statement 84 Governance & Audit Committee Report 90 Nomination & Remuneration Committee Report 96 Risk Management Committee Report 98 Sustainability Committee Report 102 Board Tender Committee Report 104 Statement on Risk Management and Internal Control 110 Statement of Responsibility by the Board of Directors
Annual Report // 6-Month Financial Period Ended 31 December 2018 63 How We Are Governed Sime Darby Plantation
OUR BOARD OF DIRECTORS
OUR COMMITMENT Governance is not just about adherence to a set of recommendations. It is a way of doing business and is at the heart of everything we do.
TAN SRI DATO’ A. GHANI OTHMAN TAN SRI DATO’ SERI MOHD BAKKE SALLEH Chairman, Non-Independent Non-Executive Director Executive Deputy Chairman & Managing Director
Nationality Malaysian Nationality Malaysian
Gender Male Gender Male
Age 72 Age 64
Date of Appointment 1 July 2013 Date of Appointment 30 December 2010
(Appointed as the Executive Deputy Chairman & Managing Director of Sime Darby Plantation Berhad on 21 November 2017)
AREAS OF EXPERTISE: AREAS OF EXPERTISE: Public Administration and Economics Economics, Finance and Management
RELEVANT EXPERIENCE: RELEVANT EXPERIENCE: Began his career with the Faculty of Economics, University of Former President & Group Chief Executive of Sime Darby Berhad, Malaya and has held various positions in the Malaysian Government Group President & Chief Executive Officer (CEO) of Felda Global including Deputy Minister of Energy, Telecommunications and Post, Ventures Holdings Berhad, Group Managing Director (MD) of Felda Deputy Minister of Finance, Minister of Youth and Sports and Chief Holdings Berhad and Group MD and CEO of Lembaga Tabung Haji. Minister of Johor. Former Chairman of Sime Darby Berhad, Sime Former Director, Property Division of Pengurusan Danaharta Nasional Darby Property Berhad and Johor Corporation. Current member of and MD of Federal Power Sdn Bhd, Syarikat Perumahan Pegawai the Board of Trustees of the World Islamic Economic Forum (WIEF) Kerajaan Sdn Bhd and Electra House Sdn Bhd. Former Group General Foundation. Manager of Island & Peninsular Group. Presently, the Chairman of the Malaysian Palm Oil Board, Fellow of the Institute of Chartered DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC Accountants in England and Wales and a member of the Malaysian COMPANIES: Institute of Accountants. Listed Issuers: None DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC COMPANIES: Public Companies: Listed Issuers: None Eastern & Oriental Berhad
Public Companies: Yayasan Sime Darby
Governance & Audit Nomination & Risk Management Sustainability Board Tender GAC NRC RMC SC BTC Committee Remuneration Committee Committee Committee Committee
64 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation How We Are Governed
OUR BOARD OF DIRECTORS
TAN SRI DATUK DR YUSOF BASIRAN MUHAMMAD LUTFI Independent Non-Executive Director Independent Non-Executive Director
NRC BTC SC
Chairman Chairman
Nationality Malaysian Nationality Indonesian
Gender Male Gender Male
Age 70 Age 49
Date of Appointment 31 December 2010 Date of Appointment 24 November 2015
AREAS OF EXPERTISE: AREAS OF EXPERTISE: Plantation and Research & Development Trading, Oil & Gas and Power Utilities
RELEVANT EXPERIENCE: RELEVANT EXPERIENCE: Former Chief Executive Officer of the Malaysian Palm Oil Council Former President Director and Chief Executive Officer of Mahaka and Director-General of the Malaysian Palm Oil Board and Palm Group of Companies. Former National Chairman of the Indonesia Oil Research Institute of Malaysia. Past President of the Academy Young Entrepreneurs Association (HIPMI) and Chairman of the of Sciences Malaysia. Former Director of Bank Negara Malaysia Indonesia Coordinating Board of Investment. Former Ambassador and Federal Land Development Authority (FELDA). Senior Fellow Extraordinary and Plenipotentiary to Japan and the Federated of the Academy of Sciences Malaysia and Fellow of the Malaysian States of Micronesia and Minister of Trade of the Republic of Oil Scientists’ and Technologists’ Association and the Incorporated Indonesia. Current President Commissioner of PT Medco Energi Society of Planters. International Tbk.
DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC COMPANIES: COMPANIES: Listed Issuers: Listed Issuers: CB Industrial Product Holding Berhad None
Public Companies: Public Companies: None None
Annual Report // 6-Month Financial Period Ended 31 December 2018 65 How We Are Governed Sime Darby Plantation
OUR BOARD OF DIRECTORS
DATUK ZAITON MOHD HASSAN DATO’ MOHD NIZAM ZAINORDIN Senior Independent Non-Executive Director Non-Independent Non-Executive Director
GAC NRC RMC GAC NRC
Chairman
Nationality Malaysian Nationality Malaysian
Gender Female Gender Male
Age 62 Age 55
Date of Appointment 24 February 2016 Date of Appointment 14 July 2017
(Appointed as Senior Independent Non-Executive Director of Sime Darby Plantation Berhad on 14 July 2017)
AREAS OF EXPERTISE: AREAS OF EXPERTISE: Banking and Finance Finance and Investment Management
RELEVANT EXPERIENCE: RELEVANT EXPERIENCE: Has working experience in PricewaterhouseCoopers, Bank Over 20 years of experience in the finance sector. Held various Pembangunan (M) Bhd and Bapema Corporation Sdn Bhd. Has senior positions in Permodalan Nasional Berhad (PNB) including served 12 years with Maybank in various senior positions including Senior Vice President of Finance and Investment Processing Division, that of General Manager, Group Strategic Planning. Former President/ Chief Financial Officer (CFO) and Group CFO. Presently, the Deputy Executive Director of Malaysian Rating Corporation Berhad. Current President and Group CFO of PNB. Holds an Executive Masters in Chairman of the Private Pension Administrator Malaysia and Chief Business Administration. A Certified Financial Planner since 2002. Executive Officer of the Malaysia Professional Accountancy Centre. Fellow of the Association of Chartered Certified Accountants and Fellow and Council Member of the Association of Chartered Certified member of the Malaysian Institute of Accountants. Accountants and member of the Malaysian Institute of Accountants, Malaysian Institute of Certified Public Accountants, International DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC Federation of Accountants (IFAC) Professional Accountants in COMPANIES: Business (PAIB) Committee and Vice Chairman of FIDE Forum. Listed Issuers: None DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC COMPANIES: Public Companies: Listed Issuers: Pengurusan Pelaburan ASN Berhad None
Public Companies: Bank Pembangunan Malaysia Berhad (Chairman)
66 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation How We Are Governed
OUR BOARD OF DIRECTORS
DATO’ MOHAMAD NASIR AB LATIF DATO’ HENRY SACKVILLE BARLOW Non-Independent Non-Executive Director Independent Non-Executive Director
SC SC GAC NRC
Chairman
Nationality Malaysian Nationality British
Gender Male Gender Male
Age 60 Age 74
Date of Appointment 14 July 2017 Date of Appointment 5 April 2019
AREAS OF EXPERTISE: AREAS OF EXPERTISE: Investment Management and Economics Finance and Plantation
RELEVANT EXPERIENCE: RELEVANT EXPERIENCE: Held various senior positions in the Employees Provident Fund (EPF) Over 35 years of experience in the Plantation Industry including including Senior Manager of Investment and Economics Research Finance Director of Barlow Boustead Estates Agency Sdn Berhad and Department, Company and Intermediary Supervision Division Joint Managing Director of Highlands & Lowlands Berhad. Former and Equity Investment Department. Former General Manager of Board member of Sime Darby Berhad and HSBC Bank Malaysia International Equity Department. Currently the Deputy Chief Executive Berhad. Former Council Member of the Incorporated Society of Officer of the Investment Division of EPF. Planters and Joint Chairman of the Roundtable on Sustainable Palm Oil (RSPO) Biodiversity Technical Committee. Currently Joint Chair DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC of the Grievance Committee of the RSPO, Fellow of the Institute of COMPANIES: Chartered Accountants in England and Wales and Honorary Treasurer Listed Issuers: of the Malaysian Branch of the Royal Asiatic Society. Yinson Holdings Berhad Malaysian Resources Corporation Berhad DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC COMPANIES: Public Companies: Listed Issuers: PLUS Malaysia Berhad None
Public Companies: None
Annual Report // 6-Month Financial Period Ended 31 December 2018 67 How We Are Governed Sime Darby Plantation
OUR BOARD OF DIRECTORS
ZAINAL ABIDIN JAMAL TAN TING MIN Non-Independent Non-Executive Director Independent Non-Executive Director
RMC SC BTC GAC RMC BTC
Chairman
Nationality Malaysian Nationality Malaysian
Gender Male Gender Female
Age 65 Age 50
Date of Appointment 14 July 2017 Date of Appointment 14 July 2017
AREAS OF EXPERTISE: AREAS OF EXPERTISE: Legal, Business and Regulatory Affairs Equity Research and Investment Analyst
RELEVANT EXPERIENCE: RELEVANT EXPERIENCE: Enrolled as an Advocate and Solicitor of the Supreme Court of Has served over 23 years with Credit Suisse Malaysia. Head of Equity Singapore and the High Court of Malaya. Served as a First Class Research in Credit Suisse Malaysia from 2010 until her retirement in Magistrate in Brunei Darussalam and was Company Secretary of 2017. Led the team to top the Institutional Investor polls for seven (7) Harrisons Malaysian Plantations Berhad. Founder and Senior Partner consecutive years, 2010 to 2017. Has also served as the Malaysian of Zainal Abidin & Co. Presently the Chairman of Global Humanitarian equity strategist and the regional plantations head for Credit Suisse. Fund, a company limited by guarantee in the United Kingdom. DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC COMPANIES: COMPANIES: Listed Issuers: Listed Issuers: IJM Corporation Berhad None Public Companies: Public Companies: None Maybank Islamic Berhad (Chairman) Padu Corporation (Limited by Guarantee) (Chairman) Lam Soon (M) Berhad
Additional Information i. Dato’ Mohamad Nasir Ab Latif is a nominee Director of the Employees Provident Fund 1. Save as disclosed herein, none of the Directors has any family relationship Board. with and is not related to any director and/or major shareholder of Sime Darby ii. The nominee Directors of Permodalan Nasional Berhad are as follows: Plantation Berhad, nor has any personal pecuniary interest in any business • Tan Sri Dato’ A. Ghani Othman; arrangement involving the Group: • Dato’ Mohd Nizam Zainordin; and • Zainal Abidin Jamal.
68 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation How We Are Governed
OUR BOARD OF DIRECTORS
LOU LEONG KOK NORZILAH MEGAWATI ABDUL RAHMAN Independent Non-Executive Director Group Secretary
RMC
Nationality Singaporean Nationality Malaysian
Gender Male Gender Female
Age 64 Age 58
Date of Appointment 1 December 2017 Date of Appointment 1 December 2017
AREAS OF EXPERTISE: RELEVANT EXPERIENCE: Trading and Investment Management Held various senior positions in Kumpulan Guthrie Berhad including Manager, Group Chief Executive’s Office, Controller, Corporate RELEVANT EXPERIENCE: Business Development and Monitoring, Director, Corporate Business Has a wealth of industry experience in the edible oil sector spanning Development and Human Resource and Head, Group Legal & over 38 years managing investments and businesses of edible oil Compliance. Has working experience in many areas, among others, and grains trading, shipping, storage terminals, refineries and biofuel investment analysis, money market trading, corporate secretarial and manufacturing, as well as investor & advisor to a leading physical legal as well as a Manager in the Group Chief Executive’s Office in palm brokerage. Presently, the Founding Chairman of Charleston Permodalan Nasional Berhad. Former Group Secretary of Sime Darby Holdings Pte Ltd, a private investment group which controls Berhad. subsidiaries and investments ranging from trading, brokerage, property development and logistics. QUALIFICATIONS: • Degree in Law from the University of Malaya DIRECTORSHIP OF OTHER LISTED ISSUERS/PUBLIC • Admitted to the Malaysian Bar COMPANIES: • Licensed Company Secretary Listed Issuers: Note: None The full profile of the Group Secretary is available online in the Senior Management section at www.simedarbyplantation.com Public Companies: None
2. Other than traffic offences, none of the Directors has any conviction for offences 3. The details of Directors’ attendance at Board Meetings held in the financial period within the past five (5) years nor public sanctions or penalties imposed by the relevant ended 31 December 2018 are set out in the Corporate Governance Overview regulatory authorities during the financial period. None of the Directors has any conflict Statement on page 75 of this Annual Report. of interest with Sime Darby Plantation Berhad. 4. The full profiles of the Directors are available online in the Board of Directors section at www.simedarbyplantation.com
Annual Report // 6-Month Financial Period Ended 31 December 2018 69 How We Are Governed Sime Darby Plantation
OUR LEADERSHIP TEAM
TAN SRI DATO’ SERI MOHD BAKKE SALLEH Executive Deputy Chairman & Managing Director
02 03 04
DATUK FRANKI ANTHONY DASS RENAKA RAMACHANDRAN MOHD HARIS MOHD ARSHAD Chief Advisor & Value Officer Chief Financial Officer Chief Operating Officer, Downstream
08 09 10
DR HARIKRISHNA KULAVEERASINGAM NORZILAH MEGAWATI ABDUL RAHMAN ELIZA MOHAMED Chief Research & Development Officer Group Secretary Chief Communications Officer
70 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation How We Are Governed
OUR LEADERSHIP TEAM
01
MOHAMAD HELMY OTHMAN BASHA Deputy to Managing Director & Chief Operating Officer, Upstream
05 06 07
ZULKIFLI ZAINAL ABIDIN DR SIMON LORD DR SHARIMAN ALWANI MOHAMED NORDIN Chief Human Resources Officer Chief Sustainability Officer Chief Strategy & Innovation Officer
11 12 13
LEE AI LENG NIK MAZIAH NIK MUSTAPHA GAJANI NAYAGI SEEVENESERAJAH Group General Counsel Chief Integrity & Assurance Officer Chief Risk Officer
Annual Report // 6-Month Financial Period Ended 31 December 2018 71 How We Are Governed Sime Darby Plantation
PROFILE OF LEADERSHIP TEAM
MOHAMAD HELMY OTHMAN BASHA DATUK FRANKI ANTHONY DASS 01 02 Deputy to Managing Director & Chief Operating Officer, Upstream Chief Advisor & Value Officer
Age Country Date of Appointment Age Country Date of Appointment 52 19 September 2016 62 1 December 2010
Skills and Experience: Skills and Experience: Began his career as a Trainee Accountant/Auditor with Wellers, Has over 35 years of plantation management and corporate experience in Accountants, Oxford, United Kingdom. Joined Shell Refining Company Sime Darby Plantation Berhad (SDPB). He began his career with Kumpulan (FOM) Bhd and has held various roles including Head of General Accounts, Guthrie Berhad (KGB) and has held various senior leadership roles in Project Accountant, Area Accountant for Shell Malaysia Trading Sdn Bhd KGB rising up through the ranks to become the Chief Executive Officer, (Southern Region) and Indirect Tax Advisor for Shell Malaysia Ltd. PT Minamas Gemilang, Indonesia and subsequently, appointed Managing Director of SDPB on 1 December 2010. He assumed his current position on He joined Guthrie Property Holding Sdn Bhd in 1997 as Finance and 21 November 2017. Administration Manager and subsequently held various leadership positions in Kumpulan Guthrie Berhad including Chief Executive Officer of Highlands He is also a Board member of a number of subsidiary companies in SDPB & Lowlands Berhad and Guthrie Ropel Berhad, the two (2) listed companies both local and abroad. within the Kumpulan Guthrie Berhad Group. He was instrumental in bringing about the completion of the acquisition and restructuring exercise Presently, he is the Chairman of the Malaysian Palm Oil Association, a of PT Minamas Gemilang Plantation in Indonesia. member of the Programme Advisory Council of Malaysian Palm Oil Board, The Board of Trustees of the Malaysian Palm Oil Council and a council He was appointed Head Plantation Upstream of Sime Darby Plantation member of the Malaysia Productivity Corporation. He is a Fellow of the Berhad (SDPB) before he left in 2013 to set up Xcellence Alliance Sdn Incorporated Society of Planters (ISP) and the Malaysian Oils Scientists and Bhd and Chemara Palmea Holdings Bhd. He later joined SDPB as Head, Technologists Association (MOSTA). Plantation Services and Special Project in 2016 and was subsequently appointed as the Chief Operating Officer, Upstream in 2017. He was appointed to his current role on 1 January 2019. Apart from assisting the Qualification(s): Managing Director with the overall running of the SDPB Group, he also • Bachelor of Science degree in Agriculture from Universiti Pertanian leads the Plantation Upstream business. Malaysia. He has also attended various management and business programmes with the Malaysian Institute of Management (MIM), Presently, he is the President of the Malayan Agricultural Producers the Asian Institute of Management (AIM) and the Harvard Senior Association. Management Leadership programmes
Qualification(s): • Fellow of the Association of Chartered Certified Accountants • Member of the Malaysian Institute of Accountants RENAKA RAMACHANDRAN 03 Chief Financial Officer
Age Country Date of Appointment
51 1 April 2011
Skills and Experience: More than 20 years of experience in finance, external audit and financial advisory services. Began her career with Raj and Associates and subsequently joined PricewaterhouseCoopers (PwC). Held various senior positions/leadership roles in PwC including Executive Director. As an Executive Director, she was involved in, among others, the audit of public listed companies, review of profit and cash flow forecast and projections for restructurings and initial public offerings, due diligence and financial analysis. She has been actively involved in the Malaysian Accounting Standards Board (MASB) for the changes to IAS 41 by working on papers with the MASB for its onward discussion with the International Accounting Standards Board. She is also a member of the Accounting and Taxation Committee of the Malaysian Palm Oil Association and a member of the ACCA Accountants for Business Global Forum.
Qualification(s): • Fellow of the Association of Chartered Certified Accountants
72 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation How We Are Governed
PROFILE OF LEADERSHIP TEAM
MOHD HARIS MOHD ARSHAD DR SHARIMAN ALWANI MOHAMED NORDIN 04 07 Chief Operating Officer, Downstream Chief Strategy & Innovation Officer
Age Country Date of Appointment Age Country Date of Appointment 46 1 April 2014 49 1 February 2014
Skills and Experience: Skills and Experience: Began his career as a trader with Cargill in Malaysia and the Philippines. He He was formerly the Senior Vice President, Strategy & Value Management joined Nestlé in Kuala Lumpur in 2001 and subsequently moved to London to in Sime Darby Berhad, an Economist at Bank Negara Malaysia and had a join the company’s global cocoa procurement and price risk management desk. stint as Sector Economist in Fidelity Management and Research, Boston, He held various senior positions in Nestlé including General Manager and Head USA. He was appointed as Head, Strategy & Business Development of of Global Oils and Fats, and helped establish Nestlé’s Commodity Procurement Sime Darby Plantation Berhad (SDPB) in 2014 and was redesignated as Centre for Asia, Oceania and Africa Regions in Singapore. He was a former Director of Commodity Risk Management, Unilever Plc (Singapore) before joining Chief Strategy & Innovation Officer in January 2018. He is also the Chief Sime Darby Plantation Berhad in 2014 as Head of Global Trading and Marketing/ Transformation Officer of SDPB. Sime Darby Oils Manufacturing. Qualification(s): Qualification(s): • PhD in International Economics & Finance from Brandeis University’s • Bachelor of Science degree in Business Administration from the University of International Business School, United States of America Arizona, United States of America • Bachelor’s degree in Economics from Cambridge University, United Kingdom
ZULKIFLI ZAINAL ABIDIN 05 Chief Human Resources Officer DR HARIKRISHNA KULAVEERASINGAM 08 Age Country Date of Appointment Chief Research & Development Officer 57 21 November 2017 Age Country Date of Appointment 1 July 2016 Skills and Experience: 57 Has more than 20 years of experience across the full spectrum of the human resources discipline. Held various senior positions including General Manager, Skills and Experience: Group Human Resources, Golden Hope Plantations Berhad and Group Chief Began his career as a Post-Doctoral Researcher with the University Human Resources Officer, Sime Darby Berhad. of California, Davis. Joined Golden Hope Plantations Berhad as a Biotechnologist. He was a Lecturer and an Associate Professor at Universiti Qualification(s): • Master in International Affairs degree and a Bachelor in Business Putra Malaysia. Joined Sime Darby Technology Centre Sdn Bhd as General Administration degree from Ohio University, United States of America (USA) Manager, Biotechnology, where he helped establish a new technology • Attended Senior Management Development Programmes at Harvard centre with biotechnology capability, and subsequently assumed the position Business School and Peter F. Drucker School of Management, Claremont, as Director of Research. Held various senior positions in Sime Darby California, USA Plantation Berhad including Senior Vice President II, Biotechnology and Breeding and Head Research & Development.
Qualification(s): DR SIMON LORD 06 • Bachelor’s degree in Plant Sciences from London University Chief Sustainability Officer • PhD in Plant Molecular and Developmental Biology from Leicester University Age Country Date of Appointment 61 21 November 2017 NORZILAH MEGAWATI ABDUL Skills and Experience: 09 Began his career as a Management Trainee at Unilever PLC - Unilever RAHMAN Plantations Ltd, and rose through the ranks as Business Development Manager Group Secretary in 1996. Held various senior leadership positions in New Britain Palm Oil Limited Group including Group Director of Sustainability for New Britain Plantation Age Country Date of Appointment Services Pte Ltd, Head of Research and Head of Technical Services. Former Vice President/Executive Board Member of the Roundtable on Sustainability 58 1 December 2017 Palm Oil Board and Group Chief Sustainability Officer of Sime Darby Berhad. Please refer to page 69 for the profile of the Group Secretary. Qualification(s): • Bachelor of Science degree in Applied Biology from Lanchester (Coventry) Polytechnic, United Kingdom • PhD in Environmental Effects of Pesticides from the University of Bath, United Kingdom
Annual Report // 6-Month Financial Period Ended 31 December 2018 73 How We Are Governed Sime Darby Plantation
PROFILE OF LEADERSHIP TEAM
ELIZA MOHAMED NIK MAZIAH NIK MUSTAPHA 10 12 Chief Communications Officer Chief Integrity & Assurance Officer Age Country Date of Appointment Age Country Date of Appointment 51 1 July 2017 44 1 March 2018
Skills and Experience: Skills and Experience: Held various senior leadership positions including Group Head - Corporate Began her career as audit associate with Arthur Andersen & Co and had Affairs at Nestlé Malaysia, Group Head - Corporate Affairs & Sustainability since accumulated over 21 years’ experience in internal and external audit, at Maybank and Group General Manager - Group Communications at Media credit management and financial accounting. Held various senior positions Prima Berhad. Served public affairs roles at Phillip Morris Malaysia and has in the Group Corporate Assurance function of Sime Darby Berhad experience in the legal profession. including Head of Group Corporate Assurance – Plantation and Head of Group Corporate Assurance – Property. Qualification(s): She was appointed as the Acting Head, Governance, Assurance & • LLB (Hons) degree in law from the University of Leeds, United Kingdom Compliance of Sime Darby Plantation Berhad (SDPB) on 1 March 2018. • Admitted as Barrister-at-law Lincolns Inn, London She was then designated as the Chief Internal Auditor on 1 July 2018. Effective 25 February 2019, she was designated as the Chief Integrity & Assurance Officer of SDPB.
11 LEE AI LENG Qualification(s): Group General Counsel • Chartered Accountant of the Malaysian Institute of Accountants • Certified Internal Auditor conferred by the Global Institute of Internal Age Country Date of Appointment Auditors, United States of America • Certification in Control Self-Assessment conferred by the Global Institute 53 1 June 2014 of Internal Auditors, United States of America • Professional member of The Institute of Internal Auditors Malaysia Skills and Experience: • Bachelor of Accounting (Hons) degree from the Universiti Utara Malaysia Has more than 25 years of experience in the areas of corporate and commercial law focusing on domestic and cross-border mergers and acquisitions, capital markets, issuance of private debt securities, joint ventures, banking and finance matters as well as real and personal 13 GAJANI NAYAGI SEEVENESERAJAH property transactions. Beginning her career in private practice in 1991, Chief Risk Officer she subsequently joined IOI Corporation Berhad in 1994 as the Group Legal Advisor and later served as Company Secretary as well. She was Age Country Date of Appointment appointed as Head of Legal at Sime Darby Plantation Berhad in 2014 and was redesignated as the Group General Counsel in April 2018. 42 1 June 2018
Qualification(s): Skills and Experience: • LLB (Hons) degree in Law from the University of Malaya, Kuala Lumpur Began her career in Ernst & Young and rose through the ranks to become • Admitted to the Malaysian Bar a Director in the Advisory practice where she provided assurance & • Licensed Company Secretary advisory services to various multi-national and public listed companies • Diploma in Accounting and Finance (Association of Chartered Certified across a myriad of industries. She joined the Group Risk Management Accountants) Department of Sime Darby Berhad as a Vice President in July 2012 and subsequently moved on to be the Head of Performance & Innovation Management for Sime Darby Berhad Group. She was appointed as Head of Portfolio Management of Sime Darby Plantation Berhad in October 2017. She was appointed as the Chief Risk Officer in June 2018.
Qualification(s): • Fellow of the Institute of Chartered Accountants in England & Wales • Member of the Malaysian Institute of Accountants • Bachelor of Arts (Hons) degree in Accounting and Financial Management from the University of Sheffield, United Kingdom
Additional Information 1. None of the Senior Management has any family relationship with and is not related to any director and/or major shareholder of Sime Darby Plantation Berhad. 2. None of the Senior Management has any conflict of interest with Sime Darby Plantation Berhad. 3. Other than traffic offences, none of the Senior Management has any conviction for offences within the past five (5) years nor public sanctions or penalties imposed by the relevant regulatory authorities during the financial year period. 4. Directorships held by the Senior Management in public companies and listed issuers, other than companies within the Sime Darby Plantation Berhad Group, if any, are disclosed in the Senior Management section at www.simedarbyplantation.com. 5. The full profiles of the Senior Management are available online in the Senior Management section at www.simedarbyplantation.com.
74 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation How We Are Governed
CORPORATE GOVERNANCE OVERVIEW STATEMENT
As a testament to our commitment to values and ethical conduct, the Board of Sime Darby Plantation Berhad embraces the enhanced corporate governance disclosure requirements set out in Paragraph 15.25 and Practice Note 9 of the Main Market Listing Requirements (MMLR) of Bursa Malaysia Securities Berhad (Bursa Securities).
The Board is pleased to present the Corporate Governance (CG) Overview Statement, which highlights how our Company complies with the principles and practices of the Malaysia Code on Corporate Governance (MCCG) 2017 for the financial period ended 31 December 2018 (FP December 2018). This statement is complemented with the prescribed Corporate Governance (CG) Report, which is available on the Company’s website at www.simedarbyplantation.com and should be read in conjunction with the Statement on Risk Management and Internal Control (SORMIC) and the respective Board Committees reports in the ensuing pages.
Our Corporate Governance framework has been developed based on the following statutory requirements, best practices and guideline:
• Companies Act 2016; • MMLR of Bursa Securities; • MCCG 2017; and • Corporate Governance Guide - 3rd Edition issued by Bursa Malaysia Berhad.
A summary of the Company’s corporate governance practices with reference to the MCCG 2017 is described in the following manner:
PRINCIPLE A PRINCIPLE B PRINCIPLE C Board Leadership and Effectiveness Effective Audit and Risk Management Integrity in Corporate Reporting and Meaningful Relationship with Stakeholders
(refer details of Principle A on pages 77 to 81) (refer details of Principle B on page 82) (refer details of Principle C on page 83)
As at the date of this CG Overview Statement, the Company has applied all of the recommended practices (including Step Up) in MCCG 2017, except for the following practices:
Recommended Practices Step Up Practices
Practice 4.5 Practice 4.3 “The Board must have at least 30% women “The Board has a policy which limits the tenure of directors.” its independent directors to nine (9) years.”
Practice 12.3 Practice 7.3 “Leverage technology to facilitate voting and “Full disclosure of detailed remuneration of each remote shareholders’ participation at General member of senior management on a named basis.” Meetings.” Practice 8.4 “The Audit Committee should comprise solely of Independent Directors.”
Detailed explanations for the above departures and non-adoption as well as measures put in place to apply the above said Practices are outlined in the CG Report. This is our commitment in promoting strong and effective governance to support better decision-making and accountability and instil stakeholders’ confidence and trust in the Company.
This statement is made in accordance with a resolution of the Board of Directors dated 5 April 2019.
Annual Report // 6-Month Financial Period Ended 31 December 2018 75 How We Are Governed Sime Darby Plantation
CORPORATE GOVERNANCE OVERVIEW STATEMENT
CORPORATE GOVERNANCE FRAMEWORK
Our Corporate Governance framework has been designed based on the following principles:
To promote greater transparency, To balance the operating autonomy To cultivate ethical business conduct accountability and responsiveness. of the various Group Companies with and instil desired behaviours based on appropriate checks and balances and the Group’s espoused Core Values and performance benchmarks. Business Principles as set out in the Code of Business Conduct.
SHAREHOLDERS
Board of Directors
Governance & Audit Risk Management EDCMD Nomination & Sustainability Board Tender Committee Committee Remuneration Committee Committee Committee
Group Integrity, Group Risk External Governance & Management Auditors Assurance Legislation
Plantation Leadership Company Constitution Committee Board Charter Management Committee Policies
Procedures
The Board Committees are established to assist the Board in discharging its statutory and fiduciary responsibilities. This includes ensuring independent oversight of risk management and internal control. Terms of Reference have been established to ensure that the Board Committees remain focused on its duties enabling the Board to take a broader perspective, looking at enterprise-level issues such as strategy and governance.
76 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation How We Are Governed
CORPORATE GOVERNANCE OVERVIEW STATEMENT
PRINCIPLE A BOARD LEADERSHIP AND EFFECTIVENESS
BOARD RESPONSIBILITIES
Our Board Charter sets out the Board’s strategic intent and outlines the roles and powers that the Board specifically reserves for itself, and those which it delegates to Management and in so doing, also sets the tone of the various Board Committees. The specified roles are highlighted below:
BOARD CHAIRMAN • Managing and leading Board meetings to ensure robust decision-making; • Building a high-performance Board; • Managing Board-Management interface by acting as the conduit between Management and the Board, developing a positive relationship with the Executive Deputy Chairman & Managing Director (EDCMD); • Acting as a spokesperson for and representative of the Board and the Group; and • Ensuring appropriate steps are taken to provide effective communication with stakeholders and that their views are communicated to the Board as a whole.
INDIVIDUAL DIRECTORS • Acting in good faith and in the best interests of the Company; • Demonstrating good stewardship and acting in a professional manner with sound mind; • Acting with reasonable care, skill and diligence subject to the business judgement rule; • Avoiding conflicts of interest with the Company in a personal or professional capacity, including improper use of the property, information and opportunity of the Company; • Exercising greater vigilance and professional scepticism in understanding and shaping the strategic direction of the Company and/or Group; and • Compliance with the Companies Act, securities legislation and the Main Market Listing Requirements.
SENIOR INDEPENDENT The Senior Independent Non-Executive Director serves as a sounding board for the Chairman, an NON-EXECUTIVE intermediary for other Directors when necessary, and the point of contact for shareholders and DIRECTOR (SINED) other stakeholders with concerns that have failed to be resolved or would not be appropriate to be communicated through the normal channels of the Chairman/EDCMD.
EXECUTIVE DEPUTY The EDCMD assumes the overall responsibility for the execution of the Group’s strategies in line CHAIRMAN & MANAGING with the Board’s direction, oversees the operations of the subsidiary companies and drives the DIRECTOR (EDCMD) Group’s businesses and performance towards achieving the Group’s vision and goals.
GROUP SECRETARY The Group Secretary is responsible for advising the Board on regulatory compliance matters and providing good information flow and comprehensive practical support to Directors, both as individuals and collectively, with particular emphasis on supporting the Non-Executive Directors in maintaining the highest standards of probity and corporate governance. All Directors have unrestricted access to the advice and services of the Group Secretary to facilitate the discharge of their duties.
For further details, refer to the Board Charter which is available on the Company’s website at www.simedarbyplantation.com under the Governance section.
Annual Report // 6-Month Financial Period Ended 31 December 2018 77 How We Are Governed Sime Darby Plantation
CORPORATE GOVERNANCE OVERVIEW STATEMENT
BOARD MEETINGS & ATTENDANCE
The breakdown of the Board and Board Committees meetings held as well as the Directors’ attendances at Board meetings are set out below:
Board & Board Committee Meetings held in FP December 2018
BTC
SC SC Total Board &
Board Committees GAC SC GAC Meeting Hours = 42.7 RMC GAC BOD RMC GAC BOD NRC BOD NRC BOD NRC BOD
Jul’ 18 Aug’ 18 Sep’ 18 Oct’ 18 Nov’ 18 Dec’ 18
Board Meetings: Board Committee Meetings:
Governance & Nomination & Risk Management Sustainability Board Tender BOD Board GAC NRC RMC SC BTC Audit Committee Remuneration Committee Committee Committee Committee
Details of the key activities of each Board Committee are set out within the relevant Committee reports from pages 84 to 103.
The table below shows each Director’s attendance at the Board meetings during the FP December 2018.
DIRECTORS’ ATTENDANCE AT BOARD MEETINGS
Board Meetings# Directors Designation/Independence Attendance % Tan Sri Dato’ A. Ghani Othman Chairman, Non-Independent 4/5 80 Tan Sri Dato’ Seri Mohd Bakke Salleh Executive Deputy Chairman & Managing Director 5/5 100 Tan Sri Datuk Dr Yusof Basiran Independent 4/5 80 Muhammad Lutfi Independent 4/5 80 Datuk Zaiton Mohd Hassan Senior Independent 5/5 100 Dato’ Mohd Nizam Zainordin Non-Independent 5/5 100 Dato’ Mohamad Nasir Ab Latif Non-Independent 5/5 100 Zainal Abidin Jamal Non-Independent 5/5 100 Tan Ting Min Independent 5/5 100 Lou Leong Kok Independent 5/5 100 Dato’ Henry Sackville Barlow Independent N/A (i) N/A (i) Board Meetings# Former Director Designation/Independence Attendance % Dato’ Che Abdullah @ Rashidi Che Omar Independent 2/3(ii) 67
Notes: # Reflects the number of meetings held during the time the Director held office. (i) Not Applicable as the effective date of appointment was 5 April 2019. (ii) An Independent Non-Executive Director; Dato’ Che Abdullah @ Rashidi Che Omar retired at the conclusion of the Fifteenth Annual General Meeting of the Company on 21 November 2018.
Details of the respective directors’ attendance at Board Committee meetings are provided in the relevant Committee reports from pages 84 to 103.
78 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation How We Are Governed
CORPORATE GOVERNANCE OVERVIEW STATEMENT
BOARD DYNAMICS SETTING STRATEGY
Beyond age, ethnic and gender diversity, our Board consists The Board is responsible for deciding the Group’s strategy and of members with diverse skills and educational background, overseeing its performance, while passing the responsibility of international and industry experiences, as well as knowledge the day-to-day operations to the EDCMD. The Board is directly and philosophies in bringing competing views when deliberating involved in approving major acquisitions, providing oversight matters at Board meetings, thus ensuring decision-making and control, growing shareholder value and promoting corporate perspectives are enhanced (refer to further details on our governance. The regular report by the EDCMD to the Board Board Diversity on page 95 of this report). A majority of our includes business updates and insights, which ensures that the Board members are independent to foster greater boardroom Directors have a sound understanding of our operational matters, objectivity. the competitive and regulatory environment, group and business unit performance, investor relations and sustainability. Board Evaluations are conducted annually to provide opportunities for increasing efficiency, maximising strengths As part of the Group’s succession planning strategy, Encik and highlighting areas for improvement. Pursuant to the Board Mohamad Helmy Othman Basha was appointed as the Deputy Evaluation exercise in August 2018, it was concluded that the to the Managing Director, in addition to his role as the Chief Board had discharged its responsibilities well, with good Board Operating Officer for Upstream in January 2019. structure and operations. Out of the 5-point Likert scale, with five (5) being the best possible rating, most assessment criteria PROFESSIONAL DEVELOPMENT AND CONTINUOUS EDUCATION under the Board assessment were rated either ‘4’ or ‘5’. The Board was satisfied with the evaluation outcome and identified Newly appointed Directors will undergo an on-boarding session key areas of enhancement. to orientate them on the Group’s business, performance, issues, strategies and structure. Site visits, which include briefings from CORPORATE CULTURE & VALUES the Management of operational units are organised to provide each new Director with a visual perspective of the Group’s The Board sets the ‘tone at the top’ in directing our Company’s operations and further depth and appreciation of the key drivers culture and values and we continue to embrace our core values behind the Group’s businesses. of Integrity, Respect & Responsibility, Enterprise and Excellence. Adherence to these founding values is paramount which are We thereafter encourage all Directors to keep their skills and embedded in the following policies on expected standards of knowledge up to date, and to help them, we provide the Board behaviour: and individual directors with the continuous education that they may require. Save for Dato’ Barlow who was appointed to the • Our Code of Business Conduct (COBC) demonstrates our Board as an Independent Non-Executive Director on 5 April 2019, enforcement of the Company’s ethical tone for behaving all our Directors have attended the Mandatory Accreditation fairly, honestly and ethically wherever we do business, and Programme (MAP). our collective commitment to uphold integrity throughout the Group; During the FP December 2018, the Group Secretary has • Our commitment to excellence extends beyond our undertaken a Directors’ Training Needs Assessment to identify organisation. We also work closely with our Vendors individual Director’s training and development aspirations, which (such as Service Providers, Suppliers, Contractors and is then translated into a professional development plan, covering Consultants) to ensure that our values and principles are areas such as legal and regulatory compliance, sustainability and carried through in every aspect of our business operations. environment as well as innovation. Our Vendor Code of Business Conduct (VCOBC) provides guidance to the Vendors on the required standards of The Group Secretary thereafter recommends the list of behaviour when conducting work for the Group and have programmes to the Board. The organising of the programmes is been derived from our Group’s Core Values; and undertaken on a regular basis. All Directors attended training • Our Whistleblowing Policy provides an avenue for the programmes, conferences, seminars, courses and/or workshops reporting of genuine concerns in relation to wrongdoings during the FP December 2018. For more detailed information without fear of reprisal. Any employee, stakeholder or on the Directors’ Training and Continuous Education the public can lodge their concerns via the Company’s Programme, please refer to the Company’s website at www. corporate website at www.simedarbyplantation.com. simedarbyplantation.com.
Annual Report // 6-Month Financial Period Ended 31 December 2018 79 How We Are Governed Sime Darby Plantation
CORPORATE GOVERNANCE OVERVIEW STATEMENT
BOARD REMUNERATION
The Nomination & Remuneration Committee (NRC) is primarily responsible for conducting periodic reviews and recommending to the Board a formal and transparent remuneration policy and framework for Directors and Senior Management of our Company, drawing on external consultants’ advice as necessary, as well as the remuneration framework of employees of our Company.
The Directors’ remuneration policy is reviewed regularly to ensure that the compensation of the Chairman and Directors of the Board are aligned to at least around the 75th percentile and the 50th percentile of appropriate peer groups, respectively. The remuneration framework is aligned to the complexity and leadership position of the Company and benchmarked against regional companies which are comparable to us in terms of size and similar nature of business, to ensure that the Board and Board Committees members are competitively remunerated.
The salient elements of the Directors’ remuneration policy and a summary of the Executive Director’s remuneration package are described in Practice 7.1 of the CG Report.
Remuneration for the Non-Executive Directors of the Board and as members of the Board Committees in the form of fees for the FP December 2018 is as follows:
Chairman Member Board/Board Committee (RM/Year) (RM/Year) 240,0001 Board 600,000 400,0002 Governance & Audit Committee 80,000 50,000 Nomination & Remuneration Committee 60,000 35,000 Risk Management Committee 60,000 35,000 Sustainability Committee 60,000 35,000 Board Tender Committee 60,000 35,000
Notes: 1 Fee for Resident Director. 2 Fee for Non-Resident Director.
REMUNERATION & MATERIAL BENEFITS OF OUR DIRECTORS
The remuneration of our Directors, which includes salaries and bonuses for the Executive Director and Director’s fees, meeting allowances and benefits for the Non-Executive Directors, is considered and recommended by our NRC and subsequently approved by our Board. The fees and benefits payable to the Non-Executive Directors are approved by our shareholders at a general meeting of the Company.
80 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation How We Are Governed
CORPORATE GOVERNANCE OVERVIEW STATEMENT
Details of Directors’ remuneration (including benefits-in-kind) and the aggregate remuneration of Directors at the Group level for the FP December 2018 are as follows:
Directors’ Directors’ Fees5 Fees6 Salary As Board Total & Other As Committee Directors’ Benefits Subsidiaries Remuneration Directors Members Fees -in-kind1 Sub-Total of SDP Grand Total (RM’000) (RM’000) (RM’000) (RM’000) (RM’000) (RM’000) (RM’000) (RM’000) Executive Director Tan Sri Dato’ Seri Mohd Bakke Salleh 2,762 N/A 4 N/A 4 N/A 4 29 2,791 N/A 4 2,791 Non-Executive Director Tan Sri Dato’ A. Ghani Othman2 302 - 302 36 338 - 338 Tan Sri Datuk Dr Yusof Basiran 121 60 181 18 199 111 310 Muhammad Lutfi3 202 18 220 14 234 25 259 Datuk Zaiton Mohd Hassan 121 76 197 15 212 - 212 N/A 4 Dato’ Mohd Nizam Zainordin 121 43 164 1 165 - 165 Dato’ Mohamad Nasir Ab. Latif 121 17 138 1 139 - 139 Zainal Abidin Jamal 121 48 169 16 185 - 185 Tan Ting Min 121 61 182 5 187 - 187 Lou Leong Kok3 202 17 219 1 220 - 220 Total for Non-Executive Directors 1,432 340 1,772 107 1,879 136 2,015 Grand Total 2,762 1,432 340 1,772 136 4,670 136 4,806
Notes: 1 Certain benefit such as Company Car and Petrol are only provided to the former Directors of Sime Darby Berhad until 1 December 2018. Other benefits-in-kind include Healthcare, Insurance & Mobile Phone. 2 Including Driver for Chairman. 3 Non-Resident Director. 4 N/A – Not Applicable. 5 Paid by SD Plantation. 6 Paid by Subsidiary Companies of SD Plantation.
Additionally, details of remuneration (including benefits-in-kind) for a Director who had retired on 21 November 2018 are as follows:
Director’s Director’s Fees5 Fees6 As Board Total As Committee Director’s Benefits Subsidiaries Director Member Fees -in-kind1 Sub-Total of SDP Grand Total (RM’000) (RM’000) (RM’000) (RM’000) (RM’000) (RM’000) (RM’000) Dato’ Che Abdullah @ Rashidi Che Omar 95 71 166 1 167 79 246 Total 95 71 166 1 167 79 246
Notes: 1 Benefits-in-kind include Healthcare, Insurance & Mobile Phone.
Bands of the senior management’s remuneration for the FP December 2018 are disclosed in Practice 7.2 of the CG Report.
Annual Report // 6-Month Financial Period Ended 31 December 2018 81 How We Are Governed Sime Darby Plantation
CORPORATE GOVERNANCE OVERVIEW STATEMENT
PRINCIPLE B EFFECTIVE AUDIT AND RISK MANAGEMENT
GOVERNANCE & AUDIT COMMITTEE (GAC) RISK MANAGEMENT COMMITTEE (RMC)
Following the retirement of Dato’ Che Abdullah @ Rashidi Che The RMC was established as one of the committees of the Board Omar at the conclusion of the previous Annual General Meeting and supports the Board by setting and overseeing the Risk (AGM) of the Company held on 21 November 2018 and the Management Framework of the Group and regularly assessing appointment of Dato’ Henry Sackville Barlow on 5 April 2019, the the aforementioned Framework and policies to ascertain its GAC is now composed of three (3) Independent Non-Executive adequacy and effectiveness. The RMC is comprised of four (4) Directors and one (1) Non-Independent Director. The GAC is Non-Executive Directors and is chaired by a Non-Independent chaired by the Senior Independent Non-Executive Director, Datuk Non-Executive Director, Encik Zainal Abidin Jamal. Zaiton Mohd Hassan. The RMC is assisted by the Chief Risk Officer (CRO) in executing The mandate of the GAC is encapsulated in its Terms of its main functions and duties as specified in the RMC’s Terms of Reference which, among others, defines its purpose, composition, Reference. appointment, authority, functions and duties. During the FP December 2018 under review, the GAC had convened three (3) The activities of the RMC, its duties and responsibilities as well as details of meetings attended by each member can be found on pages 96 to 97 of this meetings, during which key matters relating to financial reporting, Annual Report and Section A of the CG Report. internal and external audits, governance and related party transactions were discussed. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK
In effectively discharging its oversight roles on governance The RMC, along with the GAC, have been delegated with and internal controls, the GAC is assisted by the Chief Integrity the responsibilities of overseeing the effectiveness of risk & Assurance Officer (CIAO) who leads the Group’s in-house management and internal control systems on behalf of the Board, internal audit and compliance functions. and also to advise the Board on the principal risks facing the business including those that would threaten its solvency or The activities of the GAC, its duties and responsibilities as well as details of meetings attended by each member can be found on pages 84 to 89 of this liquidity. Annual Report and Section A of the CG Report. Details of the Risk Management and Internal Control Framework are disclosed in the ‘Statement of Risk Management and Internal Control’ and can be found on pages 104 to 109 of this Annual Report and Section A of the CG Report.
82 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation How We Are Governed
CORPORATE GOVERNANCE OVERVIEW STATEMENT
PRINCIPLE C INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS
I. COMMUNICATION WITH STAKEHOLDERS Integrated Reporting
THE BOARD BELIEVES IN EFFECTIVE, Our Annual Report for the FP December 2018 is prepared TRANSPARENT AND REGULAR in accordance with the International Integrated Reporting Framework (IR) issued by the International Integrated COMMUNICATION WITH ITS STAKEHOLDERS Reporting Council (IIRC) and Global Reporting Initiatives’ TO BUILD TRUST AND FACILITATE MUTUAL (GRI) Sustainability Reporting Standards to enhance UNDERSTANDING OF EACH OTHER’S reporting connectivity while providing stakeholders with OBJECTIVES AND EXPECTATIONS. a more holistic view of how the Company creates and sustains value. Timely and Quality Disclosure II. CONDUCT OF GENERAL MEETINGS The Board is committed in ensuring all communications to the investing public regarding the business, operations and Notification in writing to shareholders (via hard copy or financial performance of the Company are accurate, timely, electronic means) of the publication of the Notice of AGM factual, informative, consistent, broadly disseminated and and the Annual Report on the Company’s website, will be where necessary, filed with regulators in accordance with dispatched to shareholders at least 28 days prior to the applicable legal and regulatory requirements. AGM that is scheduled on 23 May 2019. The Notification will provide the designated website link and Quick Response We look forward to engaging with our shareholders at the (QR) code, where a copy of the Notice of AGM and the forthcoming AGM. The AGM offers an opportunity to our Annual Report may be downloaded. shareholders to raise questions pertaining to our Company’s performance directly to our Board, EDCMD and Senior Shareholders have the right to request a hard copy of our Leaders. Annual Report through the designated channel. The venue of the AGM is at a central and easily accessible location. The Company’s website is a key communication channel for the Company to reach its shareholders, the investment The AGM provides an opportunity to the Chairman and other community, and the general public. Information on the members of the Board to disclose the Company’s progress Company's values, Corporate Governance Framework, and performance. Directors shall attend the AGM to answer COBC, whistleblowing guidelines, and various other any question from shareholders. corporate governance initiatives is available on the Company’s website. More detailed information on the AGM is available online in the Investor Relations section at www.simedarbyplantation.com. The Company’s financial results, announcements made to Bursa Securities and corporate presentations can In the previous AGM and Extraordinary General Meeting also be retrieved from our Company’s website at (EGM) conducted on 21 November 2018, all but one (1) www.simedarbyplantation.com. Director (Dato’ Che Abdullah @ Rashidi Che Omar) attended the meetings and responded to all queries and concerns by the shareholders.
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GAC
The Committee assists the Board to embed a strong governance culture within the Group, which is fundamental in generating value for our stakeholders.
DATUK ZAITON MOHD HASSAN - Chairman of the Governance & Audit Committee
INSIDE THIS REPORT
The Governance & Audit Committee (GAC) plays an important role in promoting a strong corporate governance culture throughout the Group, and as such, the purpose of this report is to provide an overview of the areas that the Committee had reviewed in the financial period in support of this mandate. The focus of the GAC’s activities, as guided by its Terms of Reference (TOR), encompasses the following key areas:
• Review of financial results and statements; • Review of conflict of interest situations and related party transactions in ensuring that transactions are carried out in the best interest of the Group and not detrimental to the interest of our minority shareholders; • Foster solid governance, internal control, and risk environment; and • Oversight of the external and internal audit processes.
COMMITTEE COMPOSITION AND MEETINGS
The GAC comprises four (4) members, all of whom are Non-Executive Directors, and a majority of whom are Independent. The current GAC members are:
Members1 Membership Appointment Attendance Datuk Zaiton Mohd Hassan Chairman 24 February 2016 4/4 100% Senior Independent Non-Executive Director Dato’ Mohd Nizam Zainordin Member 14 July 2017 4/4 100% Non-Independent Non-Executive Director Tan Ting Min Member 9 August 2017 4/4 100% Independent Non-Executive Director Dato’ Henry Sackville Barlow2 Member 5 April 2019 N/A 4 N/A 4 Independent Non-Executive Director Former Member Membership Retirement Attendance Dato’ Che Abdullah @ Rashidi Member 21 November 2018 1/3 33%3 Che Omar Independent Non-Executive Director
Notes: 1 For the Members’ profiles see pages 66 to 69. 2 Dato’ Henry Sackville Barlow was appointed as Member of the GAC on 5 April 2019 after the financial period ended 31 December 2018. 3 Reflects the number of meetings held during the time the Director held office. 4 Not Applicable.
The GAC comprises Non-Executive Directors and is supported by the Group Integrity, Governance & Assurance Department in discharging its responsibilities. The GAC Chairman reports to the Board on key matters deliberated at the GAC meetings.
Meetings of the Committee are attended by the Executive Deputy Chairman & Managing Director (EDCMD), Deputy to the Managing Director & Chief Operating Officer, Upstream, Chief Advisor & Value Officer, Chief Financial Officer, Chief Operating Officer, Downstream, Chief Integrity & Assurance Officer, and Chief Risk Officer. In addition, other members of Senior Management are also invited to attend meetings as and when necessary to support detailed discussions.
The external auditors also attend and brief the Committee on matters relating to external audit for the current financial period and provided an update on past audit matters at the meetings.
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The Chairman of the GAC, Datuk Zaiton Mohd Hassan, is a Fellow of the Association of Chartered Certified Accountants (ACCA), United Kingdom, and a member of the Malaysian Institute of Accountants (MIA), Malaysian Institute of Certified Public Accountants (MICPA), and Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC).
Dato’ Mohd Nizam Zainordin is a Fellow of the ACCA, United Kingdom, a member of the MIA and a Certified Financial Planner. He has over 20 years of experience in the finance sector.
Tan Ting Min obtained her Bachelor and Master of Arts degrees from the University of Cambridge, United Kingdom in 1991 and 1994, respectively. She was the regional plantation sector team lead in Credit Suisse from 1998 to 2017 and has covered the plantation sector for close to 25 years. When she was the Head of Equity Research in Credit Suisse (2010-2017), she had written extensively on equity investment strategy in Malaysia, based on economics, political and macro fundamentals.
Dato’ Henry Sackville Barlow obtained his Bachelor and Master of Arts degrees from the University of Cambridge, United Kingdom. He is also a Fellow of the Institute of Chartered Accountants in England and Wales. Dato’ Barlow has over 35 years of experience in the Plantation Industry. Presently, he is Joint Chair of the Grievance Committee of the Roundtable on Sustainable Palm Oil (RSPO).
Collectively, the GAC members are qualified individuals and have a wide range of skills and expertise to discharge the Committee’s functions and duties. The GAC members’ financial literacy and understanding of the financial reporting process have contributed to the GAC’s discussion in upholding the integrity of the Company’s financial reporting process and financial statements.
Further details of the GAC members are available under the Board of Directors section on the Company’s website at www.simedarbyplantation.com.
ROLES OF THE COMMITTEE
The GAC is primarily responsible for:
• Assisting the Board in fulfilling its statutory and fiduciary responsibilities of monitoring the Group’s management of financial risk processes, and accounting and financial reporting practices;
• Reviewing the Group’s business process, the quality of the Group accounting function, financial reporting and the system of internal controls;
• Enhancing the independence of both the external and internal audit functions by providing direction to and oversight of these functions on behalf of the Board; and
• Assisting the Board in ensuring that an effective ethics programme is implemented across the Group, and monitors compliance with established policies and procedures.
The specific functions and duties of the GAC are provided in its TOR, which is available online in the Corporate Governance section at www.simedarbyplantation.com.
ANNUAL PERFORMANCE ASSESSMENT
The Board has conducted an annual review of the term of office and performance of the GAC and is satisfied that the Committee has effectively discharged its duties in accordance with its TOR.
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OUR FOCUS AND ACTION PLAN
The GAC receives updates on key governance matters, audit initiatives and significant matters across the Group at each of its quarterly meetings. The summary of significant matters discussed by the GAC for the financial period ended 31 December 2018 (FP December 2018) is shown below:
Significant Initiatives/Issues Matters Considered Outcome Budget 2019 Consequential impact on minimum wage that will be raised The Management advised that the impact would not be to RM1,100 nationwide. immediate as the impact was more on general workers who were on daily-rated wage. The estimated cost impact is approximately RM8.03 million per annum.
It is advisable to ensure the salary adjustments complied with the minimum wage requirements as the RSPO and the Malaysian Sustainable Palm Oil (MSPO) will check the salary of workers for certifications renewal.
Ensured financial Malaysian Financial Reporting Standards (MFRS) 9 The external auditors, PricewaterhouseCoopers PLT statements “Financial Instruments” and MFRS 16 “Leases”. (PwC) had reviewed and concurred with management’s comply with computation and impact assessment arising from the applicable adoption of MFRS 9 and MFRS 16 on the Group’s opening financial balance as at 1 July 2018. reporting standards The GAC agreed for PwC to audit the financial impact arising from the adoption of these standards for the current financial period during the final audit FP December 2018.
Significant The GAC reviews and reports to the Board on significant matters including financial reporting issues, significant judgments Judgements and made by Management, significant and unusual events or transactions, and how these matters are addressed. The two (2) Issues significant matters considered by the GAC, which were also highlighted by PwC are as follows: 1. Recoverability of the Group’s investment in Sime Darby Plantation Liberia (SDP Liberia) There were changes to the key assumptions in determining The impairment charge of USD28.4 million (RM111.8 the fair value of the investment, resulting in additional million) has been recognised by Management at SDP Group impairment charge for the financial period. level for the financial year ended 30 June 2018. The GAC agreed that Management continues to closely monitor the progress of the Group’s investment in SDP Liberia as the recoverable amount remains highly sensitive and that appropriate disclosures should be made in the financial statements.
2. Impairment assessment of the carrying value of goodwill arising from the New Britain Palm Oil Limited (NBPOL) acquisition NBPOL’s goodwill was partly allocated to PT Minamas PwC have reviewed Management impairment assessment Gemilang and its subsidiaries (Minamas Group) cash and concurred with the reasonableness of key generating units (CGU) as Minamas Group operations are assumptions used. expected to benefit from the synergies of the acquisition of NBPOL. Based on the sensitivity analysis, an individual change of the key assumptions provides sufficient headroom in Management performed impairment assessment of the the VIU to recover the carrying value of the net assets CGU based on value-in-use (VIU) determined using the (including the allocated goodwill) in Minamas Group. discounted cash flow models, which was approved by However, should all the key assumptions used changed the Directors. A range of sensitivity analysis was also in a negative manner, the Group will record a deficit. performed by Management. As such, GAC agreed that appropriate disclosures of key assumptions and sensitivities should be made in the financial statements of the Group.
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SUMMARY OF ACTIVITIES
During the financial period, the GAC discharged its functions and carried out its duties as set out in its TOR. The summary of key activities undertaken by the GAC during the FP December 2018 is provided below:
Financial reporting
• Considered the unaudited quarterly financial results and the related press statements for recommendation to the Board. In doing so, there was focus on changes in major accounting policies and practices as well as significant impairments and adjustments/ issues affecting the financial information to ensure compliance with the MFRS and other statutory requirements; • Considered the audited draft financial statements of the Company and the accompanying Directors’ and Auditor’s reports and ensured that the financial statements complied with the MFRS, for recommendation to the Board for approval; • Considered the proposed dividends for recommendation to the Board; and • Reviewed foreign currency exposures.
Internal and external audit
• Held separate quarterly private sessions with the Chief Internal Auditor and the external auditors, without the presence of Management, except for the Group Secretary; • Reviewed the Group Audit Plan of the external auditors which outlined their audit strategy and approach for the FP December 2018; • Assessed the performance, suitability, objectivity and independence of the external auditor, PwC, using the adopted assessment questionnaire from Bursa Malaysia Corporate Governance (CG) Guide (3rd Edition) entitled “External Auditor Evaluation Guide”; • Considered the global external audit fees for recommendation to the Board for approval; • Approved the Group Corporate Assurance (GCA) Plan to ascertain the extent of its scope and coverage of the Group’s activities, including the adequacy of GCA’s staffing strategies in supporting the Plan’s completion; and • Deliberated on both the external and internal audit reports and the corresponding key findings, recommendations and corrective actions taken by Management.
Governance
• Updated the Board on key matters deliberated at GAC meetings and the activities undertaken by the GAC. Minutes of the GAC meetings are circulated to the Board for noting. The report to the Board is a standing agenda item at the quarterly meetings of the Board; • Provided oversight and reviewed the internal control framework and governance policies, processes and documents including the Group Policies & Authorities, Code of Business Conduct, TOR of the GAC and TOR of the Whistleblowing Committee; • Approved the Group Compliance (GCO) Plan which outlined the key initiatives for GCO and the corresponding resources required to support the achievement of the plan; • Considered the GCO report which summarises the key activities of GCO for the period encompassing regulatory and legislation compliance as well as policy and governance matters; and • Reviewed the results of investigations conducted on whistleblowing allegations to ensure that independent investigations of such allegations had been conducted and appropriate follow-up action taken.
Related party transactions
• Reviewed related party disclosures in compliance with the MFRS 124, Main Market Listing Requirement (MMLR) of Bursa Malaysia Securities Berhad (Bursa Securities), Companies Act 2016, and the internal guidelines on a quarterly basis.
Other matters
• Reviewed the proposed Dividend Reinvestment Plan; • Reviewed the appointment of financial advisors for non-audit services; • Reviewed reports on hedges, open positions, investment tracking, and the weighted average cost of capital and investment hurdle rate; • Reviewed the minutes of meetings of the GAC of Minamas Plantation; and • Performed an annual assessment of the Chief Internal Auditor against key result areas and competencies.
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CONTINUOUS PROFESSIONAL DEVELOPMENT
The GAC members attended continuous professional development programme to keep themselves abreast of relevant developments in governance and accounting as well as auditing standards, practices, and rules. Further details on the programmes attended by the GAC members during this financial period are disclosed under Practice 8.5 of the Corporate Governance Report available under the Corporate Governance section on the Company’s website at www.simedarbyplantation.com.
GROUP INTEGRITY, GOVERNANCE AND ASSURANCE
The Group has a combined assurance (GCA) and compliance (GCO) function housed under the Group Integrity, Governance and Assurance (GIGA) Department. Previously known as the Group Governance, Assurance & Compliance (GGAC) Department, GIGA was renamed as a manifestation of the Group’s support towards the Honourable Malaysian Prime Minister’s call for the establishment of an Integrity and Governance Unit in all government-linked companies which oversees whistleblowing, investigations, integrity enhancement and governance – the functions, all of which, have always resided within GGAC. Accordingly, the Chief Internal Auditor, Nik Maziah Nik Mustapha, was re-designated as the Chief Integrity & Assurance Officer (CIAO) effective 25 February 2019.
The CIAO is a Certified Internal Auditor by the Global Institute of Internal Auditors, USA and holds a Certification in Control Self- Assessment conferred by the same Institute. She is also a Chartered Accountant of the Malaysian Institute of Accountants and a professional member of The Institute of Internal Auditors Malaysia. She holds a Bachelor of Accounting (Hons) degree from the Universiti Utara Malaysia and has accumulated over 21 years’ working experience in internal and external audit, credit management, and financial accounting in a wide range of industries including banking, airline, property, and plantation.
Group Corporate Assurance (GCA)
The GCA reports functionally to the GAC and administratively to the EDCMD to allow the required degree of independence from the operations of the Group. GCA’s principal responsibility is to undertake regular and systematic reviews so as to evaluate and improve the effectiveness of risk management, control, and governance processes. The ambit of GCA is defined in the GCA Charter, which is annually reviewed and tabled to the GAC for approval.
GCA activities are governed by The Institute of Internal Auditors’ mandatory guidance including the Definition of Internal Auditing, the Code of Ethics, and the International Professional Practices Framework (IPPF). This ensures that GCA remains effective and responds to the expanding demand for high-quality audit services. An internal Quality Assurance and Improvement Program (QAIP) has also been established, where through the internal QAIP, structured projects were identified/undertaken to achieve operational excellence, elevate competence, improve communication and administration, and sharing of best practices, in preparation for the first external assessment to be undertaken by the year 2021.
All independent internal audit services conducted in the Group during the financial period were conducted by GCA, through its 69 personnel comprising 66 internal auditors and three (3) secretarial/administrative staff. Apart from the Malaysia-based auditors, the CIAO is supported by Regional Heads in GCA offices located in Indonesia and Papua New Guinea. The operational costs incurred by GCA for the financial period amounted to RM5.45 million, comprising mainly staff costs and travelling expenses.
GCA assists the Group to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. This was attained via the conduct of the following key activities:
• Control and compliance reviews to establish compliance to laws, regulations, policies, and procedures which impact the Group; • Thematic reviews of Upstream operations which concentrate on the optimisation and performance of each Upstream region from the perspective of cost management and efficiency. These reviews assist GCA in making a comparison on the performance of controls across regions and set a benchmark to be leveraged by Management in evaluating performance; • Validation of Control Self-Assessment (CSA) results to ensure the reliability and effectiveness of the CSA exercise as well as on-going Continuous Control Monitoring (CCM) for immediate detection of non-compliances and anomalies/red flags; • Deploying data analytics throughout the audit lifecycle, to broaden audit coverage in providing more comprehensive opinion on the effectiveness of governance, risk management and controls to the business; • Business advisory/consulting reviews aimed at adding value towards key business activities; • Investigative audits pursuant to whistleblowing complaints lodged and Board/Management requests; and • Follow-up reviews on the implementation status of recommendations made to ensure that timely action has been taken to address control limitations noted during audit reviews.
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Group Compliance (GCO)
As in GCA, GCO also reports functionally to the GAC and administratively to the EDCMD, and provides oversight, coordination, consultation, and validation of the Group’s state of compliance. The main role of GCO is to assist the Board, the GAC, and Management in coordinating compliance risk management activities and provide reasonable assurance to the Management and the Board, that the Group’s operations and activities are conducted in line with all regulatory requirements, internal policies and procedures, Code of Business Conduct, and standards of good business practice.
In doing so, GCO plans and executes the corporate compliance programmes based on its approved compliance framework, addressing compliance issues and concerns within the Group, as follows:
• Initiating an Anti-Corruption Compliance programme in preparation of meeting the “adequate procedures” requirement as stipulated under the Malaysian Anti-Corruption Commission (Amendment) Act 2018; • Administering of the whistleblowing channel which entails receipt of whistleblowing complaints, channelling complaints for investigation, monitoring of cases for closure as well as reporting to relevant parties on whistleblowing complaints received; • Introducing various roll-out campaigns to generate interest and awareness in the revised Code of Business Conduct as well as resonate the Group’s commitment towards upholding a culture of high ethics and integrity; • Monitoring of the status of compliance with regulations & legislation and the implementation of corrective action; and • Reviewing the Group Policies and Authorities (GPA) to ensure that they remain relevant in the current operating environment, reflect best practices as well as identify areas that warrant new GPA provisions. Key outcomes of the GPA review are as follows: - A policy to address notification, reporting, and disclosure when dealing with regulators and government agencies was developed; - The Policy Instrument Framework (PIF) which provided the operational structure for the management and governance of all policy instruments within the Group was revised. The PIF among others established a structured hierarchy for all core policy instruments and documents and outlined the ground rules for the development, establishment, amendment, and review of all core policy instruments; and - Policies and guidance to manage exposures related to the sanctions laws.
EXTERNAL AUDITORS
The Malaysian Institute of Accountants (MIA) has revised the ‘Audit Partner Rotation’ Period in Malaysia where effective 15 December 2018, Key Audit Partners of Public Interest Entities (PIE) are allowed to serve in the same role for a maximum of seven (7) years. The Engagement Partner rotating after such a period should not resume the audit engagement partner role for the PIEs until three (3) years have elapsed.
The external auditors, PwC, have confirmed their independence in accordance with the Firm’s requirement and with the provisions of the By-Laws of Professional Independence of the MIA (inclusive of the above stated requirement) in its Report to the GAC at its meeting on 20 February 2019.
In recommending PwC for re-appointment at the forthcoming Annual General Meeting (AGM) of the Company, the GAC considered their performance, suitability, objectivity, and independence by assessing, among others:
• The competence, audit quality and resource capacity of the external auditor in relation to the audit; • The nature and extent of the non-audit services rendered and appropriateness of the level of fees; and • Obtaining written assurance from the external auditors confirming that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.
This Report is made in accordance with the resolution of the Board of Directors dated 5 April 2019.
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NRC The Committee reviews the Board composition and ensures that any appointment brings the right balance of skills, knowledge, breadth of experience and diversity to the Board. The Committee also oversees the appointment and promotion of Senior Management and succession plans to support the development of talent within the Group.
The Committee reviews and endorses the Senior Management Remuneration Policy and the Employees Remuneration Framework, which aim to attract, motivate and retain the best talent, to support the Group’s strategy and value creation for the Group and the shareholders. The Committee also ensures that at all times there is a balance between the need to compete for the very best talent and the need to pay fairly and responsibly.
TAN SRI DATUK DR YUSOF BASIRAN - Chairman of the Nomination & Remuneration Committee
INSIDE THIS REPORT
This report highlights the activities of the Nomination & Remuneration Committee during the financial period ended 31 December 2018 (FP December 2018). We report to shareholders on our responsibility in supporting the development of a balanced Board in terms of expertise, skills, experience and diversity and ensuring remuneration principles for Directors will adequately compensate the Directors for their time and effort for the continuous success of the Company.
WHO IS THE COMMITTEE:
Members1 Membership Appointment Attendance Tan Sri Datuk Dr Yusof Basiran Chairman 14 July 2017 3/3 100% Independent Non-Executive Director Datuk Zaiton Mohd Hassan Member 14 July 2017 3/3 100% Senior Independent Non-Executive Director Dato’ Mohd Nizam Zainordin Member 14 July 2017 3/3 100% Non-Independent Non-Executive Director Dato’ Henry Sackville Barlow2 Member 5 April 2019 N/A N/A Independent Non-Executive Director Former Member Membership Retirement Attendance3 Dato’ Che Abdullah @ Rashidi Member 21 November 2018 2/2 100% Che Omar Independent Non-Executive Director
Notes: 1 For the Members’ profiles, see pages 64 to 69. 2 Appointment with effect from 5 April 2019. 3 Reflects the number of meetings held during the time the Director held office. N/A Not Applicable.
The Nomination & Remuneration Committee (NRC) comprises Non-Executive Directors (NED) with a majority being Independent Directors and includes a Senior Independent NED. The composition of the NRC complies with the requirements of both the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (Listing Requirements) and the Malaysian Code on Corporate Governance (MCCG) 2017.
Meetings of the NRC are attended by the Executive Deputy Chairman & Managing Director (EDCMD). Other members of Senior Management are invited to meetings of the NRC when necessary to support detailed discussion on matters relevant to the agenda of the meeting.
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ROLES OF THE COMMITTEE
The primary objectives of the Committee are as follows:
• To assist the Board in reviewing the appropriate size and balance of the Board, and reviewing the required mix of skills, experience and knowledge of the Directors. The NRC also ensures that there is sufficient succession planning and human capital development focus in the Sime Darby Plantation Berhad (SDP) Group; and • To recommend to the Board the remuneration framework for the Non-Executive Chairman, the EDCMD, NEDs, Executive Directors, key Management positions and employees of the SDP Group.
The Terms of Reference (TOR) of the NRC are available online in the Governance section at www.simedarbyplantation.com.
ANNUAL PERFORMANCE ASSESSMENT
The Board has reviewed the Committee’s effectiveness in carrying out its duties as set out in the Committee’s Terms of Reference. The Board is satisfied that the Committee has effectively discharged its duties in accordance with its Terms of Reference.
The Committee’s Terms of Reference was revised on 29 August 2018 to allow the Committee to delegate its authority and responsibilities as the Committee deems appropriate. Such delegation will be periodically reviewed by the NRC. The TOR was revised on 5 April 2019 to include the administering and implementing of the Long Term Incentive Plan.
OUR FOCUS
During the FP December 2018, the NRC undertook the following key activities:
Nomination Function Remuneration Function
• Recommending and reviewing the Policy on Board Composition • Recommending the remuneration for the NEDs of the SDP of the Company Group of Companies for the financial year ended 30 June 2018 • Recommending the re-election of Directors retiring at the 2018 • Reviewing and recommending the remuneration and benefits Annual General Meeting (AGM) for the EDCMD and Direct Reports to the EDCMD • Recommending revisions to the TOR of the NRC • Recommending the bonus and value creation incentive payouts • Recommending the disclosure of the Report on the NRC for the for FY2017/2018 2018 Annual Report • Reviewing the performance of the EDCMD and recommending • Overseeing succession planning for the EDCMD the bonus proposal for the EDCMD for FY2017/2018 • Evaluating and recommending the promotion of Senior • Recommending the salary increment and bonus proposals for Management of SDP Direct Reports to the EDCMD for FY2017/2018 • Monitoring the conduct of the Board Effectiveness Assessment • Recommending the implementation of SDP’s Mutual Separation (BEA) 2018 Scheme • Recommending suitable training programmes to continuously • Recommending Senior Management Remuneration Policy train and equip Directors. • Recommending the total remuneration review for Malaysia and • Reviewing the Bumiputera Empowerment Agenda Key short term incentive framework for the Group. Performance Indicators (KPI) 2018 targets and achievement from January 2018 to June 2018 • Recommending the Bumiputera Empowerment Agenda KPI Plan for 2019.
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NOMINATION AND RECRUITMENT PROCESS
One of the NRC’s key roles is to drive the recruitment process for new Directors. In considering candidates as potential Directors, the NRC takes into account the following criteria:
• Skills, knowledge, expertise and experience; • Time commitment, character, professionalism and integrity; • Perceived ability to work cohesively with other members of the Board; • Specialist knowledge or technical skills in line with the Group’s strategy; • Diversity in age, gender and experience/background; and • Number of directorships in companies outside the Group.
On the appointment of Directors on the Board of SDP, where applicable, the NRC will seek third party feedback on candidates that the NRC is considering for recommendation to the Board of SDP. The NRC had, on 1 April 2019, recommended for consideration of the Board the appointment of Dato’ Henry Sackville Barlow as an Independent NED on the Board and Board Committees of SDP.
Prior to appointment, potential Directors are made aware of the time commitment expected from each of them in carrying out their roles as Director and/or Member of Board Committee(s) including attendance at the Board, Board Committees and other meetings. Directors are required to confirm that they are able to devote sufficient time to their roles at the Company and at the Group taking into consideration the number of their listed company board(s) and other commitments. In accordance with the provisions of the Listing Requirements, none of the Directors hold more than five (5) directorships in listed issuers during the FP December 2018.
On 5 April 2019, the Board approved the appointment of Dato’ Barlow as an Independent NED on the Board of SDP and as the Chairman and/or Member of the following Board Committees of SDP:
Board Committee Designation Sustainability Committee Chairman Nomination & Remuneration Committee Member Governance & Audit Committee Member
The appointment of Dato’ Barlow will facilitate the Company in addressing the requirement for Independent Directors on its Board and Board Committees.
The Group Secretary ensures that all appointments are properly made and that all necessary information is obtained from the Directors, both for the Company’s own records and for the purposes of meeting statutory obligations as well as obligations arising from the Listing Requirements.
RE-ELECTION OF DIRECTORS
The NRC ensures that the Directors retire and are re-elected in accordance with the relevant laws and regulations and the Company’s Constitution.
Pursuant to Rule 81.2 of the Company’s Constitution, any Director appointed during the year shall hold office only until the conclusion of the next AGM and shall be eligible for re-election at such meeting, but shall not be taken into account in determining the number of Directors who are to retire by rotation at such meeting.
Pursuant to Rule 103 of the Company’s Constitution, at least one-third (1/3) of the Directors (excluding the Director seeking re-election pursuant to Rule 81.2 of the Company’s Constitution) are required to retire by rotation at each AGM. Rule 104 of the Company’s Constitution states that all Directors shall retire from office once at least in each three (3) years. A retiring Director shall be eligible for re-election.
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The Board recommends the re-election of the following Directors who will be retiring pursuant to Rules 81.2 and 103 of the Company’s Constitution at the forthcoming AGM:
RULE 81.2 OF THE CONSTITUTION
Dato’ Henry Sackville Barlow
Dato’ Barlow has more than 35 years of experience in the plantation sector and is highly respected in the sustainability sphere. He is currently the Joint Chair of the Grievance Committee of the Roundtable on Sustainable Palm Oil (RSPO), a globally recognised body that develops and implements global standards for sustainable palm oil.
RULE 103 OF THE CONSTITUTION
Tan Sri Datuk Dr Yusof Basiran
Tan Sri Datuk Dr Yusof was the Chief Executive Officer of the Malaysian Palm Oil Council (MPOC) since 2006 until his retirement in 2017 and the Director-General of the Palm Oil Research Institute of Malaysia (which later became the Malaysian Palm Oil Board) for 14 years from 1992 to 2006. Tan Sri Datuk Dr Yusof is an influential public figure in the Malaysian palm oil industry widely known to be one of the vocal defenders of the industry.
At a time when the palm oil industry is under increasing pressure from the European Union (EU), the Company will benefit from Tan Sri Datuk Dr Yusof’s standing in its effort to address the challenges and discrimination against the industry.
As an Independent NED of the Company, Tan Sri Datuk Dr Yusof’s contribution has been invaluable to the NRC and the Board Tender Committee, which he has served as Chairman since July 2017 and February 2018, respectively.
Datuk Zaiton Mohd Hassan
Datuk Zaiton has held the position of Senior Independent NED of the Company since July 2017 and is currently the Chairman of the Governance & Audit Committee (GAC).
Datuk Zaiton is also the Chairman of the Audit Committee of Lembaga Tabung Haji. Datuk Zaiton has an impressive career in the banking and accounting profession with a strong track record in the areas of governance, risk and audit, across the private sector and public institutions. Datuk Zaiton was the President/Executive Director of Malaysian Rating Corporation Bhd (MARC), a Malaysian based credit rating institution which she helped set up in 1996.
With a career spanning over 40 years, Datuk Zaiton has invaluable industry experience in varied banking and financial sectors, and strong business acumen. With her market-based view of the business and an understanding of the competitive business landscape, Datuk Zaiton provides valuable input and insight to the discussions at the Board and Board Committees. Datuk Zaiton is also a member of the NRC and Risk Management Committee of the Company.
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NOMINATION & REMUNERATION COMMITTEE REPORT
RULE 103 OF THE CONSTITUTION (CONTINUED)
Dato’ Mohd Nizam Zainordin
Dato’ Mohd Nizam is a Non-Independent NED of the Company. Dato’ Mohd Nizam is a nominee Director of Permodalan Nasional Berhad (PNB), the Investment Manager of AmanahRaya Trustee Berhad – Amanah Saham Bumiputera, the major shareholder of the Company.
Dato’ Mohd Nizam has an extensive career in Finance spanning over 20 years and is the current Chief Financial Officer of PNB. As a nominee Director and representative of PNB, Dato’ Mohd Nizam sits as a member of the NRC and GAC, giving meaningful insights towards enhanced corporate governance practices and functioning of the Company. Dato’ Mohd Nizam’s specialised knowledge in the field of Finance has been instrumental in guiding the Company in taking critical policy and business decisions, benefitting the Company as a whole.
Dato’ Mohamad Nasir Ab Latif
Dato’ Mohamad Nasir is a Non-Independent NED. Dato’ Mohamad Nasir is currently the Deputy Chief Executive Officer of the Investment Division of the Employees Provident Fund Board (EPF).
Representing EPF as its nominee Director on the Board of the Company, Dato’ Mohamad Nasir monitors that the affairs of the Company are conducted in a manner dictated by the laws governing companies and ensures good corporate governance. Dato’ Mohamad Nasir’s experience in equity investment through his positions at and service on the boards of public and private companies has led to effective discussions at Board and Board Committee meetings on the regulatory and market conditions that the Company faces.
The Directors have met the Board’s expectations of high performance based on the performance and contribution of each Director as assessed through the Board Effectiveness Assessment (BEA) 2018.
The Board is of the view that the Independent Directors have brought independent and objective judgment in Board deliberations and decisions.
TENURE OF THE INDEPENDENT DIRECTORS
None of the six (6) Independent Directors have served on the Board for more than nine (9) years.
Two (2) Independent Directors namely Tan Sri Datuk Dr Yusof and Datuk Zaiton are seeking re-election at this AGM.
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NOMINATION & REMUNERATION COMMITTEE REPORT
BOARD COMPOSITION AND DIVERSITY
The Board Composition Policy was adopted by the Board in February 2018 and reviewed in September 2018 to align with the Securities Commission Malaysia’s stated target of increasing women participation on the Boards of the top 100 companies on Bursa Malaysia Securities Berhad. The Board’s progress towards achieving targets set out in the Policy is as shown below.
Gender Diversity Age Diversity Ethnic Diversity Independence of Directors
The Board will maintain The Board will work towards The Board will work towards Following the appointment of at least two (2) women having a generationally- diversifying the ethnic Dato’ Barlow, the number of Directors on the Board and diverse Board so as to have a composition of the Board as Independent Non-Executive will actively work towards balance between maturity and and when vacancies arise Directors on the Board of having a minimum of 30% experience. and suitable candidates are SDP has increased to six (6) women as members of the identified. out of 11 Directors. A Board Board by 2020. The age diversity of the Board comprising a majority of can be found on page 29 of the Independent Directors allows Corporate Governance Report at for more effective oversight www.simedarbyplantation.com. of Management.
The NRC is responsible for the implementation of the Policy and for monitoring progress towards the achievement of the Board’s objectives.
The salient features of the Policy are available online in the Corporate Governance section at www.simedarbyplantation.com.
BOARD EFFECTIVENESS ASSESSMENT (BEA)
The BEA 2018 was conducted in June 2018 through questionnaires. The questionnaires were based on the Corporate Governance Guide (3rd Edition) on the Guidance on Board Leadership and Effectiveness issued by Bursa Malaysia Securities Berhad.
In view that the BEA 2018 was recently undertaken, the effectiveness of the Board and Board Committees for the period from 1 July 2018 to 31 December 2018 and for the financial year ending 31 December 2019 (FY2019) will be undertaken in the fourth quarter of FY2019 (BEA 2019). The Company will consider engaging an external independent third party to conduct the BEA 2019.
Detailed information on the BEA and the assessment criteria is provided in the Corporate Governance Report from pages 39 to 40 available in our website www.simedarbyplantation.com.
BOARD REMUNERATION FRAMEWORK
The Remuneration Framework for members of the Board and Board Committees of SDP was last reviewed and adopted in August 2017. There has been no change to the Remuneration Framework since 2017.
Detailed disclosure on the remuneration of individual Directors of SDP on named basis is provided in the Corporate Governance Overview Statement from pages 80 to 81.
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RISK MANAGEMENT COMMITTEE REPORT
RMC
The Committee is focused on ensuring a robust risk management framework is in place. Key risk exposures encountered in the pursuit of the Group’s strategies and objectives are adequately identified, mitigated and reported.
ZAINAL ABIDIN JAMAL - Chairman of the Risk Management Committee
INSIDE THIS REPORT
The purpose of this report is to highlight areas that the Committee has reviewed during the financial period ended 31 December 2018 (FP December 2018) and the priorities going forward.
We report to shareholders on our responsibility to ensure the implementation of appropriate systems to manage the overall risk exposures of the Sime Darby Plantation Berhad Group.
WHO IS THE COMMITTEE:
Members1 Membership Appointment Attendance Zainal Abidin Jamal2 Chairman 14 July 2017 2/2 100% Non-Independent Non-Executive Director Datuk Zaiton Mohd Hassan Member 14 July 2017 2/2 100% Senior Independent Non-Executive Director Tan Ting Min Member 14 July 2017 2/2 100% Independent Non-Executive Director Lou Leong Kok Member 1 December 2017 2/2 100% Independent Non-Executive Director
Notes: 1 For the Members’ profiles see pages 64 to 69. 2 Encik Zainal Abidin Jamal was appointed as the Risk Management Committee (RMC) Chairman on 9 August 2017.
The RMC comprises a majority of Independent Non-Executive Directors and is supported by the Group Risk Management (GRM) Department in discharging its responsibilities. The RMC Chairman reports to the Board on key matters deliberated at the RMC meetings.
Meetings of the Committee are attended by the Executive Deputy Chairman & Managing Director, Deputy to Managing Director & Chief Operating Officer – Upstream, Chief Advisor & Value Officer, Chief Financial Officer, Chief Operating Officer, Downstream, Chief Risk Officer and Chief Integrity & Assurance Officer. In addition, other members of senior management are also invited to attend meetings as and when necessary to support detailed discussions.
ROLES OF THE COMMITTEE
The primary objective of the Committee is to assist the Board of Directors in the discharge of its statutory and fiduciary responsibilities by identifying significant risks and ensuring that the Group Risk Management Framework (RMF) includes the necessary policies and mechanisms to manage the overall risk exposures of the Group. The RMC is also tasked with reviewing the effectiveness of the RMF to ensure that it continues to support the vision, mission, and strategic objectives of the Group whilst safeguarding stakeholders’ interests.
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RISK MANAGEMENT COMMITTEE REPORT
Specific duties of the Committee are as follows:
• Review the adequacy of the scope, functions, authority, competency and resources of the GRM Department.
• Provide oversight, direction and counsel to the risk management process, specifically to:
(i) Establish the Group’s risk management framework based on internationally recognised risk management standards. (ii) Conduct an annual review and periodic testing of the Group RMF. (iii) Establish and periodically review the Group risk management guidelines and policies and ensure implementation of the objectives outlined in the policies and compliance with them. (iv) Review and recommend the Group’s level of risk tolerance and actively identify, assess and monitor key business risks to safeguard shareholders’ investments and the Group’s assets. (v) Monitor the Group level risk exposures and management of the significant financial and non-financial risks identified including considering whether response strategies (and contingency plans) to manage or mitigate material risks are appropriate and effective given the nature of the identifiable risks.
• Review investment proposals that are significant from a risk perspective and monitor the execution of risk mitigation strategies for such proposals. Follow up on post-investment risk mitigation strategies to ensure that the strategies are implemented subsequent to the Board’s approval.
Detailed Terms of Reference of the Committee are available online in the Corporate Governance section at www.simedarbyplantation.com.
ANNUAL PERFORMANCE ASSESSMENT
The Board performs an annual assessment of the Committee’s effectiveness in undertaking its duties as set out in the Terms of Reference. The Board is satisfied that the Committee has effectively discharged its duties in accordance with its Terms of Reference.
The Committee’s Terms of Reference on administrative matters were revised on 29 August 2018.
OUR FOCUS AND ACTION PLANS
During the FP December 2018, the RMC has undertaken the following key activities:
• Monitoring of principal risks affecting the achievement of the Group’s strategies & objectives. This includes reviewing strategic risk reports on external and emerging risk outlooks as well as country risk assessments; • Approving the establishment of the Group Business Continuity Standard which provides overarching guidelines for the development and/or update of business continuity procedures, to ensure that the Group is able to continue its operations with minimal impact to stakeholders in the event of crisis or disruption; • Reviewing of risk appetite principles and related exposures; • Reviewing and tracking previous approved investment initiatives; and • Reviewing and tracking the financial exposure position of the Group.
Where appropriate, the RMC also leveraged on the work of other Board committees such as the Sustainability Committee and Nomination & Remuneration Committee to assist with ensuring robust oversight of these particular risk exposures.
In the coming year, the RMC will continue to focus on providing oversight over the implementation of the RMF throughout the Group as well as monitoring the key risk exposures and the resultant mitigating actions affecting SDP.
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SUSTAINABILITY COMMITTEE REPORT
SC
With the intense scrutiny faced by our industry from all our stakeholders, Sime Darby Plantation can differentiate itself by developing and implementing leading responsible agriculture practices within our operations, and throughout our global supply chain.
DATO’ HENRY SACKVILLE BARLOW - Chairman of the Sustainability Committee
INSIDE THIS REPORT
The purpose of this report is to highlight areas that the Committee has reviewed during the financial period ended 31 December 2018 (FP December 2018). We report to shareholders on our oversight responsibilities in relation to the Sime Darby Plantation Berhad (SDP) Group objectives, policies and practices pertaining to sustainability, more particularly contributing to a better society, minimising environmental harm and delivering sustainable development.
WHO IS THE COMMITTEE:
Members1 Membership Appointment Attendance Dato' Henry Sackville Barlow2 Chairman 5 April 2019 N/A 3 N/A 3 Independent Non-Executive Director Muhammad Lutfi Member 13 December 2017 1/3 33% Independent Non-Executive Director Dato’ Mohammad Nasir Ab Latif Member 13 December 2017 3/3 100% Non-Independent Non-Executive Director Zainal Abidin Jamal Member 13 December 2017 3/3 100% Non-Independent Non-Executive Director Former Member Membership Retirement Attendance Dato’ Che Abdullah @ Rashidi Chairman 21 November 2018 2/3 67% Che Omar Independent Non-Executive Director Ex Officio Member Membership Appointment Attendance Sir Jonathon Espie Porritt Sustainability Advisor 22 March 2018 3/3 100%
Notes: 1 For the Members’ profiles see pages 64 to 69. 2 Dato’ Henry Sackville Barlow was appointed after the FP December 2018. 3 Not Applicable.
The Sustainability Committee (SC) comprises all Non-Executive Directors. The Committee is supported by Sir Jonathon Espie Porritt, Board Sustainability Advisor. Sir Jonathon assists the Committee by identifying emerging sustainability trends and their implications to SDP, and reviewing and advising on SDP’s progress towards meeting its sustainability commitments, whilst meeting stakeholders' expectations.
Meetings of the Committee are attended by the Executive Deputy Chairman & Managing Director and the Chief Sustainability Officer, together with other members of senior management.
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SUSTAINABILITY COMMITTEE REPORT
ROLES OF THE COMMITTEE
The SC is committed to ensuring that the Group operates in line with its sustainability purpose, which is to contribute to a better society, minimise environmental harm and deliver sustainable development.
The primary objectives of the Committee are as follows:
• Reviewing the sustainability strategy and performance of the SDP Group at the Board level; • Overseeing the monitoring, reporting and verification of the Sustainability Key Performance Indicators of the SDP Group and their implementation through the Group Blueprint and Roadmaps; • Emphasising and facilitating the adoption of a positive mind-set in favour of sustainability throughout the Group; and • Working to a set of Corporate Sustainability Principles (the Charter).
Detailed Terms of Reference for the Committee are available online at the Corporate Governance section of www.simedarbyplantation.com.
ANNUAL PERFORMANCE ASSESSMENT
The Board performs an annual assessment of the Sustainability Committee’s effectiveness in carrying out its duties as set out in the Terms of Reference. The Board is satisfied that the Committee has effectively discharged its duties in accordance with its Terms of Reference.
The Committee’s Terms of Reference were revised on 29 August 2018 to incorporate further administrative enhancements.
OUR FOCUS AND ACTION PLANS
Our Focus During the FP December 2018
SDP strives to enhance our production capabilities without compromising our commitment around contributing to a better society, minimising environmental harm, and delivering sustainable development.
Throughout the reporting period, the Committee’s focus has been on key sustainability initiatives that deliver impact.
Significant Initiatives/Issues Matters Considered Outcome Improving Due to the nature of the industry the Group operates OSH Performance continues to be an area of focus Occupational in, OSH performance continues to be an area of key for the entire Group. Safety and concern due to the number of fatalities and major Health (OSH) accidents across the Group. Sadly, SDP reported four (4) fatalities within this Performance reporting period with a Loss Time Injury Frequency The OSH performance, which includes the review of Rate (LTIFR) of 13.0 (13 injuries per million hours lag indicators such as Lost Time Incidents and lead worked). There is still tremendous room for indicators such as Concerned Reporting, and key improvement and the Committee is committed to work initiatives implemented by Management to improve with management in achieving SDP’s goal of Zero the safety and health performance are discussed Harm. during each meeting.
Intensifying The 5-year Operational Excellence and Innovation The Operational Excellence programme has maintained Deployment Business Management Strategy (OEIBMS) 2.0 was momentum with completion of 723 projects within the of Operational launched last year, with a target of harvesting Financial Period Ended December 2018. Excellence RM550 million of cumulative benefits over a period Efforts of five (5) years. The Operational Excellence initiatives this year have continued to receive national and international Key initiatives to further expand the roll-out and acclaim, and SDP has emerged as the Permodalan scope of these efforts, such as the War on Waste Nasional Berhad Group Innovation Challenge (now in its 3rd iteration) are reviewed in detail Champion for the 8th year in a row. during each meeting.
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SUSTAINABILITY COMMITTEE REPORT
Significant Initiatives/Issues Matters Considered Outcome Enhancing Human Rights has emerged as an area of increased The Group has implemented several initiatives to Respect for stakeholder interest with legislations being passed in mitigate risks around Human Rights abuses within Human Rights countries where the Group operates, such as the UK its operations and continues to conduct impact within the Modern Slavery Act (2015), US Trade Enforcement and assessments to understand salient human rights issues Organisation Trade Facilitation Act (2015) and the Australia Modern and risk for each country that the Group operates in. Slavery Bill (2018). The Group also continues to engage and collaborate The Committee has deliberated in detail on the initiatives with partners to work together to address the more underway to mitigate risks around Human Rights complex human rights challenges the industry as a abuses and the Group’s commitment around Business whole faces. and Human Rights.
Effective Operating in an industry under intense scrutiny by The Group has been actively participating in various Engagement of a wide range of stakeholders, effective engagement strategic thought leadership platforms to ensure active Stakeholders with these stakeholders is imperative in ensuring the engagement with stakeholders. reputation of the Group is not only protected, but also projected in a positive manner. The Group has also initiated various platforms and collaborations to proactively engage with stakeholders The Committee deliberated in detail the approach and around material sustainability issues such as initiatives the Group is taking to effectively engage human wildlife conflicts (PONGO Alliance), human with stakeholders, which includes direct engagements, rights (Decent Rural Living Initiative) and grievance participation in pre-competitive collaborations, and mechanisms (Collaboration with ELEVATE). participation in thought leadership platforms.
Through the appointment of the external Sustainability Advisor, an independent third party view point is also brought as input to discussions within the SC.
Enhancing Stakeholder expectations around managing sustainability The Group has achieved a 98% traceability to mill, and Supply Chain risks of the supply chain has intensified recently, with the global mill list has been made publicly available. The Sustainability a focus on the issue of deforestation within the supply grievances against suppliers within the Group’s supply chain. chain and actions taken have also been made available publicly in line with stakeholders’ expectations. The Committee scrutinised in detail the efforts made by management in ensuring increased transparency of the SDP has also engaged with several non-government Group’s global supply chain via traceability and also the organisations to support the Group in proactively efforts being made to manage sustainability risks within identifying sustainability risks within its supply chain. the supply chain. This has resulted in improved visibility of SDP’s global supply chain, and also mechanisms being put in place to effectively respond to supplier grievances.
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SUSTAINABILITY COMMITTEE REPORT
Significant Initiatives/Issues Matters Considered Outcome Climate Change The impact of the Group’s operations through emissions The overall carbon reduction strategy and implementation Impacts has also been an area of focus during the SC meetings. plans of key initiatives were reviewed and management has continued with its implementation. The SC conducted an extensive review of the carbon reduction strategy and targets during this period, with Key commitments made in the Responsible Agriculture input from the Sustainability Advisor. Key initiatives Charter were also updated to reflect the latest which contribute to the carbon reduction targets, such developments around implementation of no-deforestation as a revised biogas strategy was also deliberated in within operations and supply chains. detail to ensure targets were feasible whilst maintaining ambitions. The SC will play a vital role in monitoring and verifying this strategy.
During the reporting period, SDP has launched the Innovation and Productivity Charter which articulates our aspirations in delivering sustainable development through enabling high levels productivity.
SDP is still the leading producer of certified sustainable palm oil globally, but has also received further recognition of its efforts around sustainability as it emerged as overall winners in the inaugural Sustainability Business Awards Malaysia. SDP also received awards during the event for Best Sustainability in the Community and Best Land Use and Biodiversity and special recognition for the Strategy & Sustainability Management and Supply Chain Management categories.
Priorities for 2019 Moving forward, the SC will continue to work with management in ensuring that the Group continues on its journey to become the leader in responsible agricultural practices within the palm oil sector. The SC has authorised the implementation of five (5) key management strategies which seek to deliver value to shareholders whilst balancing the needs of its diverse stakeholders. These strategies are:
• Flawless implementation of sustainability standards; • Lead in the development of new standards and approaches; • Inclusion of stakeholders in delivering sustainable development; • Manage sustainability risks within the Group’s global supply chain; and • Differentiate the Group via sustainability and leverage on sustainability to create value.
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BOARD TENDER COMMITTEE REPORT
BTC The Board Tender Committee is established to assume the responsibility for reviewing and deliberating on key tenders, ensuring that tender exercises are conducted in a transparent and fair manner, adopting the principle of good governance, and delivering the best value to the Group. The Committee will continue to ensure that the procurement of key contracts also comply with the process and procedures of the Group Procurement Policies & Authorities.
TAN SRI DATUK DR YUSOF BASIRAN - Chairman of the Board Tender Committee
INSIDE THIS REPORT
The purpose of this report is to highlight areas that the Committee has reviewed during the financial period ended 31 December 2018 (FP December 2018) and the priorities going forward.
WHO IS THE COMMITTEE:
Members1 Membership Appointment Attendance Tan Sri Datuk Dr Yusof Basiran Chairman 21 February 2018 1/1 100% Independent Non-Executive Director Zainal Abidin Jamal2 Member 27 February 2019 N/A 3 N/A 3 Non-Independent Non-Executive Director Tan Ting Min Member 21 February 2018 1/1 100% Independent Non-Executive Director Former Member Membership Retirement Attendance Dato’ Che Abdullah @ Rashidi Member 21 November 2018 0/1 0% Che Omar Independent Non-Executive Director
Notes: 1 For the Members’ profiles see pages 64 to 69. 2 Encik Zainal Abidin Jamal was appointed after the FP December 2018. 3 Not Applicable.
The Board Tender Committee (BTC) comprised a majority of Independent Non-Executive Directors. The BTC is supported by Group Procurement who assists in arranging various sub-tender committee meetings to review and support the tender papers prior to tabling to the BTC. The BTC Chairman reports to the Board on key matters deliberated at the BTC meetings.
Meetings of the BTC are attended by the Deputy to Managing Director & Chief Operating Officer, Upstream, Chief Advisor & Value Officer, Chief Financial Officer and other members of senior management.
ROLES OF THE COMMITTEE
The BTC was established on 21 February 2018 to assist the Board in overseeing the process of awarding significant contracts/tenders by Sime Darby Plantation Berhad (SDP) and its subsidiaries (SDP Group). The BTC has the mandate to review and approve tenders with value above RM100 million up to RM500 million. For tenders above RM500 million, the BTC has the mandate to review and support the tenders before the same are deliberated and approved by the Board. Meetings of the BTC are held as and when required.
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BOARD TENDER COMMITTEE REPORT
The Committee is responsible for:
• Overseeing that the tender process is carried out in accordance with the Group Procurement Policies & Authorities and standard operating procedures including the fulfillment of the Bumiputera Empowerment Agenda of the Government; • Reviewing and ensuring that the tender evaluation criteria are comprehensive and allow for maximum competition among vendors; • Awarding tenders based on merit, always allowing for qualitative considerations and competitive pricing where practical and feasible; • Reviewing the adequacy of the Tender Evaluation Report which incorporates both the technical and commercial evaluation; • Deliberating on the Tender Evaluation Report and recommending actions as appropriate to: - award to the vendor as recommended; or - recommend price renegotiation benchmarking against the lowest bidder or market rate; or - award to a vendor(s) other than the one recommended and support with reason(s); or - propose specification change and to proceed with a new tender or to request the resubmission of quotation on changes only or to renegotiate; or - to keep-in-view or to cancel the tender with supporting reason(s)/justification(s). • Participating in the negotiations and/or site visits if such actions will assist in the decision making; and • Reviewing, supporting and approving the Tender Report, highlighting any concern or irregularity in the tender.
Detailed Terms of Reference for the Committee are available online at the Corporate Governance section of www.simedarbyplantation.com.
ANNUAL PERFORMANCE ASSESSMENT
The Board performs an annual assessment of the BTC’s effectiveness in undertaking its duties as set out in the Terms of Reference. The Board is satisfied that the Committee has effectively discharged its duties in accordance with its Terms of Reference.
The BTC’s Terms of Reference were revised and standardised on 29 August 2018 on administrative matters.
OUR FOCUS & ACTION PLANS
The BTC is committed to ensuring that the Group continues to procure goods and services for key contracts/tender in a transparent, objective and fair manner adopting the principles of good governance and at the same time delivering best value to the Group. The BTC is also committed to ensuring that the procurement of key contracts are conducted in accordance with the process and procedures of the Group Procurement Policies & Authorities.
Besides getting the best value for the Company through procurement, cost reduction and cost avoidance have become a top priority for the Company.
During the FP December 2018, the Company has undertaken the following key activities:
• To revise the Group Policies & Authorities on procurement; and • To standardise specifications, consolidate volume, source for alternative materials and adopt the most competitive method of negotiation to secure the best value to the Group.
Moving forward, the BTC is committed to ensuring that SDP continues to pursue sustainable value creation for the SDP Group to benefit all stakeholders.
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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL
INTRODUCTION
The Board is pleased to provide the Statement of Risk Management and Internal Control which outlines the state of risk management and internal control within SDP for the financial period under review.
RESPONSIBILITIES AND ACCOUNTABILITIES
The Board has an overall responsibility for the Group’s risk management and internal control systems and is focused on setting the tone and culture towards their effectiveness. Successful integration of good governance structures and processes with performance- focused risk management and internal control at every level of the Group and across our operations has been key towards the effective pursuit of our objectives. This is as encapsulated in our governance framework on risk management and internal controls which assigns responsibility to relevant levels at Board and Management as detailed below:
BOARD OF DIRECTORS
Governance & Audit Risk Management Executive Deputy Chairman & Committee Committee Managing Director
Group Integrity, Governance & Assurance Group Risk Management Management Committee
Group Corporate Assurance
Group Compliance
Refer to the Governance & Audit Committee (GAC) Report on pages 84 to 89 for an overview of the activities conducted by the Group Integrity, Governance & Assurance function. Further details on risk management governance are provided in the next section.
RISK MANAGEMENT
Risk Management Governance
The Board acknowledges its overall responsibility for the establishment, oversight and monitoring of the Group’s risk management framework and related processes as well as reviewing its effectiveness to ensure that these activities continue to support the mission, vision and strategic objectives of the Group whilst safeguarding stakeholders’ interests.
Our integrated approach is two (2) pronged, i.e. a top down strategic view which is complemented by bottom up operational risk assessments, whilst taking cognisance of the external environment in which we operate.
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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL
The Risk Management Committee (RMC) assists the Board in providing the framework and guidance in which the business units can operate, identify, and report on Group-wide risks. The RMC has a broad mandate to ensure the effective implementation of the objectives outlined in the Risk Management Framework and compliance with them throughout the Group. Furthermore, the RMC is also responsible for periodically reporting higher risk exposures as well as on the progress and assessment of risk management in the Group to the Board. The RMC is assisted by the Group Risk Management function which is responsible for supporting the RMC with oversight of the Risk Management Framework.
The Board delegates to the Executive Deputy Chairman & Managing Director (EDCMD) the responsibility for ensuring effective implementation and maintenance of the Risk Management Framework and that all personnel adhere to its mandates. The Management Committee supports the EDCMD in ensuring risk management is adequately carried out, as part of their responsibility in evaluating and making key strategic and operational decisions. Jointly, the EDCMD and Management Committee are responsible for providing leadership and sponsorship for the implementation of the Risk Management Framework. The EDCMD and Management Committee ensure that risk assessment is explicitly performed during strategic planning exercises, on top of managing risk exposures in the pursuit of the Group’s strategies.
The Risk Management Governance Structure shown below captures the arrangements and accountability of relevant levels of management and operations.
BOARD OF DIRECTORS
Governance & Audit Risk Management Committee Committee EXECUTIVE DEPUTY CHAIRMAN & MANAGING DIRECTOR
Group Integrity, Governance & Group Risk Assurance Management
MANAGEMENT COMMITTEE (RISK OWNERS) Accountable and responsible for effective risk 2nd & 3rd Line of Defence identification & management
RISK CHAMPIONS Respective Business Units/Support Function have nominated Risk Champions who will support the Risk Owners on risk management matters
BUSINESS UNITS/SUPPORT FUNCTIONS
• Group Advisory & Value Creation • Upstream • Sime Darby Oils • Finance • Group Human Resources • Group Sustainability & Quality Management • Group Strategy & Innovation • Group Legal • Group Research & Development • Group Corporate Secretarial • Group Communications
1st Line of Defence
These three (3) lines of defence in the exercise of their functions are designed to reinforce each other in the implementation and strengthening of the Group’s Risk Management Framework.
To read more about how we practised risk management during the period under review, see pages 96 to 97.
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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL
Group Risk Management Framework
Our Risk Management Framework is aligned with ISO31000:2018 standard on risk management which promotes three (3) facets of risk management as depicted in the diagram below:
Continual Integrated Improvement
Human and Cultural Structured and Factors Comprehensive Value Creation and Protection
Best Available Information Customised
Dynamic Inclusive
Principles (clause 4)
Integration Scope, Context, Criteria
Risk Assessment
Risk Identification Improvement Design
Leadership and Risk Analysis Commitment
Risk Evaluation MONITORING & REVIEW MONITORING COMMUNICATION & CONSULTATION & CONSULTATION COMMUNICATION
Risk Treatment Evaluation Implementation RECORDING & REPORTING
Framework (clause 5) Process (clause 6)
The primary goal of the Risk Management Framework is to identify, evaluate and manage risks that would impede the achievement of the Group’s long-term and short-term strategies and objectives. Creating and protecting value is the key driver of risk management. The role of leaders and their responsibilities are emphasised in the framework to ensure that risk management is an essential part of business. The Risk Management Framework is also aligned with COSO 2017 Enterprise Risk Management— Integrating with Strategy and Performance which clearly underscores our commitment towards enterprise risk management in strategic planning and our will to embed risk management throughout the organisation.
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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL
Group Business Continuity Framework
Our Business Continuity Framework was established during the period under review and is aligned with ISO22301:2012 standard on business continuity management systems. It covers end to end guidance to assist with managing a crisis event, as depicted in the diagram below:-
BUSINESS CONTINUITY
Process Emergency and Crisis Management Recovery and Restoration Management
Document Emergency Crisis Communications Disaster Recovery Business Continuity Preparedness and Plan (CCP) Plan (DRP) Plan (BCP) Response (EPR) Procedures
Nature of Documents procedures Documents Documents procedures Documents procedures Document to manage potential procedures to manage to recover and to recover and restore and actual emergency communications when protect business business operations to situations with ESH a crisis is imminent or IT infrastructure to normality implications has happened support business operations
Objective of Safety and health of Communications IT applications/data People relocate and Document people are maintained occurs effectively protected resume operation effectively
The Group is committed to safeguard the interests of all stakeholders in times of disaster and/or emergency. Therefore, Business Continuity processes are put in place to ensure that the Group is able to continue operations with minimal impact to stakeholders in the event of disruption.
Risk Reporting
The Risk Management Framework provides for consistent review and reporting. On a quarterly basis, formal risk reports are developed and presented to the Management Committee and RMC. Any potential risks identified are escalated as appropriate, with mitigation actions put in place to manage such risks. Significant risks affecting the business as well as periodic external and emerging risk outlooks are presented to the RMC.
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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL
INTERNAL CONTROL FRAMEWORK
Group Policies and Authorities (GPAs)
Our GPAs represent a formal delegation of the Board’s powers and functions to Management and enables the Board to facilitate a robust control environment entailing clear lines of responsibility, accountability and authority limits. The GPAs are broadly categorised as follows:
• Functional policies that describe the approach taken to achieve corporate objectives; • Standards of ethical behaviour and business conduct that are necessary to establish sustainable business practices and enhance the image of the Group; • Policies that safeguard the integrity of the Group’s physical and intangible assets; • Policies to ensure the effective functioning of key processes; and • Authorisation limits to enter into financial commitments on behalf of the Group.
The GPAs are reviewed and revised, as appropriate, on an annual basis to ensure that they are relevant to the current operating environment and reflect better intended practices. In addition to the core GPAs, various policies, procedures and guidelines are developed by relevant departments and business units to support the achievement of the principles stipulated in the GPAs, all of which, are mandatory to be complied with by Directors and Employees of the Group.
Code of Business Conduct
Our Code of Business Conduct (COBC) demonstrates SDP’s commitment towards conducting business in an ethical manner and is instrumental in guiding us to uphold our Group’s fundamental Core Values: Integrity, Respect & Responsibility, Enterprise and Excellence. All Directors and Employees of the Group must read and declare compliance with the COBC upon appointment to or joining the Group and relevant training and attestation programmes are developed to ensure that staff will be able to understand the COBC and apply it in their daily lives. Where cases of breaches of the COBC, including fraud, had been suspected, investigations will be conducted and where fault has been established, will be addressed in line with existing human resource policies. As our counterparties are also encouraged to adopt similar principles and standards of behaviour, the Vendor COBC outlines the standards of behaviour required from the Vendors in relation to labour & human rights, environment, safety & health and ethics & management practices.
Performance Reward
Our Performance Management Framework is designed to support the Group’s vision of becoming a sustainable high performance organisation to drive business results, by aligning organisational objectives to individual performance. Our annual performance management process includes the cascading of Key Performance Indicators (KPIs) to our employees which are aligned to our business strategy and includes measurements on business growth and productivity, customer and stakeholder management, operational efficiencies as well as well human capital development.
Internal Audit
Internal audits performed evaluate whether risk management, control and governance processes are designed and operate sustainably and effectively and provide an objective and independent assessment to the Management and Board on the state of internal controls. Where limitations have been noted, recommendations on corrective action to be implemented are followed up to ensure these are appropriately addressed.
Business Reporting
Our business performance is monitored on a periodic basis by the Board and Management via the preparation and review of operational reports, periodic budgets and financial performance (actual against budget) and forecast reports.
108 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation How We Are Governed
STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL
Whistleblowing
Our whistleblowing channels (website, e-mail, telephone) provide an avenue for genuine wrongdoing concerns to be raised in good faith without fear of reprisals or retaliation. We take all reports of possible wrongdoings seriously and shall investigate the reports, regardless of the length of service, position/title, relationship or connection of the alleged parties to the Group.
MATERIAL JOINT VENTURES AND ASSOCIATES
The disclosures in this statement exclude the risk management and internal control practices of the Group’s Joint Ventures and Associates. The Group’s interests in these entities are safeguarded through the appointments of members of the Group’s Senior Management team to the Board of Directors and, in certain cases, the management or operational committees of these entities.
REVIEW OF THE STATEMENT BY THE EXTERNAL AUDITORS
As per the requirement of Paragraph 15.23 of the MMLR of Bursa Securities, the external auditors have reviewed this Statement of Risk Management and Internal Control (SORMIC). Their limited assurance review was performed in accordance with the Audit and Assurance Practice Guide (AAPG) 3 (Revised: February 2018) issued by the Malaysian Institute of Accountants. The AAPG 3 (Revised) does not require the external auditors to consider whether the SORMIC covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk management and internal control systems including the assessment and opinion by the Board of Directors and the Management thereon.
CONCLUSION
For the financial period under review and up to the date of approval of this statement, the Board is satisfied with the adequacy and effectiveness of the Group’s system of risk management and internal control to safeguard the shareholders’ investments and the Group’s assets.
The Board has received reasonable assurance from the EDCMD and the Group Chief Financial Officer that the Group’s risk management and internal control systems, in all material aspects, are operating adequately and effectively. This statement is made in accordance with the Statement of Risk Management and Internal Controls – Guidance for Directors of Listed Issuers (Guidelines) issued on 31 December 2012, which is in line with the requirements of Paragraph 15.26(b) of the MMLR of Bursa Securities and Principle B of the Malaysian Code on Corporate Governance 2017 issued by Securities Commission Malaysia.
This statement is made in accordance with a resolution of the Board dated 5 April 2019.
Annual Report // 6-Month Financial Period Ended 31 December 2018 109 How We Are Governed Sime Darby Plantation
STATEMENT OF RESPONSIBILITY BY THE BOARD OF DIRECTORS
The Directors are responsible for the preparation, integrity and fair presentation of the annual financial statements of the Sime Darby Plantation Berhad Group. As required by the Companies Act, 2016 (Act) and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the financial statements for the financial period ended 31 December 2018, as presented on pages 112 to 326, have been prepared in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Act.
The Directors consider that in preparing the financial statements, the Group and the Company have used the appropriate accounting policies, consistently applied and supported by reasonable and prudent judgments and estimates. The Directors are satisfied that the information contained in the financial statements give a true and fair view of the financial position of the Group and of the Company at the end of the financial period and of the financial performance and cash flows for the financial period.
The Directors have responsibility for ensuring that proper accounting records are kept. The accounting records should disclose with reasonable accuracy the financial position of the Group and the Company to enable the Directors to ensure that the financial statements comply with the Act. The Directors have the general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group to prevent and detect fraud and other irregularities.
This statement is made in accordance with a resolution of the Board of Directors dated 5 April 2019.
BOARD APPROVAL OF FINANCIAL STATEMENTS
The annual financial statements for the financial period ended 31 December 2018 are set out on pages 112 to 326. The preparation thereof was supervised by the Group Chief Financial Officer and approved by the Board of Directors on 5 April 2019.
110 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
FINANCIAL STATEMENTS
112 Directors’ Report 117 Statements of Profit or Loss 118 Statements of Comprehensive Income 119 Statements of Financial Position 121 Statements of Changes in Equity 123 Statements of Cash Flows 131 Notes to the Financial Statements 321 Statement by Directors 321 Statutory Declaration 322 Independent Auditors’ Report
OTHER INFORMATION
327 Notice of Annual General Meeting 334 Analysis of Shareholdings 337 Additional Compliance Information 342 Share Price Movement & Financial Calendar 343 Properties of the Group 349 Notice to Shareholders Under the Personal Data Protection Act 2010 353 Global Reporting Initiative (GRI) - Notice to Proxies Under the Personal Data Protection Act 2010 - Form of Proxy
Annual Report // 6-Month Financial Period Ended 31 December 2018 111 Financial Statements Sime Darby Plantation
DIRECTORS’ REPORT For the financial period ended 31 December 2018
The Directors have pleasure in presenting their Report together with the audited financial statements of the Group and of the Company for the six months financial period ended 31 December 2018.
PRINCIPAL ACTIVITIES
The principal activities of the Company consist of the production, processing, refining and sales of palm oil and palm kernel oil, manufacturing and marketing of specialty fats and edible oils, rubber and other palm oil related products and investment holding.
The principal activities of the Group consist of the production, processing, refining and sales of palm oil and palm kernel oil, manufacturing and blending, marketing and distribution of specialty fats, edible oils, rubber and other palm oil related products, production and sales of sugar and beef, and the involvement in other agriculture related business as disclosed in Note 53 to the financial statements. During the financial period, the Group acquired Markham Farming Company Limited whose principal activities include processing and marketing of coconut oils and cultivation of oil palm.
Other than the above, there were no significant changes in the nature of these activities during the financial period.
FINANCIAL RESULTS
GROUP COMPANY RM’000 RM’000
Profit/(loss) before tax 457,047 (120,573) Tax expense (145,252) (15,970) Profit/(loss) for the financial period 311,795 (136,543)
Profit/(loss) for the financial period attributable to: - equity holders of the Company 243,508 (199,204) - Perpetual Sukuk 62,661 62,661 - non-controlling interests 5,626 - 311,795 (136,543)
In the opinion of the Directors, the results of the operations of the Group and of the Company during the financial period were not substantially affected by any items, transaction or event of a material and unusual nature.
DIVIDENDS
Since the end of the previous financial year, the Company has paid the following dividends:
RM’000
Special interim single tier dividend of 3.0 sen per ordinary share, paid on 5 October 2018 204,025
The final single tier dividend of 8.0 sen per ordinary share and the special final single tier dividend of 3.0 sen per ordinary share (the “FYE June 2018 Final Dividend”) were approved by the shareholders during the Annual General Meeting on 21 November 2018. During the Extraordinary General Meeting held on the same day, the shareholders of the Company approved the establishment of the Dividend Reinvestment Plan that provides the shareholders of the Company with an option to elect to reinvest their dividend in new ordinary shares of the Company (“DRP"). The Board determined that the DRP shall apply to the FYE June 2018 Final Dividend.
112 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
DIRECTORS’ REPORT For the financial period ended 31 December 2018
DIVIDENDS (CONTINUED)
The FYE June 2018 Final Dividend of RM748.1 million were paid on 7 January 2019, RM406.1 million satisfied by the issuance of 83,735,906 new Sime Darby Plantation Berhad shares pursuant to the DRP and the balance of RM342.0 million was paid in cash.
A final single tier dividend of 1.7 sen per ordinary share in respect of the financial period ended 31 December 2018 has been declared on 28 February 2019 and will be paid on 21 May 2019. The entitlement date for the dividend payment is 10 May 2019.
RESERVES AND PROVISIONS
All material transfers to or from reserves and provisions during the financial period are shown in the financial statements.
SHARE CAPITAL, PERPETUAL SUKUK AND DEBENTURES
There were no issuances of ordinary shares, Perpetual Sukuk and debentures during the financial period.
DIRECTORS
The Directors in office during the financial period and during the period from the end of the financial period to date of this Report are:
Tan Sri Dato’ A. Ghani Othman Tan Sri Dato’ Seri Mohd Bakke Salleh Tan Sri Datuk Dr. Yusof Basiran Muhammad Lutfi Datuk Zaiton Mohd Hassan Dato’ Mohamad Nasir Ab. Latif Dato’ Mohd Nizam Zainordin Dato’ Che Abdullah @ Rashidi Che Omar (Retired on 21 November 2018) Dato’ Henry Sackville Barlow (Appointed on 5 April 2019) Zainal Abidin Jamal Tan Ting Min Lou Leong Kok
DIRECTORS’ REMUNERATION
Details of Directors’ remuneration are set out in Note 11 to the financial statements.
DIRECTORS’ BENEFITS
During and at the end of the financial period, no arrangements subsisted to which the Company is a party, with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate, as disclosed in Directors’ Interests in Shares.
Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than benefits disclosed as Directors’ remuneration in Note 11 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he or she is a member, or with a company in which he or she has a substantial financial interest except for any benefits which may be deemed to have arisen from the transactions disclosed in Note 11 to the financial statements.
The Directors and officers of the Group and of the Company are covered by Directors and Officers liability insurance for any liability incurred in the discharge of their duties, provided that they have not acted fraudulently or dishonestly or derived any personal profit or advantage. The insurance premium paid for the financial period amounted to RM341,748.
Annual Report // 6-Month Financial Period Ended 31 December 2018 113 Financial Statements Sime Darby Plantation
DIRECTORS’ REPORT For the financial period ended 31 December 2018
DIRECTORS’ INTERESTS IN SHARES
According to the Register of Directors’ Shareholdings required to be kept under Section 59 of the Companies Act 2016, none of the Directors who held office at the end of the financial period held any shares, or debentures of, the Company or its related corporations during the financial period.
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS
(a) Before the financial statements of the Group and of the Company were prepared, 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 impairment for doubtful debts, and satisfied themselves that all known bad debts had been written off and adequate impairment had been made for doubtful debts; and
(ii) to ensure that any current assets, which were unlikely to realise in the ordinary course of business, their values of current assets as shown in the accounting records of the Group and of the Company, have been written down to amounts which they might be expected to realise.
(b) At the date of this Report, the Directors are not aware of any circumstances:
(i) which would render the amount written off for bad debts or the amount of the impairment for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent;
(ii) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or
(iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.
(c) As at the date of this Report:
(i) there are no charges on the assets of the Group or of the Company which have arisen since the end of the financial period to secure the liability of any other person; and
(ii) there are no contingent liabilities in the Group or in the Company which have arisen since the end of the financial period other than those arising in the ordinary course of business.
(d) At the date of this Report, the Directors are not aware of any circumstances not otherwise dealt within the Report or financial statements which would render any amount stated in the financial statements misleading.
(e) 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 financial period which, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and 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 financial period and the date of this Report which is likely to affect substantially the results of the operations of the Group and of the Company for the financial period in which this Report is made.
114 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
DIRECTORS’ REPORT For the financial period ended 31 December 2018
LIST OF DIRECTORS OF SUBSIDIARIES
Pursuant to Section 253 of the Companies Act 2016, the list of Directors of the subsidiaries during the financial period and up to the date of this Report is as follows (excluding Directors who are also Directors of the Company):
Abdul Jalil Sulaiman Godfrey Shiletikwa Urasa Nor Aznan Mohd Yusof Agus Dani Ariyanto H. Hariadi Supiyanto, Ir. Nuchanand Sukmongkol Ahmad Zairil Zainal Haryanto Tedjawidjaja Pandu Wibowo Ahmad Zamani Zainuddin Herman Heru Suprobo SH Philip KO Kunjappy Alagendran Maniam Hernandy Rifansyah Karli Prof. Peter Caligari Amir Hisham Hashim Hersoebeno Brotowinoto R Krishna Moorthy Ramasamy Amir Mohareb Hissammudin Mohamad Sabidin Renaka Ramachandran Andrew Timothy Worrall Ir. Kurniawanto Setiadi Robert Anak Tugang Armando Edgar Mahyudion Daniel Ir. Safwani Robert Nilkare Ary Tri Prasetyo Izaidin Mohd Zahari Rosely Kusip Asanee Mallamphut James Walter Graham Datin Rosezalina Daros @ Darooi Asmawatti Othman Jeffry Faizal Kamaruddin Roslin Azmy Hassan Azmi Jaafar Jonathan Pennefather Ruari MacWilliam Azrulizam Ahamad Azaman Kenneth Surendharan Sreedharan Rusdianto S. Sos Bambang Sumantri Hadi Mulyanto Khairul Nizam Idris Samrish Banja Bryan Dyer Khaizarudin Awaludin Sandeep Bhan Budi Darmono Lakon Anak Igey Shahrakbah Yacob Chim Foong May Lee Ai Leng Shamsuddin Muhammad Craig Gibsone Lee Chong Yee Shashi Kumar Anak Rajan Dato’ Idris Kechot Lim Ban Yeow Shogo Yoshida Datu Haji Abdul Rashid Mohd Azis M. Rukun Siregar (Alternate Director to Fuyuhiko Nakata) Datuk Franki Anthony Dass Marie Cindhia Veronique Magny-Antoine Sir Joseph Tauvasa Djoko Martopo Marie-Claude Priscille Koenig Suhartono Dodik Prayitno Mersal Abang Rosli Suko Budi Hardjito Dr. K. Harikrishna Dr. K. Kulaveerasingam (Alternate Director to Datu Suparmadi Dr. Luc Bonneau Haji Abdul Rashid Mohd Azis) Supasak Chirasavinuprapand Dr. Shariman Alwani Mohamed Nordin Michelle Chang Yuet Ling Tan Sri Datuk Amar Haji Bujang Dr. Stephen Nelson Mohamad Helmy Othman Basha Mohammed Bujang Mohammed Nor Drs. Jakob Tobing MPA Mohammad Japri Giman Tang Men Kon Edi Febriyanto Mohamad Pirabaharan Abdullah Tri Haryono SP Elaim Tangirongo Mohd Faris Adli Shukery Tuan Haji Mohamad Sabry Haji Othman (Alternate Director to Tan Sri Datuk Elly Mahesa Jenar Mohd Hamdi Abd Karim Mohd Haris Mohd Arshad Amar Haji Bujang Mohammed Ernie Gangloff Bujang Mohammed Nor) Mohd Khiri Abd Wahab Fazli Salikin Vistra NC B.V. Mohd Nazri Mohamad Nageeb Francois van Hoydonck Yogesh Kotak Mohd Zamri Pardi Fuyuhiko Nakata Yogi Supardi Muhammad Rukun Siregar Yustinus Lambang Setyo Putro Nindyo Pranantoro Zuhairi Zubir
Annual Report // 6-Month Financial Period Ended 31 December 2018 115 Financial Statements Sime Darby Plantation
DIRECTORS’ REPORT For the financial period ended 31 December 2018
SUBSIDIARIES
Details of subsidiaries of the Company are set out in Note 53 to the financial statements.
IMMEDIATE AND ULTIMATE HOLDING COMPANIES
The Directors regard Permodalan Nasional Berhad as its immediate holding company and Yayasan Pelaburan Bumiputra as its ultimate holding company. Both companies are incorporated in Malaysia.
CHANGE OF FINANCIAL YEAR END
Following the approval by the Board of Directors, in their resolution dated 21 February 2018, on the change of the financial year end from 30 June to 31 December, the financial period covered in these financial statements is for a period of six (6) months from 1 July 2018 to 31 December 2018. Thereafter, the financial year of the Group and of the Company shall revert to twelve (12) months ending 31 December, for each subsequent year.
Consequently, the comparatives for the statements of profit or loss, statements of comprehensive income, statements of changes in equity and statements of cash flows as well as certain comparatives in the notes to the financial statements of the Group and of the Company are not comparable to those of the previous 12 months ended 30 June 2018.
AUDITORS
The audit fees for services rendered by the auditors to the Group and the Company for the financial period ended 31 December 2018 are disclosed in Note 6(f) to the financial statements.
The Group and the Company do not indemnify the auditors of the Company for losses in the event of legal actions brought against the auditors for alleged wrongful acts by the auditors.
The auditors, PricewaterhouseCoopers PLT (LLP0014401-LCA & AF 1146), have expressed their willingness to accept the re-appointment as auditors.
This Report was approved by the Board of Directors on 5 April 2019.
TAN SRI DATO’ A. GHANI OTHMAN TAN SRI DATO’ SERI MOHD BAKKE SALLEH DIRECTOR DIRECTOR
Selangor 5 April 2019
116 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
STATEMENTS OF PROFIT OR LOSS For the financial period ended 31 December 2018
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Revenue 5 6,542,548 14,368,888 1,652,040 4,178,810 Operating expenses 6 (6,185,191) (12,741,307) (1,676,203) (3,608,405) Other operating income 7 - gain on sale of land to related parties - 676,429 - 610,564 - others 155,620 321,421 137,941 226,105 Other gains and losses 8 42,423 (52,667) (153,938) 340,810 Operating profit/(loss) 555,400 2,572,764 (40,160) 1,747,884 Share of results of joint ventures 22(a) 1,591 (22,855) - - Share of results of associates 23(a) 1,568 (13,932) - - Profit/(loss) before interest and tax 558,559 2,535,977 (40,160) 1,747,884 Finance income 9 8,473 24,433 8,934 18,908 Finance costs 10 (109,985) (183,460) (89,347) (159,812) Profit/(loss) before tax 457,047 2,376,950 (120,573) 1,606,980 Tax expense 12 (145,252) (491,547) (15,970) (196,383) Profit/(loss) for the financial period/year 311,795 1,885,403 (136,543) 1,410,597
Profit/(loss) for the financial period/year attributable to: - equity holders of the Company 243,508 1,727,479 (199,204) 1,286,297 - Perpetual Sukuk 37 62,661 124,300 62,661 124,300 - non-controlling interests 38 5,626 33,624 - - 311,795 1,885,403 (136,543) 1,410,597
sen sen
Basic/diluted earnings per share attributable to equity holders of the Company 13 3.58 25.52
Annual Report // 6-Month Financial Period Ended 31 December 2018 117 Financial Statements Sime Darby Plantation
STATEMENTS OF COMPREHENSIVE INCOME For the financial period ended 31 December 2018
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Profit/(loss) for the financial period/year 311,795 1,885,403 (136,543) 1,410,597
Items that will be reclassified subsequently to profit or loss: Currency translation differences gains/(losses): - subsidiaries 15 168,452 (728,064) - - - joint ventures 22(a) 4,872 (13,138) - - Available-for-sale investments - changes in fair value 25 - (59,529) - (145) Cash flow hedge - changes in fair value (4,551) 20,641 (7,465) 25,208 - transfers to profit or loss 8 (7,966) 27,682 267 (378) Tax (expense)/credit relating to components of other comprehensive income 15 (975) 90 26 (199) 159,832 (752,318) (7,172) 24,486
Items that will not be reclassified subsequently to profit or loss: Actuarial (loss)/gain on defined benefit plans 39 (2,100) 21,155 - 3,134 Share of other comprehensive profit/(loss) of joint ventures 22(a) 3,231 (5,637) - - Investment at fair value through other comprehensive income (“FVOCI”) - changes in fair value 26 1,204 - (839) - Tax credit/(expense) relating to components of other comprehensive income 15 526 (5,244) - (752) 2,861 10,274 (839) 2,382
Total other comprehensive income/(loss) for the financial period/year 15 162,693 (742,044) (8,011) 26,868
Total comprehensive income/(loss) for the financial period/year 474,488 1,143,359 (144,554) 1,437,465
Total comprehensive income/(loss) for the financial period/year attributable to: - equity holders of the Company 400,755 1,026,983 (207,215) 1,313,165 - Perpetual Sukuk 62,661 124,300 62,661 124,300 - non-controlling interests 11,072 (7,924) - - 474,488 1,143,359 (144,554) 1,437,465
118 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
STATEMENTS OF FINANCIAL POSITION As at 31 December 2018
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
NON-CURRENT ASSETS Property, plant and equipment 16 17,004,073 17,742,040 7,838,988 8,032,186 Investment properties 17 15,176 14,710 - - Prepaid lease rentals 19 - 528,890 - - Right-of-use assets 20 2,239,212 - 287,477 - Subsidiaries 21 - - 8,381,283 8,456,737 Joint ventures 22 446,805 437,302 311,938 312,036 Associates 23 41,678 38,725 420 420 Intangible assets 24 2,892,843 2,824,541 2,081,424 2,084,899 Available-for-sale investments 25 - 28,090 - 26,588 Investments at fair value through other comprehensive income (“FVOCI”) 26 29,294 - 25,749 - Deferred tax assets 27 508,991 518,896 - - Tax recoverable 28 290,412 275,428 - - Trade and other receivables 29 115,122 109,340 - - Amount due from a subsidiary 31 - - 49,080 56,679 23,583,606 22,517,962 18,976,359 18,969,545
CURRENT ASSETS Inventories 30 1,681,776 1,570,577 219,530 146,065 Biological assets 18 178,783 152,242 19,007 36,152 Trade and other receivables 29 2,203,139 2,301,441 218,841 306,864 Tax recoverable 28 302,446 307,466 93,372 28,974 Amounts due from subsidiaries 31 - - 522,981 583,231 Amounts due from related parties 31 2,171 2,559 2,903 4,228 Derivatives 32 58,664 57,226 20,860 27,968 Bank balances, deposits and cash 33 491,042 363,238 65,693 68,284 4,918,021 4,754,749 1,163,187 1,201,766
Non-current assets held for sale 34 124,675 218,964 14 28,504 TOTAL ASSETS 28,626,302 27,491,675 20,139,560 20,199,815
Annual Report // 6-Month Financial Period Ended 31 December 2018 119 Financial Statements Sime Darby Plantation
STATEMENTS OF FINANCIAL POSITON As at 31 December 2018
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
EQUITY Share capital 35 1,100,000 1,100,000 1,100,000 1,100,000 Reserves 36 12,018,449 12,574,687 7,968,715 9,132,506 Attributable to equity holders of the Company 13,118,449 13,674,687 9,068,715 10,232,506 Perpetual Sukuk 37 2,231,398 2,230,717 2,231,398 2,230,717 Non-controlling interests 38 396,078 408,398 - - TOTAL EQUITY 15,745,925 16,313,802 11,300,113 12,463,223
NON-CURRENT LIABILITIES Retirement benefits 39 229,809 213,209 50,306 48,633 Deferred income 42 446 601 - - Deferred tax liabilities 27 2,653,870 2,497,457 710,406 704,379 Amount due to a subsidiary 31 - - 504,707 490,463 Borrowings 40 5,492,575 5,395,204 4,292,526 4,397,767 Finance lease obligation - 12,602 - - Lease liabilities 41 165,433 - 7,478 - Trade and other payables 43 63,447 60,813 139,939 61,969 8,605,580 8,179,886 5,705,362 5,703,211
CURRENT LIABILITIES Trade and other payables 43 1,466,545 1,588,102 363,567 380,777 Deferred income 42 28,536 19,275 42 36 Amounts due to subsidiaries 31 - - 1,000,313 1,093,237 Amounts due to related parties 31 61,020 54,104 36,826 31,454 Retirement benefits 39 7,784 10,485 - - Finance lease obligation - 823 - - Lease liabilities 41 27,122 - 1,919 - Tax payable 89,028 160,509 - - Derivatives 32 21,198 24,502 8,883 8,149 Dividend payable 748,092 - 748,092 - Borrowings 40 1,804,339 1,094,194 974,443 519,728 4,253,664 2,951,994 3,134,085 2,033,381
Liabilities directly associated with non-current assets held for sale 34 21,133 45,993 - - TOTAL LIABILITIES 12,880,377 11,177,873 8,839,447 7,736,592 TOTAL EQUITY AND LIABILITIES 28,626,302 27,491,675 20,139,560 20,199,815
120 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
STATEMENTS OF CHANGES IN EQUITY For the financial period ended 31 December 2018
GROUP Attributable to equity holders of the Company Non- Share Retained Perpetual controlling Total capital Reserves earnings Total Sukuk interests equity Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 July 2018, as previously stated 1,100,000 515,841 12,058,846 13,674,687 2,230,717 408,398 16,313,802 Effects on adoption of MFRS 9 and MFRS 16 52 - - (8,275) (8,275) - - (8,275) At 1 July 2018, restated 1,100,000 515,841 12,050,571 13,666,412 2,230,717 408,398 16,305,527 Profit for the financial period - - 243,508 243,508 62,661 5,626 311,795 Other comprehensive income for the financial period 15 - 155,449 1,798 157,247 - 5,446 162,693 Total comprehensive income for the financial period - 155,449 245,306 400,755 62,661 11,072 474,488 Transactions with equity holders: - dividends - - (952,117) (952,117) - (24,557) (976,674) - distribution to Perpetual Sukuk holders 37 - - - - (61,980) - (61,980) - disposal of a subsidiary - (931) 4,330 3,399 - 1,165 4,564 At 31 December 2018 1,100,000 670,359 11,348,090 13,118,449 2,231,398 396,078 15,745,925
At 1 July 2017 600,000 1,225,589 10,632,495 12,458,084 2,231,384 433,887 15,123,355 Profit for the financial year - - 1,727,479 1,727,479 124,300 33,624 1,885,403 Other comprehensive (loss)/ income for the financial year 15 - (709,748) 9,252 (700,496) - (41,548) (742,044) Total comprehensive (loss)/ income for the financial year - (709,748) 1,736,731 1,026,983 124,300 (7,924) 1,143,359 Transactions with equity holders: - share issues 35 500,000 - - 500,000 - - 500,000 - dividends - - (238,029) (238,029) - (72,184) (310,213) - distribution to Perpetual Sukuk holders 37 - - - - (124,967) - (124,967) - acquisition of shares from non-controlling interests - - (72,351) (72,351) - 54,619 (17,732) At 30 June 2018 1,100,000 515,841 12,058,846 13,674,687 2,230,717 408,398 16,313,802
Annual Report // 6-Month Financial Period Ended 31 December 2018 121 Financial Statements Sime Darby Plantation
STATEMENTS OF CHANGES IN EQUITY For the financial period ended 31 December 2018
COMPANY Attributable to equity holders of the Company Share Retained Perpetual Total capital Reserves earnings Total Sukuk equity Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 July 2018, as previously stated 1,100,000 51,513 9,080,993 10,232,506 2,230,717 12,463,223 Effects on adoption of MFRS 9 and MFRS 16 52 - - (4,459) (4,459) - (4,459) At 1 July 2018, restated 1,100,000 51,513 9,076,534 10,228,047 2,230,717 12,458,764 (Loss)/profit for the financial period - - (199,204) (199,204) 62,661 (136,543) Other comprehensive loss for the financial period 15 - (8,011) - (8,011) - (8,011) Total comprehensive (loss)/income for the financial period - (8,011) (199,204) (207,215) 62,661 (144,554) Transactions with equity holders: - dividends 14 - - (952,117) (952,117) - (952,117) - distribution to Perpetual Sukuk holders 37 - - - - (61,980) (61,980) At 31 December 2018 1,100,000 43,502 7,925,213 9,068,715 2,231,398 11,300,113
At 1 July 2017 600,000 27,027 8,030,343 8,657,370 2,231,384 10,888,754 Profit for the financial year - - 1,286,297 1,286,297 124,300 1,410,597 Other comprehensive income for the financial year 15 - 24,486 2,382 26,868 - 26,868 Total comprehensive income for the financial year - 24,486 1,288,679 1,313,165 124,300 1,437,465 Transactions with equity holders: - share issues 35 500,000 - - 500,000 - 500,000 - dividends 14 - - (238,029) (238,029) - (238,029) - distribution to Perpetual Sukuk holders 37 - - - - (124,967) (124,967) At 30 June 2018 1,100,000 51,513 9,080,993 10,232,506 2,230,717 12,463,223
122 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
STATEMENTS OF CASH FLOWS For the financial period ended 31 December 2018
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
CASH FLOWS FROM OPERATING ACTIVITIES Profit/(loss) for the financial period/year 311,795 1,885,403 (136,543) 1,410,597
Adjustments for: Amortisation of: - intangible assets 24 19,077 34,686 4,741 8,884 - prepaid lease rentals 19 - 37,783 - - Bad debts written off 97 1,103 - - Depreciation of: - property, plant and equipment 6(a) 526,631 1,081,099 122,987 241,636 - investment properties 17 40 79 - - - right-of-use assets 6(a) 63,357 - 2,627 - Dividend income (4,059) (61,878) (4,059) (53,465) Finance costs 10 109,985 183,460 89,347 159,812 Finance income 9 (8,473) (24,433) (8,934) (18,908) Write back of donation - (95,202) - (95,202) Fair value losses/(gains): - commodities futures contracts (3,268) 22,479 3,849 26,305 - forward foreign exchange contracts (non-hedging derivatives) (8,838) 18,031 (1,112) 1,183 - forward foreign exchange contracts (cash flow hedge) 7,966 (27,682) (267) 378 Fair value changes in biological assets (net) (22,939) 29,734 17,145 18,428 Gains on disposals of: - property, plant and equipment (35,589) (224,922) (26,328) (200,518) - non-current assets held for sale (46,058) (676,429) (16,756) (610,564) Impairment of: - property, plant and equipment 16 20,508 194,693 1,296 11,000 - prepaid lease rentals 19 - 5,025 - - - investment in subsidiaries 21 - - 136,084 405,692 - investment in associate 23(b) - 126,157 - - - amounts due from subsidiaries 6(e) - - 11,795 61,658 - available-for-sale investments 25 - 22,424 - - - advances for plasma plantation projects 6(e) 3,440 1,248 - - - trade and other receivables 6(e) 5,768 14,504 2,724 13,106 Settlement of associate’s bank borrowings - 22,300 - 22,300 Intangible assets written off 24 193 1,062 193 - Property, plant and equipment written off 16 32,268 39,691 12,241 12,055 Compensation on termination of finance lease obligation - 10,550 - -
Annual Report // 6-Month Financial Period Ended 31 December 2018 123 Financial Statements Sime Darby Plantation
STATEMENTS OF CASH FLOWS For the financial period ended 31 December 2018
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
CASH FLOWS FROM OPERATING ACTIVITIES (CONTINUED) Retirement benefits 39 12,838 31,363 4,262 9,492 Reversal of impairment of: - investment in subsidiaries 7 - - (72,509) (51) - amounts due from subsidiaries 7 - - - (2,531) - advances for plasma plantation projects 7 (315) (1,928) - - - trade and other receivables 7 (7,498) (3,404) - - Share of results of: - joint ventures 22 (1,591) 22,855 - - - associates 23 (1,568) 13,932 - - Tax expense 12 145,252 491,547 15,970 196,383 Unrealised exchange (gains)/losses (net) (26,818) 39,371 119,838 (348,895) Write-down of inventories (net) 4,070 7,177 50 110 1,096,271 3,221,878 278,641 1,268,885
Changes in working capital: Inventories (113,620) (78,618) (73,515) (16,844) Trade and other payables (89,187) (194,407) (37,607) (20,245) Trade and other receivables 103,042 (194,259) 81,417 36,244 Intercompany and related party balances 7,304 (68,994) 105,361 627,171 Cash generated from operations 1,003,810 2,685,600 354,297 1,895,211 Tax paid (154,255) (357,543) (74,130) (144,838) Retirement benefits paid 39 (2,793) (7,379) (2,589) (3,844) Net cash generated from operating activities 846,762 2,320,678 277,578 1,746,529
CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of a subsidiary 44 (227,882) (23,738) - - Additional investment: - in existing subsidiaries 49(e) - - (23,214) (84,194) - in existing associates - (3,820) - (100) - in existing joint ventures - (1,350) - (1,350) Repayment of convertible notes of an associate 49(d) - 12,340 - - Advances for plasma plantation projects (7,236) (15,543) - - Repayment of advances for plasma plantation projects - 142 - - Advances to a joint venture 49(c) - (21,978) - (21,978) Advances to subsidiaries 49(e) - - (61,774) (161,897) Repayment from a subsidiary 49(e) - - 51,120 -
124 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
STATEMENTS OF CASH FLOWS For the financial period ended 31 December 2018
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
CASH FLOWS FROM INVESTING ACTIVITIES (CONTINUED) Dividends received from: - associates 23(d) - 6,183 - - - other investments 5(b) 4,059 61,878 4,059 1,740 - subsidiaries 5(b) - - - 51,725 Finance income received 8,473 16,834 8,934 18,908 Proceeds from sale of: - property, plant and equipment 44,239 307,396 31,145 223,354 - redeemable loan stock 49(f)(iv) - 333,244 - - - non-current assets held for sale 66,861 - 45,246 - Purchase of: - property, plant and equipment (797,165) (1,495,784) (210,735) (376,221) - intangible assets (3,403) (5,017) (1,358) (4,961) Net cash used in investing activities (912,054) (829,213) (156,577) (354,974)
CASH FLOWS FROM FINANCING ACTIVITIES Finance costs paid (117,614) (234,226) (98,861) (202,620) Loans raised 1,314,730 806,011 511,560 - Repayment to former fellow subsidiary - (601,745) - (601,745) Advances from former fellow subsidiary - 370,246 - 370,246 Repayment of loan due to a subsidiary - - - (194,128) Loan repayments (719,990) (1,601,242) (269,165) (389,165) Repayment of finance lease obligations - (50,192) - (871) Payments for the principal portion of lease liabilities (19,397) - (1,334) - Distribution to Perpetual Sukuk holders 37 (61,980) (124,967) (61,980) (124,967) Settlement of associate’s bank borrowings - (22,300) - (22,300) Acquisition of shares from non-controlling interests - (17,732) - - Dividend paid to shareholders 14 (204,025) (238,029) (204,025) (238,029) Dividend paid to non-controlling interests of subsidiaries 38 (24,557) (72,184) - - Net cash generated from/(used in) financing activities 167,167 (1,786,360) (123,805) (1,403,579)
Annual Report // 6-Month Financial Period Ended 31 December 2018 125 Financial Statements Sime Darby Plantation
STATEMENTS OF CASH FLOWS For the financial period ended 31 December 2018
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS DURING THE FINANCIAL PERIOD/YEAR 101,875 (294,895) (2,803) (12,024)
Exchange differences 25,929 (49,993) 212 (23,845)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL PERIOD/YEAR 363,238 713,448 68,284 104,153
Less: Reclassified to non-current assets held for sale 34 - (5,322) - - CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL PERIOD/YEAR 33 491,042 363,238 65,693 68,284
NOTES TO STATEMENTS OF CASH FLOWS
(A) Principal non-cash transactions
Details of significant non-cash transactions during the financial period are set out in Note 49(g) to the financial statements.
126 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
STATEMENTS OF CASH FLOWS For the financial period ended 31 December 2018
NOTES TO STATEMENTS OF CASH FLOWS (CONTINUED)
(B) Reconciliation of liabilities arising from financing activities
A reconciliation between the opening and closing balances in the statement of financial position for liabilities arising from financing activities is as follows:
GROUP Finance Lease lease Borrowings* liabilities obligations Total Note RM’000 RM’000 RM’000 RM’000
At 1 July 2018, previously stated 6,537,995 - 13,425 6,551,420 Effects on adoption of MFRS 16 52 - 199,538 (13,425) 186,113 At 1 July 2018, restated 6,537,995 199,538 - 6,737,533
Cash flows from financing activities Finance costs paid (117,614) - - (117,614) Loans raised 1,314,730 - - 1,314,730 Loan repayments (719,990) - - (719,990) Repayment of lease liabilities 41 - (19,397) - (19,397)
Non-cash changes Acquisition of a subsidiary 44(a) 34,806 - - 34,806 Finance costs 10 105,371 4,614 - 109,985 Finance costs capitalised 10 17,452 - - 17,452 Recognition of additional lease liabilities - 8,439 - 8,439 Exchange differences 169,634 (639) - 168,995 At 31 December 2018 7,342,384 192,555 - 7,534,939
* The borrowings include interest payable for the Group which was classified under trade and other payable in Note 43.
Annual Report // 6-Month Financial Period Ended 31 December 2018 127 Financial Statements Sime Darby Plantation
STATEMENTS OF CASH FLOWS For the financial period ended 31 December 2018
NOTES TO STATEMENTS OF CASH FLOWS (CONTINUED)
(B) Reconciliation of liabilities arising from financing activities (continued)
A reconciliation between the opening and closing balances in the statement of financial position for liabilities arising from financing activities is as follows: (continued)
GROUP Amount due to former Amounts immediate due to Finance lease holding former fellow Borrowings* obligations company subsidiaries Total Note RM’000 RM’000 RM’000 RM’000 RM’000
At 1 July 2017 7,773,718 53,067 145,392 1,291,944 9,264,121 Cash flows from financing activities Finance costs paid (199,986) (1,044) - (33,196) (234,226) Repayment of lease liabilities - (50,192) - - (50,192) Advance from former fellow subsidiaries - - - 370,246 370,246 Repayment to former fellow subsidiaries - - - (601,745) (601,745) Loans raised 806,011 - - - 806,011 Loan repayments (1,601,242) - - - (1,601,242)
Non-cash changes Finance costs 10 164,858 1,044 - 17,558 183,460 Finance costs capitalised 10 45,018 - - - 45,018 Assignment of debt from former immediate holding company to a former fellow subsidiary 49(g) - - (145,392) 145,392 - Proceed from sale of non-current assets held for sale 49(g) - - - (689,587) (689,587) Proceed from sale of property, plant and equipment 49(g) - - - (612) (612) Compensation on termination of lease liabilities 6(e) - 10,550 - - 10,550 Issuance of new ordinary shares to former immediate holding company 35 - - - (500,000) (500,000) Exchange differences (450,382) - - - (450,382) At 30 June 2018 6,537,995 13,425 - - 6,551,420
* The borrowings include interest payable for the Group which was classified under trade and other payable in Note 43.
128 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
STATEMENTS OF CASH FLOWS For the financial period ended 31 December 2018
NOTES TO STATEMENTS OF CASH FLOWS (CONTINUED)
(B) Reconciliation of liabilities arising from financing activities (continued)
A reconciliation between the opening and closing balances in the statement of financial position for liabilities arising from financing activities is as follows: (continued)
COMPANY Amounts Lease due to a Borrowings* liabilities subsidiary Total Note RM’000 RM’000 RM’000 RM’000
At 1 July 2018, previously stated 4,939,282 - 497,341 5,436,623 Effects on adoption of MFRS 16 52 - 10,406 - 10,406 At 1 July 2018, restated 4,939,282 10,406 497,341 5,447,029
Cash flows from financing activities Finance costs paid (86,409) - (12,452) (98,861) Loan raised 511,560 - - 511,560 Loan repayments (269,165) - - (269,165) Repayment of lease liabilities 41 - (1,334) - (1,334)
Non-cash changes Finance costs 10 80,236 325 8,786 89,347 Finance costs capitalised 10 10,922 - - 10,922 Exchange differences 103,137 - 18,090 121,227 At 31 December 2018 5,289,563 9,397 511,765 5,810,725
* The borrowings include interest payable for the Company which was classified under trade and other payable in Note 43.
Annual Report // 6-Month Financial Period Ended 31 December 2018 129 Financial Statements Sime Darby Plantation
STATEMENTS OF CASH FLOWS For the financial period ended 31 December 2018
NOTES TO STATEMENTS OF CASH FLOWS (CONTINUED)
(B) Reconciliation of liabilities arising from financing activities (continued)
A reconciliation between the opening and closing balances in the statement of financial position for liabilities arising from financing activities is as follows: (continued)
COMPANY Amount due Amounts to former due to Finance immediate Amounts former lease holding due to a fellow Borrowings* obligations company subsidiary subsidiaries Total Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 July 2017 5,665,044 19,443 145,392 742,679 1,291,944 7,864,502 Cash flows from financing activities Finance costs paid (148,533) (218) - (20,673) (33,196) (202,620) Repayment of lease liabilities - (871) - - - (871) Advance from former fellow subsidiaries - - - - 370,246 370,246 Repayment to former fellow subsidiaries - - - - (601,745) (601,745) Repayment to a subsidiary - - - (194,128) - (194,128) Loan repayments (389,165) - - - - (389,165)
Non-cash changes Finance costs 10 122,708 218 - 19,328 17,558 159,812 Finance costs capitalised 10 31,187 - - - - 31,187 Assignment of debt from former immediate holding company to a former fellow subsidiary 49(g) - - (145,392) - 145,392 - Proceed from sale of non-current assets held for sale 49(g) - - - - (689,587) (689,587) Proceed from sale of property, plant and equipment 49(g) - - - - (612) (612) Issuance of new ordinary shares to former immediate holding company 35 - - - - (500,000) (500,000) Termination of lease liabilities - (18,572) - - - (18,572) Exchange differences (341,959) - - (49,865) - (391,824) At 30 June 2018 4,939,282 - - 497,341 - 5,436,623
* The borrowings include interest payable for the Company which was classified under trade and other payable in Note 43.
130 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
1. CORPORATE INFORMATION
The principal activities of the Company consist of the production, processing, refining and sales of palm oil and palm kernel oil, manufacturing and marketing of specialty fats and edible oils, rubber and other palm oil related products and investment holding.
The principal activities of the Group consist of the production, processing, refining and sales of palm oil and palm kernel oil, manufacturing and blending, marketing and distribution of specialty fats, edible oils, rubber and other palm oil related products, production and sales of sugar and beef, and the involvement in other agriculture related business as disclosed in Note 53 to the financial statements. During the financial period, the Group acquired Markham Farming Company Limited whose principal activities include processing and marketing of coconut oils and cultivation of oil palm.
Other than the above, there were no significant changes in the nature of these activities during the financial period.
The Company is a public limited company incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad commencing 30 November 2017. The registered office of the Company is located at Level 10, Main Block, Plantation Tower, No. 2, Jalan PJU 1A/7, Ara Damansara, 47301 Petaling Jaya, Selangor Darul Ehsan.
The Directors regard Permodalan Nasional Berhad as its immediate holding company and Yayasan Pelaburan Bumiputra as its ultimate holding company. Both companies are incorporated in Malaysia.
Following the approval by the Board of Directors, in their resolution dated 21 February 2018, on the change of the financial year end from 30 June to 31 December, the financial period covered in these financial statements is for a period of six (6) months from 1 July 2018 to 31 December 2018. Thereafter, the financial year of the Group and of the Company shall revert to twelve (12) months ending 31 December, for each subsequent year.
Consequently, the comparatives for the statements of profit or loss, statements of comprehensive income, statements of changes in equity and statements of cash flows as well as certain comparatives in the notes to the financial statements of the Group and of the Company are not comparable to those of the previous 12 month ended 30 June 2018.
2. BASIS OF PREPARATION
The financial statements of the Group and of the Company have been prepared in accordance with the Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.
The financial statements have been prepared under the historical cost convention except as disclosed in the summary of principal accounting policies in Note 3.
The preparation of financial statements in conformity with MFRS, requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of the revenue and expenses during the reported period. It also requires Directors to exercise their judgement in the process of applying the Group’s and the Company’s accounting policies. Although these estimates and judgement are based on Directors’ best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4.
Annual Report // 6-Month Financial Period Ended 31 December 2018 131 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
2. BASIS OF PREPARATION (CONTINUED)
(a) Accounting pronouncements that have been adopted in preparing these financial statements
During the financial period, the Group has considered the new accounting pronouncements in the preparation of the financial statements, as follows:
(i) New accounting pronouncements with effective date on or after 1 July 2018
• Amendments to MFRS 140 “Investment Property - Transfer of Investment Property” • IC Interpretation 22 “Foreign Currency Translations and Advance Consideration” • MFRS 9 “Financial Instruments”
The Group has adopted MFRS 9 for the first time in the financial statements, which resulted in changes in accounting policies. The Group has applied MFRS 9 retrospectively with the date of initial application of 1 July 2018. In accordance with the transitional provisions provided in MFRS 9, comparative information for 30 June 2018 was not restated and continued to be reported under the previous accounting policies governed under MFRS 139. The cumulative effects of initially applying MFRS 9 were recognised as an adjustment to the opening balance of retained earnings as at 1 July 2018.
The Group and the Company have assessed the impact of adoption of MFRS 9 on 1 July 2018 and have identified the following:
• The Group’s and the Company’s equity instruments that were previously classified as available-for-sale investments satisfy the conditions for classification under fair value through other comprehensive income (“FVOCI”) and hence there will be no change to the accounting treatment of these assets. Any impairment and foreign exchange differences on translation of monetary available-for-sale financial assets were recognised in other comprehensive income from 1 July 2018 onwards.
• Additional impairment of RM11.2 million and RM5.4 million respectively on the receivables based on expected credit loss (“ECL”) model, which resulted in a decrease in retained earnings of RM8.3 million and RM4.5 million for the Group and the Company respectively as at 1 July 2018. The additional amounts were derived from probability-weighted assessments performed on receivables balance carried as at 30 June 2018. The resultant total impairment losses on receivables of RM54.8 million and RM312.8 million (including inter-company receivables) as at 1 July 2018 represent the lifetime ECL estimated by the Group and the Company on their receivables on adoption of the standard.
The detailed impact of change in accounting policies is set out in Note 52.
As permitted by the transitional provision of MFRS 9, the Group has elected to adopt the modified retrospective approach with the following practical expedients:
• Fair value of financial assets and financial liabilities at 1 July 2018 are treated as the new gross carrying amount of those financial assets or the new amortised cost of those financial liabilities at 1 July 2018.
• Prior periods are not restated. Differences between carrying amount as at 30 June 2018 and the carrying amount upon adoption of the standard are recognised in retained earnings as at 1 July 2018.
• The Group uses reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date those financial instruments were initially recognised for comparison with the credit risk at 1 July 2018.
• The Group assumes that the credit risk on its financial instruments have not increased significantly since initial recognition even though certain contractual payments may have been due for more than 30 days.
Other than MFRS 9, the adoption of other amendments listed above did not have any impact on the current period or any prior period and is not likely to affect future period.
132 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
2. BASIS OF PREPARATION (CONTINUED)
(a) Accounting pronouncements that have been adopted in preparing these financial statements (continued)
(ii) New accounting pronouncement that has yet to be effective but has been early adopted:
• MFRS 16 “Leases”
The Group has elected to early adopt MFRS 16 “Leases” which will take effect on or after 1 January 2019, on 1 July 2018.
MFRS 16 replaces the guidance in MFRS 117 “Leases”, IC Interpretation 4 “Determining whether an Arrangement contains a Lease”, IC Interpretation 115 “Operating Leases – Incentives” and IC Interpretation 127 “Evaluating the Substance of Transactions Involving the Legal Form of a Lease”.
MFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use (“ROU”) asset representing its right to use the underlying asset and a lease liability representing its obligations to make lease payments. ROU asset is depreciated throughout the lease period in accordance with the depreciation requirements of MFRS 116 “Property, Plant and Equipment” whereas lease liability is accreted to reflect interest and is reduced to reflect lease payments made. Lease that were classified as finance leases under MFRS 117, the carrying amount of the ROU asset and lease liability at the date of initial application shall be the carrying amount of the lease asset and lease liability immediately before the date of initial application.
For lessors, MFRS 16 retains most of the requirements in MFRS 117. Lessors continue to classify all leases as either operating leases or finance leases and account for them differently.
As a result, leasehold land and prepaid lease rentals have been reclassified to ROU assets together with a recognition of additional RM186.1 million and RM10.4 million of ROU assets on 1 July 2018 for the Group and the Company respectively. The detailed impact of changes in accounting policies is set out in Note 52.
As permitted by the transitional provision of MFRS 16, the Group has elected to adopt a simplified transition approach where cumulative effects of initial application are recognised on 1 July 2018 as an adjustment to the opening balance of retained earnings. The Group has also applied the following practical expedients under MFRS 16:
• No adjustments are made on transition for leases for which the underlying assets are of low value.
• A single discount rate is applied to portfolio of leases with reasonably similar characteristics.
• The Group does not apply the standard to leases which lease terms end within 12 months from 1 July 2018.
• The Group uses hindsight in determining lease terms for contracts that contain options for extension or termination.
(b) Accounting pronouncements that are not yet effective and have not been early adopted in preparing these financial statements
(i) Interpretation and amendments that are effective on or after 1 January 2019
• IC Interpretation 23 “Uncertainty over Income Tax Treatments” • Amendments to MFRS 9 “Prepayment Features with Negative Compensation” • Amendments to MFRS 119 “Plan amendment, curtailment or settlement” • Amendments to MFRS 128 “Long-term Interest in Associates and Joint Ventures” • Annual Improvements to MFRSs 2015-2017 Cycle
Annual Report // 6-Month Financial Period Ended 31 December 2018 133 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
2. BASIS OF PREPARATION (CONTINUED)
(b) Accounting pronouncements that are not yet effective and have not been early adopted in preparing these financial statements (continued)
(ii) Interpretation and amendments that are effective on or after 1 January 2020
• Amendments to MFRS 3 “Definition of a Business” • Amendments to MFRS 101 and MFRS 108 “Definition of Material” • The Conceptual Framework for Financial Reporting
(c) Accounting pronouncement where the effective date has been deferred to a date to be determined by the Malaysian Accounting Standards Board (“MASB”) is set out below:
• Amendments to MFRS 10 and MFRS 128 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
The following significant accounting policies have been applied consistently in dealing with items that are considered material in relation to the financial statements, and to all the financial periods presented, unless otherwise stated.
(a) Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and all of its subsidiaries made up to the end of the financial period and are prepared using uniform accounting policies for like transactions and other events in similar circumstances.
(i) Subsidiaries
Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group has power over the entity, has exposure to or rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
Subsidiaries are consolidated using the acquisition method except for those subsidiaries acquired under common control. Under the acquisition method, subsidiaries are consolidated from the date on which control is transferred to the Group and de-consolidated from the date when control ceases. The consideration is measured at the fair value of the assets given, equity instruments issued and liabilities incurred at the date of exchange.
Contingent consideration is recorded at fair value as component of the purchase consideration with subsequent adjustment resulting from events after the acquisition date taken to profit or loss. Acquisition related costs are recognised as expenses when incurred.
Existing equity interests in the acquiree are re-measured to fair value at the date of business combination with any resulting gain or loss taken to profit or loss.
Identifiable assets, liabilities and contingent liabilities assumed in a business combination are measured at their fair values, at the date of acquisition. The excess of the consideration and the fair value of previously held equity interests over the Group’s share of the fair value of the identifiable net assets acquired at the date of acquisition is reflected as goodwill. Any gain from bargain purchase is recognised directly in profit or loss.
134 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(a) Basis of consolidation (continued)
(i) Subsidiaries (continued)
Intercompany transactions and balances are eliminated on consolidation, but unrealised losses arising therefrom are eliminated only to the extent of the cost of the asset that can be recovered, and the balance is recognised in profit or loss as reduction in net realisable value or as impairment loss.
Non-controlling interests in the results and net assets of non-wholly owned subsidiaries are presented separately in the financial statements. Transactions with owners of non-controlling interests without a change in control are treated as equity transactions in the statements of changes in equity.
When control ceases, the disposal proceeds and the fair value of any retained investment are compared to the Group’s share of the net assets disposed. The difference together with the carrying amount of allocated goodwill and the exchange reserve that relate to the subsidiary is recognised as gain or loss on disposal in profit or loss.
(ii) Business combinations under common control
Business combinations under common control are accounted using the predecessor method of accounting where the profit or loss and other comprehensive income include the results of each of the combining entities from the earliest date presented or from the date when these entities came under the control of the common controlling party (if later).
The assets and liabilities of the combining entities are accounted for based on the carrying amounts from the perspective of the common controlling party, or the combining entities if the common controlling party does not prepare consolidated financial statements.
The difference in cost of acquisition over the aggregate carrying value of the assets and liabilities of the combining entities as of the date of the combination is taken to equity. Transaction costs for the combination are recognised in profit or loss.
Similar treatment applies in the Company’s separate financial statements when assets and liabilities representing the underlying businesses under common control are directly acquired by the Company. In accounting for business combinations in the Company’s separate financial statements, the excess of the cost of acquisition over the aggregate carrying amounts of assets and liabilities as of the date of the combination is taken to equity.
(iii) Joint ventures
Joint ventures are separate vehicles in which the Group has rights to its net assets and where its strategic, financial and operating decisions require unanimous consent of the Group and one or more parties sharing the control.
Joint ventures are accounted using the equity method. Equity method is a method of accounting whereby the investment is recorded at cost inclusive of goodwill and adjusted thereafter for the Group’s share of the post-acquisition results and other changes in the net assets of the joint ventures based on their latest audited financial statements or management accounts. Where necessary, adjustments are made to the financial statements of joint ventures used by the Group in applying the equity method to ensure consistency of accounting policies with those of the Group.
After application of the equity method, the carrying amount of the joint ventures will be assessed for impairment. Equity method is discontinued when the carrying amount of joint venture reaches zero, or reaches the limit of the obligations in the case when the Group has incurred legal or constructive obligations in respect of the joint venture.
Annual Report // 6-Month Financial Period Ended 31 December 2018 135 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(a) Basis of consolidation (continued)
(iii) Joint ventures (continued)
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated on the same basis but only to the extent of the costs that can be recovered, and the balance that provides evidence of reduction in net realisable value or an impairment of the assets transferred are recognised in profit or loss.
When joint control ceases, the disposal proceeds and the fair value of any retained investment are compared to the carrying amount of the joint venture. The difference together with the exchange reserve that relate to the joint venture is recognised as gain or loss on disposal. In the case of partial disposal without losing joint control, the difference between the proceeds and the carrying amount disposed, and the proportionate exchange reserve is recognised as gain or loss on disposal.
(iv) Associates
Associates are entities in which the Group is in a position to exercise significant influence. Significant influence is the power to participate in the financial and operating policy decisions, but not control over those policies.
Investments in associates are accounted for using the equity method, similar to Note 3(a)(iii) above.
(b) Foreign currencies
(i) Presentation and functional currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (“RM”), which is the Company’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions and monetary items are translated into the functional currency using the exchange rates prevailing at the transaction dates and at the end of the reporting period, respectively. Foreign exchange differences arising therefrom and on settlement are recognised in profit or loss.
Foreign exchange differences arising from the translation of a monetary item designated as hedge of net investment in a foreign operation are recognised in other comprehensive income in the consolidated financial statements until the net investment is disposed.
(iii) Translation of foreign currency financial statements
For consolidation purposes, foreign operations’ results are translated into the Group’s presentation currency at average exchange rates for the financial period whilst the assets and liabilities, including goodwill and fair value adjustments arising on consolidation, are translated at exchange rates ruling at the end of the reporting period. The resulting translation differences are recognised in other comprehensive income and accumulated in exchange reserve.
Intercompany loans where settlement is neither planned nor likely to occur in the foreseeable future, are treated as part of the parent’s net investment. Translation differences arising therefrom are recognised in other comprehensive income and reclassified from equity to profit or loss upon repayment or disposal of the relevant entity.
Exchange reserve in respect of a foreign operation is recognised to profit or loss when control, joint control or significant influence over the foreign operation is lost. On partial disposal without losing control, a proportion of the exchange reserve in respect of the subsidiary is re-attributed to the non-controlling interests. The proportionate share of the cumulative translation differences is reclassified to profit or loss in respect of all other partial disposals.
136 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(c) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of an asset. The carrying amount of the replaced part is derecognised and all repairs and maintenance costs are charged to profit or loss during the financial period in which they are incurred.
All costs directly related to bearer plants are capitalised until such time as the bearer plants reach maturity, at which point all further costs are expensed and depreciation commences. Such costs include seedling and planting costs, other upkeep costs, and an allocation of overhead costs.
Freehold land is not depreciated as it has indefinite life. Depreciation commences when the bearer plants mature or when the assets under constructions are ready for their intended use. Other property, plant and equipment are depreciated on a straight-line basis to write down the cost or valuation of each asset to its residual value over its estimated useful lives as follows:
Bearer plants - Oil palm 22 years, or the lease term, if shorter - Rubber trees 24 years, or the lease term, if shorter - Growing canes 5 years, or the lease term, if shorter Plant and machinery 5 to 40 years, or over the lease term, if shorter Vehicles, equipment and fixtures 3 to 10 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
Property, plant and equipment are tested for impairment whenever indication of impairment exists, see Note 3(l)(i) on impairment of non-financial assets.
(d) Investment properties
Investment properties are land and buildings held for rental income and/or capital appreciation which are not substantially occupied or intended to be occupied for use by, or in the operations of the Group.
Investment properties are stated at cost less accumulated depreciation and accumulated impairment losses. Freehold land and buildings under construction are not depreciated. Other investment properties are depreciated on a straight-line basis to write down the cost of each asset to its residual value over its estimated useful life as follows:
Buildings 20 to 50 years, or over the lease term, if shorter
The residual values and useful lives are reviewed, and adjusted if appropriate, annually. Investment properties are tested for impairment whenever indication of impairment exists, see Note 3(l)(i) on impairment of non-financial assets.
(e) Biological assets
Biological assets comprised cattle livestock and produce growing on bearer plants. Biological assets are measured at fair value less costs of disposal. Any gains or losses arising from changes in the fair value less costs of disposal net of transfers to produce stocks are recognised net in profit or loss. Fair value is determined based on the present value of expected net cash flows from the biological assets. The expected net cash flows are estimated using the expected output method and the estimated market price of the biological assets.
Biological assets are classified as current assets for bearer plants that are expected to be harvested and livestock that are expected to be sold or used for production on a date not more than 12 months after the reporting date, and the balance is classified as non-current.
Annual Report // 6-Month Financial Period Ended 31 December 2018 137 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(f) Prepaid lease rentals
Accounting policies applied from 1 July 2018
Following the early adoption of MFRS 16 “Leases” on 1 July 2018, the Group has reclassified the carrying amount of prepaid lease rental to right-of-use (“ROU”) assets. See note 3(v) to the financial statements for the new accounting policies.
Accounting policies applied until 30 June 2018
Prepaid lease rentals represent payments for rights to use land over a pre-determined period that is accounted for as an operating lease and is stated at cost less accumulated amortisation and accumulated impairment losses. The prepaid lease rentals are amortised on a straight-line basis over the lease period ranging generally from 20 to 50 years.
(g) Intangible assets
(i) Goodwill
Goodwill represents the excess of the consideration and the fair value of previously held interests over the Group’s share of the fair value of identifiable assets, liabilities and contingent liabilities of the acquiree at the date of acquisition.
Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash generating units for the purpose of impairment testing. Goodwill on acquisition of joint ventures and associates is included as part of the cost of investments in joint ventures and associates. Such goodwill is tested for impairment as part of the overall net investment in each joint venture and associate.
(ii) Research and development costs
Research costs are charged to profit or loss in the financial period in which the expenditure is incurred.
Internally generated agriculture development costs are capitalised as intangible assets when the following criteria are fulfilled:
(i) it is technically feasible to complete the intangible asset so that it will be available for use or sale; (ii) management intends to complete the intangible asset and use or sell it; (iii) there is an ability to use or sell the intangible asset; (iv) it can be demonstrated how the intangible asset will generate probable future economic benefits; (v) adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and (vi) the expenditure attributable to the intangible asset during its development can be reliably measured.
Subsequently, such capitalised development costs are amortised from the commencement of commercial production of the product to which they relate on a straight-line basis between 5 and 20 years. The useful life will be reviewed and adjusted, if appropriate, annually. Impairment testing is performed annually on development activities which have not entered commercial production. Development activity is also tested for impairment whenever indication of impairment exists. See Note 3(l)(i) on impairment of non-financial assets.
Development costs previously recognised as an expense in profit and loss are not recognised as an asset in subsequent period.
138 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(g) Intangible assets (continued)
(iii) Smallholder relationships
Smallholder relationships have arisen on the acquisition of subsidiaries. These assets reflect the economic relationship between Group and the smallholders who cultivate and harvest fresh fruits bunches on land owned by the smallholders. These assets are shown at fair value on acquisition of subsidiaries and subsequently subject to amortisation on a straight line basis over the estimated average remaining lease term of the Group’s land of 45 years. The smallholder relationships are tested for impairment whenever indication of impairment exists.
(iv) Computer software
Expenditure on computer software that is not an integral part of the related hardware is treated as an intangible asset and is carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the straight-line basis over their estimated useful lives. The annual amortisation rates range from 10% to 33%. Projects in progress are not amortised as these computer software are not yet available for use.
(v) Intellectual property rights
Intellectual property rights acquired from third parties are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the straight-line basis over their estimated useful life of 20 years.
(vi) Other intangible assets
Other intangible assets with finite useful lives are capitalised at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the straight-line basis over their contractual periods or estimated useful lives. The principal annual amortisation rates are:
Brand names and trademarks 5% to 20% Assets usage rights 7% Customer relationships Contract periods ranging from 10 months to 10 years
These intangible assets are tested for impairment whenever indication of impairment exists. See Note 3(l)(i) on impairment of non-financial assets.
(h) Non-current assets held for sale
Non-current assets or groups of assets are classified as “held for sale” if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Depreciation ceases when an asset is classified as a non-current asset held for sale. Non-current assets held for sale are stated at the lower of carrying amount and fair value less costs of disposal.
(i) Inventories
Inventories comprise palm oil products, sugar stocks, coconut oil, raw materials, trading inventories, consumables and spare parts. Inventories are stated at the lower of cost and net realisable value. The cost of raw materials, trading inventories and consumable stores represent cost of purchase plus incidental costs, and in the case of other inventories, include cost of materials, direct labour, other direct costs and related production overheads based on normal operating capacity.
Annual Report // 6-Month Financial Period Ended 31 December 2018 139 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(i) Inventories (continued)
Costs for palm oil products and sugar stock includes all direct expenses, an appropriate proportion of variable and fixed overheads arising from manufacturing and head office expenses and the estimated fair value less costs of disposal attributed to agriculture produce at the point of harvest in accordance with MFRS 141 “Agriculture”. The fair value of biological assets harvested from the Group’s own plantations and sold during the year are recorded as part of the biological assets movement (see Note 18) and as part of “fair value changes in biological assets (net)” in determining profit.
The cost of inventories is determined on a weighted average basis whilst net realisable value is the estimated selling price in the ordinary course of business, less estimated cost to completion and estimated selling expenses.
(j) Financial assets
Accounting policies applied from 1 July 2018
From 1 July 2018, the Group classifies its financial assets in the following measurement categories:
(i) Financial assets at amortised cost - Debt instruments (previously classified as loans and receivables)
The Group and the Company classify its financial assets at amortised cost when the asset is held within a business model with the objective to collect contractual cash flows and the contractual terms give rise to cash flows that are solely payments of principal and interest (“SPPI”). Financial assets of the Group and the Company which fall under this category are trade and other receivables, bank balances, deposits and cash.
At initial recognition, the Group and the Company measure a financial asset at its fair value plus transaction costs that are directly attributable to the acquisition of the financial asset. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains and losses together with the related foreign exchange gains and losses.
(ii) Financial assets at fair value through other comprehensive income (“FVOCI”) - Equity instruments (previously classified as available-for-sale financial assets)
The Group and the Company have made an irrevocable election to classify its equity investments in unquoted shares under this category. At initial recognition, the Group and the Company measure a financial asset at its fair value plus transaction costs that are directly attributable to the acquisition of the financial asset.
Subsequently, any fair value gains and losses on equity investments are recognised in investment in FVOCI reserve (previously known as available-for-sale reserve). On derecognition, the cumulative gain or loss is reclassified from investment in FVOCI reserve to retained earnings. Dividends from such investments continue to be recognised in profit or loss as other income when the Group’s and the Company’s right to receive payments are established.
Equity instruments designated at FVOCI are not subject to impairment assessment.
(iii) Financial assets at fair value through profit or loss (“FVTPL”) - Debt instruments
Financial assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Accordingly, the Group and the Company classify its non-hedging derivative assets under this category.
140 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(j) Financial assets (continued)
Accounting policies applied from 1 July 2018 (continued)
From 1 July 2018, the Group classifies its financial assets in the following measurement categories: (continued)
(iii) Financial assets at fair value through profit or loss (“FVTPL”) - Debt instruments (continued)
At initial recognition, the Group and the Company measure this financial asset at its fair value. Transaction costs attributable to the acquisition of the financial asset are expensed in profit or loss. Net changes in the fair value of financial assets at FVTPL are subsequently recognised in other gains and losses in profit or loss.
Purchases and sales of financial assets are recognised at trade date, the date at which the Group and the Company commit to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group and the Company have transferred substantially all the risks and rewards of ownership.
Financial assets are classified as current assets for those having maturity dates of not more than 12 months after the end of the reporting period, and the balance is classified as non-current.
See note 3(l)(ii) on impairment of financial assets.
Accounting policies applied until 30 June 2018
The Group’s and the Company’s financial assets are classified into four categories and the accounting policies for each of these categories are as follows:
(i) Financial assets at fair value through profit or loss
Quoted warrants and non-hedging derivative assets are financial assets held for trading, and are classified as fair value through profit or loss. These financial assets are measured at fair value. Any gain or loss arising from changes in fair value and transaction costs are recognised in profit or loss.
(ii) Loans and receivables
Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. These financial assets are recorded at fair value plus transaction costs and thereafter, they are measured at amortised cost using the effective interest method less accumulated impairment losses.
(iii) Available-for-sale financial assets
Available-for-sale financial assets are financial assets that are designated as available for sale or are not classified in any of the two preceding categories. These financial assets are recorded initially at fair value plus transaction costs and thereafter, they are measured at fair value. Except for impairment, foreign exchange differences on translation of monetary available-for-sale financial assets such as debt instruments, interest calculated using the effective interest method and dividends which are recognised in profit or loss, any gain or loss arising from changes in fair value are recognised in other comprehensive income. On derecognition, the cumulative gain or loss is reclassified from available-for-sale reserve to profit or loss.
Annual Report // 6-Month Financial Period Ended 31 December 2018 141 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(j) Financial assets (continued)
Accounting policies applied until 30 June 2018 (continued)
The Group’s and the Company’s financial assets are classified into four categories and the accounting policies for each of these categories are as follows: (continued)
Financial assets are classified as current assets for those having maturity dates of not more than 12 months after the end of the reporting period, and the balance is classified as non-current. For available-for-sale financial assets, the classification is based on expected date of realisation of the assets.
Regular way purchase or sale of a financial asset is recognised at settlement date which is the date that an asset is delivered to or by the Group and the Company. A contract that requires or permits net settlement of the change in the value of the contract is not a regular way contract. Such contract is accounted for as a derivative in the period between the trade date and the settlement date.
(k) Derivatives and hedging activities
Derivatives are measured at fair value and carried as assets when the fair value is positive and as liabilities when the fair value is negative.
A derivative that is neither designated nor an effective hedging instrument is categorised under fair value through profit or loss and changes in its fair value is recognised in profit or loss. In the case of a derivative that qualifies for cash flow hedge, the effective portion of changes in its fair value is recognised in other comprehensive income.
The gain or loss is removed from equity and included in profit or loss in the same period or periods during which the hedged item affects profit or loss. In the case of a hedge of a forecast transaction which results in the recognition of a non-financial asset or a non-financial liability, the gain or loss is removed from equity and included in the carrying amount of the asset or liability.
When a derivative expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to profit or loss within other gains and losses.
Since adoption of MFRS 9, the Group and the Company document at the inception of the hedge relationship, the economic relationship between hedging instruments and hedged items including whether changes in the cash flows of the hedging instruments are expected to offset changes in the cash flows of hedged items. The Group and the Company document its risk management objective and strategy for undertaking its hedge transaction. Prior to 1 July 2018, the Group and the Company documented at the inception of the transaction, the relationship between hedging instruments and hedged items and its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that were used in hedging transactions have been, and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.
(l) Impairment
(i) Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life or are not yet available for use are tested for impairment. Other non-financial assets are assessed for indication of impairment. If an indication exists, an impairment test is performed.
142 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(l) Impairment (continued)
(i) Impairment of non-financial assets (continued)
An impairment loss is recognised for the amount by which the carrying amount of the non-financial asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. Impairment loss on non-financial assets is charged to profit or loss.
Except for goodwill, non-financial assets that were previously impaired are reviewed for possible reversal of the impairment at the end of each reporting period. Any subsequent increase in recoverable amount is recognised in the profit or loss. Reversal of impairment loss is restricted to the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior financial periods.
An impairment loss recognised for goodwill is not reversed.
The Group and the Company perform impairment exercise annually and whenever events or circumstances occur indicating that impairment may exist.
(ii) Impairment of financial assets
Accounting policies applied from 1 July 2018
The Group and the Company recognise an allowance for expected credit loss (“ECL”) for all debt instruments not held at FVTPL and financial guarantee contracts issued. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group and the Company expect to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. For financial guarantee contract, the ECL is the difference between expected payments to reimburse the holder of the guarantee debt instruments less any amounts the Group and the Company expect to recover from the other party.
While cash and cash equivalents are also subject to the impairment requirements of MFRS 9, the identified impairment loss is immaterial.
ECLs are measured based on a general 3-stage approach and a simplified approach.
General 3-stage approach for other receivables, non-trade inter-company balances, advances for plasma plantation projects and financial guarantee contracts issued
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
Simplified approach for trade receivables including inter-company balances
For trade receivables, the Group and the Company apply a simplified approach in calculating ECLs. Therefore, the Group and the Company do not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group and the Company have established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
Annual Report // 6-Month Financial Period Ended 31 December 2018 143 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(l) Impairment (continued)
(ii) Impairment of financial assets (continued)
Accounting policies applied from 1 July 2018 (continued)
Significant increase in credit risk
The Group and the Company consider the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk, the Group and the Company compare the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. The assessment considers available, reasonable and supportable forward-looking information.
The following indicators are incorporated in the assessment:
• external credit rating (as far as available) • actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the debtor’s ability to meet its obligations • actual or expected significant changes in the operating results of the debtor • significant increases in credit risk on other financial instruments of the same debtor • significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements • significant changes in the expected performance and behaviour of the debtor, including changes in the payment status of debtor in the group and changes in the operating results of the debtor
Macroeconomic information (such as market interest rates or growth rates) is incorporated as part of the internal rating model.
Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor is more than 90 days past due in making a contractual payment.
Definition of default
The Group and the Company consider a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group and the Company may also consider a financial asset to be in default when internal or external information indicates that the Group and the Company are unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group and the Company. A financial asset is written off to profit or loss when there is no reasonable expectation of recovering the contractual cash flows.
Grouping of instruments for ECL measured on collective basis
Collective assessment To measure ECL, trade receivables arising from plantation upstream and downstream, and other operations were assessed based on credit risk profile and grouped into two categories (i.e. local and export customers). Local customers are defined as the customers with operation presence within the country in which the entity operates. Export customers represent customers outside the country in which the entity operates. Both portfolios are differentiated by country risks and are subject to different credit assessment.
Individual assessment Trade receivables, other receivables, advances from plasma plantation projects, amounts due from subsidiaries and amounts due from related parties which are in default or credit-impaired are assessed individually.
144 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(l) Impairment (continued)
(ii) Impairment of financial assets (continued)
Accounting policy applied until 30 June 2018
(i) Loans and receivables Loans and receivables are assessed individually and thereafter collectively for objective evidence of impairment. If 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 flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss. Reversal of impairment loss to profit or loss, if any, is restricted to not exceeding what the amortised cost would have been had the impairment not been recognised previously.
(ii) Available-for-sale financial assets A significant or prolonged decline in the fair value of the available-for-sale financial assets below its cost indicates that the assets are impaired. If such evidence exists, the decline in fair value together with the cumulative loss recognised in other comprehensive income, if any, is taken to profit or loss. An impairment loss recognised for equity instrument is not reversed through profit and loss. Reversal of impairment losses through profit or loss is made only if the financial asset is a debt instrument and the increase in fair value can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.
(m) Share capital and Perpetual Sukuk
(i) Share capital
Proceeds from ordinary shares issued are accounted for as share capital in equity. Costs directly attributable to the issuance of new shares are deducted from equity.
Dividends to the owner of the Company and non-controlling interests are recognised in the statement of changes in equity in the period in which they are declared.
(ii) Perpetual Sukuk
Perpetual Sukuk is classified as equity instruments as there is no contractual obligation to redeem the instrument. Costs directly attributable to the issuance of the instrument, net of tax, are treated as a deduction from the proceeds.
Perpetual Sukuk holders’ entitlement is accounted for as an appropriation in profit or loss and distribution is recognised in the statement of changes in equity in the period in which it is declared.
(n) Provisions
Provisions are recognised when the Group and the Company have a legal or constructive obligation, where the outflow of resources is probable and can be reliably estimated. Provisions are measured at the present value of the obligation. The increase in the provision due to the passage of time is recognised as finance costs.
Annual Report // 6-Month Financial Period Ended 31 December 2018 145 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(o) Employee benefits
(i) Short-term employee benefits
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the period in which the services are rendered by employees.
(ii) Defined contribution pension plans
A defined contribution pension plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
The Group has various defined contribution pension plans in accordance with local conditions and practices in the countries in which it operates. The Group’s contributions to defined contribution pension plans are charged to profit or loss in the financial period in which they relate.
(iii) Defined benefit pension plans
A defined benefit pension plan is a pension plan that is not a defined contribution pension plan. Typically defined benefit pension plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The Group has various defined benefit pension plans, some of which are funded by payments from the relevant group of companies in various countries. The Group’s defined benefit pension plans are determined based on a periodic actuarial valuation by external consultants where the amount of the benefits that eligible employees have earned in return for their services in the current and prior financial periods are estimated.
The liabilities in respect of the defined benefit pension plans are the present value of the defined benefit obligations at the end of the reporting period, adjusted for actuarial gains and losses and past service costs, and reduced by the fair value of the plan assets. The defined benefit obligations, calculated using the Projected Unit Credit Method, are determined by independent actuaries, considering the estimated future cash outflows.
Actuarial gains or losses arising from market adjustments and changes in actuarial assumptions are recognised in other comprehensive income.
(iv) Termination benefits
Termination benefits are payable whenever an employee’s employment is terminated in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of a proposal to encourage voluntary redundancy.
(v) Other long-term employee benefits
Other long-term employee benefits such as deferred compensation payable 12 months or more after the service period are calculated based on the Group’s and the Company’s policy using the same methodology as other post-employment benefits.
146 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(p) Financial liabilities
The Group’s financial liabilities are classified into four categories and the accounting policies for each of these categories are as follows:
(i) Financial liabilities at fair value through profit or loss (“FVTPL”)
Financial liabilities are classified as FVTPL if they are held for trading. Derivatives are categorised as held for trading unless they are designated and are effective hedging instruments.
(ii) Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due. Financial guarantee contracts are recognised initially at fair value plus transaction costs.
Accounting policies applied from 1 July 2018
Financial guarantee contracts are subsequently measured at the higher of the amount determined in accordance with expected credit loss under MFRS 9 “Financial Instruments” and the amount initially recognised less, where appropriate, the cumulative amount of income recognised in accordance with the principles of MFRS 15 “Revenue from Contracts with Customers”.
Accounting policies applied until 30 June 2018
Financial guarantee contracts are subsequently measured at the higher of the amount determined in accordance with MFRS 137 “Provision, contingent liabilities and contingent assets” and the amount initially recognised less cumulative amortisation, where appropriate.
(iii) Financial liabilities at amortised cost (previously classified as other financial liabilities)
Payables, amounts due to subsidiaries, amounts due to related parties and borrowings are recognised initially at fair value plus transaction costs and thereafter, at amortised cost using the effective interest method. Amortisation is charged to profit or loss.
(iv) Derivatives used for hedging activities
The accounting policy for derivatives used for hedging activities is disclosed in Note 3(k).
Financial liabilities are classified as current liabilities for those having maturity dates of not more than 12 months after the reporting date, and the balance is classified as non-current.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy.
(q) Cash and cash equivalents
For the purpose of the statements of cash flows, cash and cash equivalents include cash in hand and deposits held at call with banks and other short-term highly liquid investments (with original maturities of 3 months or less) and are subject to an insignificant risk of changes in value, net of bank overdrafts. In the statements of financial position, bank overdrafts are included in short-term borrowings.
Annual Report // 6-Month Financial Period Ended 31 December 2018 147 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(r) Borrowings and borrowing costs
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statements of profit or loss over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalised in the cost of those assets until the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the statements of profit or loss in the financial period in which they are incurred.
(s) Tax
Taxation comprises current and deferred tax. Tax is recognised in the profit or loss, except to the extent that it relates to items recognised directly in other comprehensive income. In this case, the tax is recognised in other comprehensive income.
The current income tax charge is the expected income taxes payable in respect of the taxable profit for the financial period and is measured using the applicable tax rates. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Provisions are established where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognised on temporary difference arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements including those arising from business combination. Deferred tax is not recognised on goodwill and those arising from initial recognition of an asset or liability which at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax is recognised on temporary differences arising on investments in subsidiaries, joint ventures and associates except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is measured based on the tax rates (and laws) that have been enacted or substantively enacted at the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
(t) Deferred income
Government grants are recognised at fair value when there is reasonable assurance that the Group will comply with the conditions attached to them and the grants will be received. Grants are treated as deferred income and allocated to profit or loss over the useful lives of the related assets or over the period of the operating expenditure to which the grants are intended to compensate.
148 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(u) Revenue
(i) Revenue from contracts with customers
Revenue from contracts with customers is recognised by reference to each distinct performance obligation promised in the contract with customer when or as the Group and the Company transfer control of the goods or services promised in a contract and the customer obtains control of the goods or services. Revenue from contracts with customers is measured at its transaction price, being the amount of consideration to which the Group and the Company expect to be entitled in exchange for transferring promised goods or services to a customer, net of goods and services tax, returns, rebates and discounts. The transaction price is allocated to each distinct good or service promised in the contract. Depending on the terms of the contract, revenue is recognised when the performance obligation is satisfied, which may be at a point in time or over time.
Sales of agricultural produce and refined palm oil related products
The Group’s and the Company’s revenue are derived mainly from its upstream and downstream operations.
In the upstream operations, revenue is from sales of agricultural produce such as crude palm oil (“CPO”), fresh fruit bunches (“FFB”), palm kernel (“PK”), rubber, beef and sugar. In the downstream operations, revenue is derived from sales of refined oil related products and provision of freight and tolling services.
Revenue from sales of agricultural produce and refined palm oil related products are recognised net of discount and taxes collected on behalf at the point in time when control of the goods has transferred to the customer. Depending on the terms of the contract with the customer, control transfers either upon delivery of the goods to a location specified by the customer and acceptance of the goods by the customer; or upon delivery of the goods on board vessels or tankers for onward delivery to the customer.
Contracts where control of goods transfer to the customer upon delivery of the goods on board vessels or tankers are often bundled with freight services. In such contracts, sale of goods and provision of freight are accounted for as separate performance obligations as the customer can benefit from the sale of goods and shipping services on its own or with the use of other resources. The transaction price is allocated to each performance obligation based on the stand-alone selling prices of the goods and services.
There is no element of financing present as the Group’s and the Company’s sale of goods are either on cash terms (immediate payments or advance payments not exceeding 30 days); or on credit terms of up to 30 days. The Group’s and the Company’s obligations to provide quality claims against off-spec goods under the Group’s and the Company’s standard contractual terms are recognised as a provision.
Rendering of services - Provision for freight, tolling and other services
Revenue from provision of freight is recognised in the accounting period in which services are rendered. In cases where customers pay for the bundled contract in advance to the rendering of the freight services, a deferred income is recognised.
Revenue from the provision of tolling services is recognised in the period in which the manufacturing activities are performed. There is no element of financing present as the sales is made with credit terms of up to 30 days.
Annual Report // 6-Month Financial Period Ended 31 December 2018 149 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(u) Revenue (continued)
(ii) Revenue from other sources
Specific revenue recognition criteria for other revenue and income earned by the Group and the Company are as follows:
• Rental income - recognised on a straight-line basis over the lease terms. • Dividend income - recognised when the right to receive payment is established.
(v) Leases
Accounting policies applied from 1 July 2018
The Group and the Company recognise a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of the right-of-use assets are determined on the same basis as those of property, plant and equipment as follows:
Leasehold land over the lease period ranging from 20 to 999 years Buildings 20 to 50 years, or over the lease term, if shorter Plant and machinery 5 to 40 years, or over the lease term, if shorter
In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurement of the lease liability.
The lease liability is initially measured at the present value of future lease payments at the commencement date, discounted using the Group’s and the Company’s incremental borrowing rates. Lease payments included in the measurement of the lease liability include fixed payments, any variable lease payments, amount expected to be payable under a residual value guarantee, and exercise price under an extension option that the Group and the Company are reasonably certain to exercise.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in rate, or if the Group or the Company changes its assessment of whether it will exercise an extension or termination option.
Lease payments associated with short term leases and leases of low value assets are recognised on a straight-line basis as an expense in profit or loss. Short term leases are leases with a lease term of 12 months or less. Low value assets are those assets valued at less than RM20,000 each when purchased new.
150 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(v) Leases (continued)
Accounting policies applied until 30 June 2018
(i) Finance lease
Leases where the Group or the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. Leasehold land which in substance is a finance lease is classified as property, plant and equipment.
(ii) Operating lease
Leases, where the Group or the Company does not assume substantially all the risks and rewards of the ownership are classified as operating leases and, except for property interest held under operating lease, the leased assets are not recognised on the statements of financial position. Property interest held under an operating lease, which is held to earn rental income or for capital appreciation or both, is classified as investment property. Payments made under operating leases are recognised in the statements of profit or loss on a straight-line basis over the term of lease. Lease incentives received are recognised in the statements of profit or loss as an integral part of the total lease expense, over the term of the lease.
(w) Commodity future, forward contract and option
Commodity future, forward contract and option are entered into by the Group and the Company to manage exposure to adverse movements in vegetable oil prices. Certain contracts are entered into and continue to be held for the purpose of the receipt or delivery of the physical commodity in accordance with the Group’s and the Company’s expected purchase, sale or usage requirements. Accordingly, such contracts are deemed not to be financial instruments. Gains or losses arising from these contracts are deferred and included in the measurement of the purchase or sale transactions only upon the recognition of the anticipated transactions.
Contracts entered other than for the purpose of the receipt or delivery of physical commodity are treated as derivatives.
(x) Contingent liabilities
The Group and the Company do not recognise contingent liabilities, but discloses their existence in the notes to the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or the Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare circumstances where there is a liability that cannot be recognised because it cannot be measured reliably. However, contingent liabilities do not include financial guarantee contracts.
Annual Report // 6-Month Financial Period Ended 31 December 2018 151 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(y) Segment reporting
Segment information is presented in a manner that is consistent with the internal reporting provided to management for the allocation of resources and assessment of its performance. The Group’s operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.
Segment revenue, expense, assets and liabilities are those amounts resulting from operating activities of a segment that are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to the segment. They are determined before intragroup balances and intragroup transactions are eliminated as part of the consolidation process, except to the extent that such intragroup balances and transactions are between group companies within a single segment. Intragroup transactions which in substance represent re-allocation of non-current assets from a segment to another segment are also eliminated. Inter-segment pricing is based on similar terms as those available to external parties.
(z) Fair value estimation
Fair values shown in the financial statements are categorised into three different levels to increase consistency and comparability in fair value measurements. The levels of hierarchy are based on the input used to measure the fair value of an asset or a liability. The hierarchy based on highest to the lowest priority is as follows:
Level 1 – quoted prices in active markets for identical assets or liabilities Level 2 – valuation inputs (other than Level 1 input) that are observable for the asset or liability, either directly or indirectly Level 3 – valuation inputs that are not based on observable market data
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENT IN APPLYING ACCOUNTING POLICIES
The preparation of financial statements in conforming with MFRS requires the use of certain critical accounting estimates that involve complex and subjective judgements and the use of assumptions, some of which may be for matters that are inherently uncertain and susceptible to change. The Directors exercise their judgement in the process of applying the Group’s accounting policies. Estimates and assumptions are based on the Directors’ best knowledge of current events. Such estimates and judgement could change from period to period and have a material impact on the results, financial position, cash flows and other disclosures.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:
(a) Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units (“CGU”) to which the goodwill is allocated. Estimating the recoverable amount requires management to make an estimate of the expected future cash flows from the CGUs and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The recoverable amounts of the CGUs were determined based on the value in use (“VIU”) calculations. The VIU is the net present value of the projected future cash flows derived from the CGU discounted at an appropriate discount rate. Projected cash flows are estimates made based on historical and industry trends, general market and economic conditions and other available information.
The carrying amount of the Group’s and the Company’s goodwill as at 31 December 2018 were USD517.0 million (RM2,147.6 million based on 31 December 2018 exchange rate) arising from the acquisition of NBPOL and goodwill of RM1,974.8 million arising from the merger exercise of plantation businesses. Based on the impairment assessments, no impairment charge is required. The key assumptions are as disclosed in Note 24 to the financial statements.
152 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENT IN APPLYING ACCOUNTING POLICIES
(b) Impairment of property, plant and equipment and investments in subsidiaries
The Group and the Company assesses whether there is any indication that the property, plant and equipment and investments in subsidiaries are impaired at the end of each reporting period in accordance with the respective accounting policies. This requires an estimation of the recoverable amount of the cash generating units (“CGU”). Significant judgement is required in the estimation of the present value of future cash flows generated by the assets, which involve uncertainties and are significantly affected by assumptions used and judgements made regarding estimates of future cash flows and discount rates. Changes in assumptions could significantly affect the results of the Group’s and the Company’s test for impairment of assets.
During the financial period, impairments of property, plant and equipment of RM20.5 million were charged to the Group’s statement of profit or loss. The impairments recognised by the Group were mainly attributed to impairment of the Group’s property, plant and equipment in Liberia of RM14.5 million which the recoverable amounts of this CGU was determined based on the fair value less costs of disposal. The Group has injected additional fund into Sime Darby Plantation (Liberia) Inc. (“SDP Liberia”), a wholly-owned subsidiary as deemed equity for the purposes of supporting the Liberia operations. SDP Liberia did not meet its operating targets due to lower average CPO selling price and incurred higher operating costs which lead to higher losses as compared to the forecast. These were identified as indicators for an impairment test to be performed for Group’s PPE in relation to its Liberia operations.The key assumptions and the sensitivity analysis are as disclosed in Note 16(d)(i) to the financial statements.
The Company also recorded impairment of investments in subsidiaries of RM136.1 million during the financial period. The impairments were mainly attributed to impairment of cost of investments in Sime Darby Plantation (Liberia) Inc. and Kumpulan Jelei Sdn Bhd of RM49.6 million and RM78.2 million respectively (see Note 21).
(c) Taxation
(i) Income taxes
The Group is subject to income taxes in numerous jurisdictions in which the Group operates. Significant judgement is required in determining the provision for income taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for tax based on estimates of assessment of the tax liability due. The Group also recognised certain tax recoverable for which the Group believes that there is reasonable basis for recognition. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions and tax recoverable balance in the financial period in which such determination is made.
(ii) Deferred tax assets
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which temporary differences or unutilised tax losses and tax credits (including investment allowances) can be utilised. This involves judgement regarding future taxable profits of a particular entities within the Group in which the deferred tax asset has been recognised.
During the financial period, the Group has recognised deferred tax assets arising from unutilised tax losses and other deductible temporary differences as disclosed in Note 27.
(d) Bearer plants
There are certain parcels of land use rights where the remaining periods are less than 25 years as at 31 December 2018. The assumption of further extension of the land use rights periods to be granted on those lands involve judgement on the future decision by the local authority and the explicit terms and conditions imposed on the land titles. Based on the management’s assessment of the assumed extension of the land use rights, management is of the view that there is no impairment indicator of the related bearer plants.
Annual Report // 6-Month Financial Period Ended 31 December 2018 153 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
5. REVENUE
The Group and the Company derive the following types of revenue:
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Revenue from contracts with customers 5(a) 6,529,131 14,297,590 1,642,464 4,114,121 Revenue from other sources 5(b) 13,417 71,298 9,576 64,689 Total revenue 6,542,548 14,368,888 1,652,040 4,178,810
(a) Disaggregation of revenue from contracts with customers
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Upstream - Malaysia 473,237 1,287,012 314,989 1,160,484 - Indonesia 468,596 791,003 - - - Papua New Guinea and Solomon Islands (“PNG/SI”) 581,693 1,569,218 - - - Liberia 24,227 33,062 - - Downstream - Bulk products 5(a)(i) 2,647,541 5,314,485 678,527 2,188,384 - Differentiated products 5(a)(ii) 2,305,006 5,244,940 645,295 758,078 Other operations 28,831 57,870 3,653 7,175 6,529,131 14,297,590 1,642,464 4,114,121
Notes:
(i) Bulk products include basic refined products comprising Refined Bleached Deodorised (“RBD”) palm oil, palm olein, stearin Palm Fatty Acid Distillate (“PFAD”), crude palm kernel oil which are refined in the bulk refineries and kernel crushing plants and coconut oils products which are extracted from the copra.
(ii) Differentiated products are further processed from the basic refined products into products catering to customers’ specific requirements.
154 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
5. REVENUE (CONTINUED)
(a) Disaggregation of revenue from contracts with customers (continued)
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Sales of palm based products, other refined edible oils, rubber, sugar, beef and other agricultural products 6,416,746 14,105,060 1,638,070 4,104,016 Freight services 107,697 182,952 741 2,930 Tolling services 4,688 9,578 3,653 7,175 6,529,131 14,297,590 1,642,464 4,114,121
Timing of revenue recognition - at point in time 6,416,746 14,105,060 1,638,070 4,104,016 - over time 112,385 192,530 4,394 10,105 6,529,131 14,297,590 1,642,464 4,114,121
(b) Revenue from other sources
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Dividends (gross) received/receivable from: - other investments 4,059 61,878 4,059 1,740 - subsidiaries - - - 51,725 Rental income 9,358 9,420 5,517 11,224 13,417 71,298 9,576 64,689
(c) Revenue expected to be recognised in relation to unsatisfied performance obligations
The following table shows the revenue expected to be recognised in the future relating to performance obligations that were unsatisfied (or partially satisfied) at the end of the financial period/year.
GROUP COMPANY Financial Financial Financial Financial year ended period ended year ended period ended 31.12.2019 31.12.2018 31.12.2019 31.12.2018 Note RM’000 RM’000 RM’000 RM’000
Freight income 42 28,536 19,275 42 36
Annual Report // 6-Month Financial Period Ended 31 December 2018 155 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
6. OPERATING EXPENSES
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
(a) Operating expenses include: Changes in inventories of finished goods and work-in-progress (692,002) (152,194) (47,766) 14,081 Finished goods and work-in-progress purchased 583,602 1,006,803 - - Raw materials and consumables 2,663,733 4,310,305 531,662 1,230,015 Other direct costs of sales 6(b) 1,238,903 2,468,484 291,818 571,501 Employee costs 6(d) 1,294,676 2,442,638 455,435 829,006 Depreciation of: - property, plant and equipment 6(c) 526,631 1,081,099 122,987 241,636 - right-of-use assets 6(c) 63,357 - 2,627 - - investment properties 17 40 79 - - Amortisation of: - intangible assets 24 19,077 34,686 4,741 8,884 - prepaid lease rentals 19 - 37,783 - - Other operating expenses 6(e) 487,174 1,511,624 314,699 713,282 6,185,191 12,741,307 1,676,203 3,608,405
(b) Other direct costs of sales include: Transport and handling charges 394,998 798,364 31,935 70,524 Commissions fees 3,589 1,892 23,336 50,336 Tolling fees 9,900 1,023 4,436 11,487 Upkeep, manuring, and collection expenses 376,199 757,633 118,592 248,302 Selling and distribution expenses 98,827 124,159 457 800 Mills and refineries maintenance expenses 148,081 386,083 37,292 77,651 Research expenses 1,586 8,098 46,926 89,933 Others 205,723 391,232 28,844 22,468 1,238,903 2,468,484 291,818 571,501
156 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
6. OPERATING EXPENSES (CONTINUED)
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
(c) Depreciation Depreciation for the financial period/year - property, plant and equipment 16 543,747 1,116,475 127,622 251,237 - right-of-use assets 20 64,908 - 2,843 - Depreciation for property, plant and equipment capitalised to immature bearer plants (17,116) (35,376) (4,635) (9,601) Depreciation for right-of-use assets capitalised to immature bearer plants (1,551) - (216) - Depreciation included in profit or loss 6(a) 589,988 1,081,099 125,614 241,636
(d) Employee costs include: Salaries, wages and bonus 1,032,998 1,990,939 316,654 583,258 Defined contribution plans 62,996 114,953 49,706 101,558 Retirement benefits 39 12,838 31,363 4,262 9,492 Termination benefits 19,566 21,698 12,897 8,555 Other employee benefits 166,278 283,685 71,916 126,143 1,294,676 2,442,638 455,435 829,006
Annual Report // 6-Month Financial Period Ended 31 December 2018 157 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
6. OPERATING EXPENSES (CONTINUED)
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
(e) Other operating expenses include: Fair value changes in biological assets (net) (22,939) 29,734 17,145 18,428 Impairment of: - property, plant and equipment 16 20,508 194,693 1,296 11,000 - prepaid lease rentals 19 - 5,025 - - - investment in subsidiaries 21 - - 136,084 405,692 - investment in associates 23 - 126,157 - - - available-for-sale investments 25 - 22,424 - - - advances for plasma plantation projects 50(c)(iii) 3,440 1,248 - - - trade and other receivables 50(c)(iii) 5,768 14,504 2,724 13,106 - amounts due from subsidiaries 50(c)(iii) - - 11,795 61,658 Settlement of associate’s bank borrowings - 22,300 - 22,300 Bad debts written off 50(c)(iii) 97 1,103 - - Intangible assets written off 24 193 1,062 193 - Property, plant and equipment written off 16 32,268 39,691 12,241 12,055 Donations* 20,000 (63,457) 21,042 (95,202) Insurance charges 13,150 31,831 2,562 8,277 Information technology charges 38,068 78,574 14,339 26,591 Management fees to a former fellow subsidiary - 14,036 - 14,036 Professional fees 36,720 114,943 8,702 41,681 Quit rent and assessment 22,127 49,431 8,282 21,518 Rental expenses 12,999 64,511 8,283 20,527 Repairs and maintenance 103,751 243,003 17,290 33,525 Telecommunication expenses 4,949 8,464 471 1,380 Travelling expenditure 28,033 56,849 5,284 11,314 Utilities expenditure 67,262 123,942 16,250 32,653 Compensation on termination of finance lease obligation - 10,550 - - Inventories write-down 4,070 7,177 50 110
* Donations for the financial year ended 30 June 2018 include a write back of contribution to Yayasan Sime Darby of RM95.2 million.
158 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
6. OPERATING EXPENSES (CONTINUED)
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
(f) Auditors’ remuneration Fees for statutory audits: - PricewaterhouseCoopers PLT, Malaysia 2,659 2,810 1,564 1,741 - Member firms of PricewaterhouseCoopers International Limited 6,309 6,906 - - - Other firms 644 653 - - 9,612 10,369 1,564 1,741
Fees for assurance related services - PricewaterhouseCoopers PLT, Malaysia - 2,789 - 2,789 - Member firms of PricewaterhouseCoopers International Limited - 733 - - - 3,522 - 2,789
Fees for non-audit services - PricewaterhouseCoopers PLT, Malaysia 149 299 149 299 - Member firms of PricewaterhouseCoopers International Limited 1,439 1,555 - - - Other firms 4,614 455 4,413 455 6,202 2,309 4,562 754
Annual Report // 6-Month Financial Period Ended 31 December 2018 159 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
7. OTHER OPERATING INCOME
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Gain on disposal of: - property, plant and equipment 35,589 224,922 26,328 200,518 - non-current assets held for sale 46,058 676,429 16,756 610,564 Government grants/incentives 3,117 310 - - Insurance claims 10,201 12,569 5,675 3,379 Other compensation income 9,320 5,827 8,919 5,827 Reversal of impairment of: - investment in subsidiaries 21 - - 72,509 51 - advances for plasma plantation projects 50(c)(iii) 315 1,928 - - - trade and other receivables 50(c)(iii) 7,498 3,404 - - - amounts due from subsidiaries 50(c)(iii) - - - 2,531 Sale of scrap 14,195 26,333 2,428 1,499 Sale of rubber wood 428 2,383 428 2,383 Other income 28,899 43,745 4,898 9,917 155,620 997,850 137,941 836,669
8. OTHER GAINS AND LOSSES
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Fair value losses on forward foreign exchange contracts: - non-hedging derivatives - (18,031) - (1,183) - cash flow hedge (7,966) - - (378) Fair value losses on commodities future contracts - (22,479) (3,849) (26,305) Foreign currencies exchange losses: - realised (15,627) (35,422) (32,741) (15,637) - unrealised (17,114) (97,675) (121,603) (24,336) Fair value gains on forward foreign exchange contracts: - non-hedging derivatives 8,838 - 1,112 - - cash flow hedge - 27,682 267 - Fair value gains on commodities future contracts 3,268 - - - Foreign currencies exchange gains: - realised 27,092 34,954 1,111 35,418 - unrealised 43,932 58,304 1,765 373,231 42,423 (52,667) (153,938) 340,810
160 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
9. FINANCE INCOME
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Finance income from: - accretion of interests 50(c)(iii) - 7,599 - - - banks and other financial institutions 5,146 11,601 957 3,853 - subsidiaries - - 7,155 14,332 - others 3,327 5,233 822 723 8,473 24,433 8,934 18,908
10. FINANCE COSTS
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Finance costs charged by: - banks and other financial institutions 117,614 199,986 86,516 145,311 - finance lease of plant and machinery - 1,044 - 218 - lease liabilities 4,614 - 325 - - a former fellow subsidiary - 17,558 - 17,558 - subsidiaries - - 8,786 19,328 Amortisation of deferred financing expenses 40 5,209 9,890 4,642 8,584 127,437 228,478 100,269 190,999 Interests capitalised in: - capital work-in-progress 16 (875) (5,834) (840) (2,575) - bearer plants 16 (16,476) (38,828) (9,981) (28,256) - intangible assets 24 (101) (356) (101) (356) (17,452) (45,018) (10,922) (31,187) Net finance costs 109,985 183,460 89,347 159,812
Annual Report // 6-Month Financial Period Ended 31 December 2018 161 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
11. DIRECTORS’ REMUNERATION
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Non-executive Directors: - fees and allowances 2,153 3,323 1,938 2,897 - estimated monetary value of benefits 108 195 108 195 2,261 3,518 2,046 3,092
Executive Directors: - salaries and other emoluments 2,386 1,844 2,386 1,844 - defined contribution pension plans 376 285 376 285 - estimated monetary value of benefits 29 21 29 21 2,791 2,150 2,791 2,150
12. TAX EXPENSE
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Current tax: In respect of current financial period/year - Malaysian income tax 25,418 174,354 7,389 116,096 - foreign income tax 48,699 195,063 - - 74,117 369,417 7,389 116,096 In respect of prior financial years - Malaysian income tax (33) (6,546) 1,553 (4,688) - foreign income tax (1,274) 22,419 - - (1,307) 15,873 1,553 (4,688) Deferred tax - origination and reversal of temporary differences 27 72,442 106,257 7,028 84,975 Tax expense 145,252 491,547 15,970 196,383
162 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
12. TAX EXPENSE (CONTINUED)
A reconciliation of income tax expense applicable to profit/(loss) before tax at the statutory income tax rate to income tax expense at the effective income tax rate is as follows:
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Profit/(loss) before tax 457,047 2,376,950 (120,573) 1,606,980
Applicable tax 107,772 605,781 (28,937) 385,675 Effects of income not subject to tax (35,620) (285,996) (16,648) (321,475) Effects of expenses not deductible for tax purposes 57,920 182,404 87,321 200,681 Expenses subject to double deductions (14,405) (28,907) (12,280) (21,841) Deferred tax assets not recognised in respect of tax losses and deductible temporary differences for the current financial period/year 40,828 33,068 - - (Over)/under provision in respect of prior financial years (1,307) 15,873 1,553 (4,688) Perpetual Sukuk distribution and expenses (15,039) (29,832) (15,039) (29,832) Effect of changes in tax rates on current tax 12(b) - (12,137) - (12,137) Share of tax expense from associates and joint ventures 5,103 11,293 - - Tax expense for the financial period/year 145,252 491,547 15,970 196,383
Applicable tax rate (average) (%) 12(a) 23.6 25.5 24.0 24.0
Effective tax rate (%) 31.8 20.7 (13.2) 12.2
(a) The applicable tax rate of the Group is derived from the consolidation of all the Group’s companies’ applicable tax rates based on their respective domestic tax rates. The applicable tax of the Company is the product of profit before tax multiplied by the domestic tax rate of the Company.
(b) On 10 April 2017, Malaysia released an Exemption Order (“the Order”) to formalise a proposal in the 2017 Budget to temporarily reduce corporate income tax rates based on incremental taxable income compared to the preceding year of assessment (“YA”). The Order is applicable for YA 2017 and YA 2018 only. During the financial year ended 30 June 2018, the Company achieve an incremental taxable income of more than 20% and therefore the Company is entitled to a lower taxable rate at 20% for the incremental taxable income.
Annual Report // 6-Month Financial Period Ended 31 December 2018 163 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
13. EARNINGS PER SHARE
Basic earnings per share
The basic earnings per share for the financial period/year has been calculated based on the Group’s net profit attributable to the equity holders of the Company for the financial period/year and the weighted average number of ordinary shares in issue during the financial period/year.
GROUP Financial Financial period ended year ended 31.12.2018 30.06.2018
Profit for the financial period/year attributable to equity holders of the Company (RM’000) 243,508 1,727,479
Weighted average number of ordinary shares in issue (’000) 6,800,839 6,768,721
Basic earnings per share (sen) 3.58 25.52
Diluted earnings per share
There is no dilution in earnings per share as there is no potential diluted ordinary shares.
14. DIVIDENDS
Dividends payable and paid in respect of the ordinary shares for the financial period/year are as follows:
GROUP Financial Financial period ended year ended 31.12.2018 30.06.2018 RM’000 RM’000
Dividends for the financial year ended 30 June 2018: Special interim single tier dividend of RM0.03 per share, paid on 5 October 2018 (30 June 2018: RM0.035 per share) 204,025 238,029 Final single tier dividend of RM0.08 per share, paid on 7 January 2019 544,067 - Special final single tier dividend of RM0.03 per share, paid on 7 January 2019 204,025 - 952,117 238,029
The special interim single tier dividend was paid in cash.
The final single tier dividend and special final single tier dividend (the “FYE June 2018 Final Dividend”) were approved by the shareholders during the Annual General Meeting on 21 November 2018. During the Extraordinary General Meeting held on the same day, the shareholders of the Company approved the establishment of the Dividend Reinvestment Plan that provides the shareholders of the Company with an option to elect to reinvest their dividend in new ordinary shares of the Company (“DRP”). The Board determined that the DRP shall apply to the FYE June 2018 Final Dividend.
The FYE June 2018 Final Dividend of RM748.1 million were paid on 7 January 2019, RM406.1 million satisfied by the issuance of 83,735,906 new Sime Darby Plantation Berhad shares pursuant to the DRP and the balance of RM342.0 million was paid in cash.
A final single tier dividend of 1.7 sen per ordinary share in respect of the financial period ended 31 December 2018 has been declared on 28 February 2019 and will be paid on 21 May 2019. The entitlement date for the dividend payment is 10 May 2019.
164 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
15. OTHER COMPREHENSIVE INCOME
GROUP Attributable to equity holders of the Company Investments Non- Hedging at FVOCI Exchange Retained controlling reserve reserve reserve earnings Total interests Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2018 Items that will be reclassified subsequently to profit or loss: Currency translation differences: - subsidiaries - - 163,219 - 163,219 5,233 168,452 - joint ventures - - 4,872 - 4,872 - 4,872 Net changes in fair value: - cash flow hedge (12,517) - - - (12,517) - (12,517) Tax expenses relating to components of other comprehensive income (975) - - - (975) - (975)
Items that will not be reclassified subsequently to profit or loss: Actuarial loss on defined benefit plans - - - (1,911) (1,911) (189) (2,100) Net changes in fair value: - investment at FVOCI - 850 - - 850 354 1,204 Share of other comprehensive income of joint ventures - - - 3,231 3,231 - 3,231 Tax credit relating to actuarial loss on defined benefit plans - - - 478 478 48 526 (13,492) 850 168,091 1,798 157,247 5,446 162,693
Annual Report // 6-Month Financial Period Ended 31 December 2018 165 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
15. OTHER COMPREHENSIVE INCOME (CONTINUED)
GROUP Attributable to equity holders of the Company Available- Non- Hedging for- Exchange Retained controlling reserve sale reserve reserve earnings Total interests Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
30 June 2018 Items that will be reclassified subsequently to profit or loss: Currency translation differences: - subsidiaries - - (695,401) - (695,401) (32,663) (728,064) - joint ventures - - (13,138) - (13,138) - (13,138) Net changes in fair value: - available-for-sale investments - (49,968) - - (49,968) (9,561) (59,529) - cash flow hedge 48,669 - - - 48,669 (346) 48,323 Tax credit relating to components of other comprehensive income 90 - - - 90 - 90
Items that will not be reclassified subsequently to profit or loss: Actuarial gain on defined benefit plans - - - 19,853 19,853 1,302 21,155 Share of other comprehensive loss of joint ventures - - - (5,637) (5,637) - (5,637) Tax expenses relating to actuarial gain on defined benefit plans - - - (4,964) (4,964) (280) (5,244) 48,759 (49,968) (708,539) 9,252 (700,496) (41,548) (742,044)
166 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
15. OTHER COMPREHENSIVE INCOME (CONTINUED)
COMPANY Investments at FVOCI Hedging Retained reserve reserve earnings Total RM’000 RM’000 RM’000 RM’000
31 December 2018 Items that will be reclassified subsequently to profit or loss:
Net changes in fair value: - cash flow hedge - (7,198) - (7,198) Tax credit relating to cash flow hedge - 26 - 26
Items that will not be reclassified subsequently to profit or loss:
Net changes in fair value: - investment at FVOCI (839) - - (839) (839) (7,172) - (8,011)
COMPANY Available-for- Hedging Retained sale reserve reserve earnings Total RM’000 RM’000 RM’000 RM’000
30 June 2018 Items that will be reclassified subsequently to profit or loss:
Net changes in fair value: - available-for-sale investments (145) - - (145) - cash flow hedge - 24,830 - 24,830 Tax expenses relating to cash flow hedge - (199) - (199)
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on defined benefit plans - - 3,134 3,134 Tax expenses relating to actuarial gain - - (752) (752) (145) 24,631 2,382 26,868
Annual Report // 6-Month Financial Period Ended 31 December 2018 167 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 - Total Total (8,650) RM’000 RM’000 (20,508) (32,268) 244,114 244,114 831,632 831,632 253,814 253,814 (543,747) (529,102) (8,289,736) (1,462,354) 16,279,686 16,279,686 17,742,040 17,742,040 17,004,073 17,004,073 17,004,073 17,004,073 25,822,911 25,822,911 ------9,436 9,436 (5,474) Capital Capital RM’000 RM’000 (19,159) 767,596 767,596 767,596 767,596 219,990 219,990 749,628 749,628 749,628 749,628 768,787 768,787 progress progress (241,920) work-in- work-in- - (295) (379) 2,410 2,410 9,853 9,853 (1,342) (7,896) 72,222 72,222 34,475 34,475 RM’000 RM’000 (68,322) 436,552 436,552 436,552 436,552 485,174 485,174 485,174 485,174 Vehicles, Vehicles, 2,201,542 2,201,542 equipment equipment (1,708,472) and fixtures and fixtures - (2,599) (3,764) 26,793 26,793 27,146 27,146 61,997 61,997 RM’000 RM’000 (11,983) 108,615 108,615 (132,701) (149,268) Plant and Plant and 1,849,669 1,849,669 1,861,652 1,861,652 1,935,156 1,935,156 1,935,156 1,935,156 4,061,486 4,061,486 machinery machinery (1,977,062) - - GROUP plants plants (3,088) Bearer Bearer RM’000 RM’000 (15,921) (21,640) 201,287 201,287 494,596 494,596 109,742 109,742 (227,917) (296,352) 7,378,752 7,378,752 7,378,752 7,378,752 7,915,811 7,915,811 7,915,811 7,915,811 (3,038,299) 11,250,462 11,250,462 (Note 16(a)) (5) (646) (4,486) (1,011) 13,624 13,624 17,678 17,678 98,830 98,830 55,764 55,764 RM’000 RM’000 (56,427) (114,807) Buildings Buildings 3,089,014 3,089,014 3,093,500 3,093,500 3,158,441 3,158,441 3,158,441 3,158,441 4,780,771 4,780,771 (1,565,903) ------land land RM’000 RM’000 1,445,885 1,445,885 Leasehold Leasehold (1,445,885) ------land land 7,022 7,022 (5,262) RM’000 RM’000 Freehold Freehold 2,758,103 2,758,103 2,758,103 2,758,103 2,759,863 2,759,863 2,759,863 2,759,863 2,759,863 2,759,863
52 6(c) 6(e) 6(e) Note 44(a) stated financial period financial period PROPERTY, PLANT AND EQUIPMENT PROPERTY, At 1 July 2018, as previously 2018, as previously 1 July At 16 of adoption MFRS Effect 2018, restated 1 July At Depreciation charge for the the for charge Depreciation the for Impairment charge of a subsidiary Acquisition depreciation Accumulated impairment losses Accumulated 31 December 2018 31 December Value Net Book Additions Net book value Reclassification Disposals Exchange differences Exchange Write offs Write At 31 December 2018 31 December At At 31 December 2018 31 December At Cost 16.
168 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 - 956 956 Total Total (6,664) 11,640 11,640 (83,086) (39,691) RM’000 RM’000 (194,693) (555,267) (745,364) 1,575,822 1,575,822 (1,116,475) (8,165,603) 18,339,595 18,339,595 17,742,040 17,742,040 17,742,040 17,742,040 26,462,910 26,462,910 - - - - - (376) 1,555 1,555 (1,824) (11,665) (19,431) Capital Capital 879,110 879,110 767,596 767,596 483,313 483,313 767,596 767,596 787,027 787,027 RM’000 RM’000 (582,517) progress progress work-in- work-in- - - (13) 335 335 (4,080) (6,470) 58,180 58,180 42,435 42,435 (17,195) (16,219) 503,387 503,387 436,552 436,552 436,552 436,552 RM’000 RM’000 (130,278) 2,087,066 2,087,066 Vehicles, Vehicles, (1,644,044) equipment equipment and fixtures and fixtures - - (311) (7,760) 74,290 74,290 (57,541) (39,761) (12,423) 481,781 481,781 RM’000 RM’000 (297,018) (159,596) 1,720,395 1,720,395 1,861,652 1,861,652 1,861,652 1,861,652 3,915,578 3,915,578 Plant and Plant and (1,894,330) machinery machinery - GROUP 278 278 956 956 (5,162) plants plants 11,640 11,640 Bearer Bearer (37,324) 945,762 945,762 RM’000 RM’000 (439,036) (118,565) (299,397) (383,864) 7,404,067 7,404,067 7,378,752 7,378,752 7,378,752 7,378,752 (2,843,996) 10,522,145 10,522,145 (Note 16(a)) - - (2,842) (1,072) (1,659) 14,277 14,277 58,301 58,301 (54,642) (16,468) RM’000 RM’000 (225,788) (294,463) 3,563,214 3,563,214 3,093,500 3,093,500 3,093,500 3,093,500 4,583,556 4,583,556 Buildings Buildings (1,435,414) ------(8) land land (922) (24,355) (15,731) (33,322) RM’000 RM’000 (347,819) 1,504,492 1,504,492 1,445,885 1,445,885 1,445,885 1,445,885 1,809,435 1,809,435 Leasehold Leasehold
------land land (3,578) (3,249) RM’000 RM’000 Freehold Freehold 2,764,930 2,764,930 2,758,103 2,758,103 2,758,103 2,758,103 2,758,103 2,758,103
34 6(c) 6(e) 6(e) Note non-current assets held for sale held for assets non-current financial year financial year other receivables other PROPERTY, PLANT AND EQUIPMENT (CONTINUED) PROPERTY, Depreciation charge for the the for charge Depreciation the for Impairment charge - Accumulated depreciation Accumulated impairment losses Accumulated of RM17.1 million (30 June PPE for charged depreciation the financial period are during plant and equipment (“PPE”) property, the Group’s of Included in additions costs plants, borrowing bearer of RM1.6 million right-of-use assets (30 June 2018: NIL) capitalised in immature for charged 2018: RM35.4 million) and depreciation plants of RM16.5 million bearer capitalised in immature costs of RM0.9 million (30 June 2018: RM5.8 million) and borrowing capitalised in capital work-in-progress (30 June 2018: RM38.8 million). 30 June 2018 Value Net Book 2017 1 July At Transfers (to)/from: Transfers Net book value - inventories Additions - Disposals Reclassification Write offs Write Exchange differences Exchange At 30 June 2018 At At 30 June 2018 At Cost 16.
Annual Report // 6-Month Financial Period Ended 31 December 2018 169 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 - Total Total (1,296) (3,448) (4,817) (4,149) 10,485 10,485 RM’000 RM’000 (12,241) 226,407 226,407 (127,622) (279,965) 7,752,221 7,752,221 8,032,186 8,032,186 7,838,988 7,838,988 7,838,988 7,838,988 9,701,719 9,701,719 (1,859,283) ------(216) 65,592 65,592 65,592 65,592 35,095 35,095 58,481 58,481 58,481 58,481 58,481 58,481 Capital Capital RM’000 RM’000 (41,990) progress progress work-in- work-in- - - - - 49 (11) 5,631 5,631 (3,303) 21,771 21,771 RM’000 RM’000 (18,528) 111,020 111,020 111,020 111,020 116,629 116,629 116,629 116,629 400,630 400,630 (284,001) Vehicles, Vehicles, equipment equipment and fixtures and fixtures - - 561 561 (694) 5,872 5,872 (1,296) (3,448) (1,547) 20,382 20,382 RM’000 RM’000 (34,334) 353,211 353,211 353,211 353,211 342,155 342,155 342,155 342,155 864,440 864,440 (518,837) Plant and Plant and machinery machinery ------COMPANY plants plants Bearer Bearer RM’000 RM’000 (45,669) (10,276) 160,411 160,411 (628,279) 2,101,439 2,101,439 2,101,439 2,101,439 2,205,905 2,205,905 2,205,905 2,205,905 2,834,184 2,834,184 (Note 16(a)) - - - - (152) (191) 9,875 9,875 3,258 3,258 15,977 15,977 RM’000 RM’000 (29,091) (428,166) Buildings Buildings 1,014,037 1,014,037 1,014,037 1,014,037 1,013,713 1,013,713 1,013,713 1,013,713 1,441,879 1,441,879 ------land land RM’000 RM’000 279,965 279,965 (279,965) Leasehold Leasehold ------land land (4,817) RM’000 RM’000 Freehold Freehold 4,106,922 4,106,922 4,106,922 4,106,922 4,102,105 4,102,105 4,102,105 4,102,105 4,102,105 4,102,105
52 6(c) 6(e) 6(e) Note
financial period financial period stated PROPERTY, PLANT AND EQUIPMENT (CONTINUED) PROPERTY, At 1 July 2018, as previously 2018, as previously 1 July At 16 of adoption MFRS Effect At 1 July 2018, restated 1 July At acquisition group Intra Depreciation charge for the the for charge Depreciation the for Impairment charge depreciation Accumulated impairment losses Accumulated Reclassification Additions Disposals Net book value 31 December 2018 31 December Value Net Book At 31 December 2018 31 December At Intra group disposal group Intra At 31 December 2018 31 December At Cost Write offs Write 16.
170 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 - (58) 580 580 (250) Total Total 9,128 9,128 (11,000) (11,000) (23,448) (12,055) 416,653 416,653 RM’000 RM’000 (251,237) 8,032,186 8,032,186 7,903,873 7,903,873 8,032,186 8,032,186 9,846,397 9,846,397 (1,803,211) ------(250) (153) 65,592 65,592 62,733 62,733 63,463 63,463 65,592 65,592 65,592 65,592 Capital Capital (60,201) RM’000 RM’000 progress progress work-in- work-in- - - - - (58) (60) 274 274 312 312 8,982 8,982 21,062 21,062 (38,534) 111,020 111,020 119,042 119,042 111,020 111,020 378,564 378,564 RM’000 RM’000 (267,544) Vehicles, Vehicles, equipment equipment and fixtures and fixtures - - - (333) 3,382 3,382 7,162 7,162 29,578 29,578 (69,597) (11,000) (11,000) (19,936) 353,211 353,211 413,955 413,955 353,211 353,211 856,065 856,065 RM’000 RM’000 (491,854) Plant and Plant and machinery machinery ------COMPANY 278 278 plants plants Bearer Bearer (83,278) (10,229) 316,335 316,335 RM’000 RM’000 (605,163) 2,101,439 2,101,439 1,878,333 1,878,333 2,101,439 2,101,439 2,706,602 2,706,602 (Note 16(a)) ------5,472 5,472 8,631 8,631 (1,280) 21,641 21,641 (56,436) RM’000 RM’000 (401,992) 1,014,037 1,014,037 1,036,009 1,036,009 1,014,037 1,014,037 1,416,029 1,416,029 Buildings Buildings ------(44) land land (3,392) (36,658) 279,965 279,965 283,401 283,401 279,965 279,965 316,623 316,623 RM’000 RM’000 Leasehold Leasehold
------(10) land land (3,468) RM’000 RM’000 Freehold Freehold 4,106,922 4,106,922 4,110,400 4,110,400 4,106,922 4,106,922 4,106,922 4,106,922
24 34 6(c) 6(e) 6(e) Note financial year financial year sale held for assets PROPERTY, PLANT AND EQUIPMENT (CONTINUED) PROPERTY, Intra group acquisition group Intra Depreciation charge for the the for charge Depreciation the for Impairment charge non-current (to)/from Transfers Transfers to intangible assets Transfers Accumulated depreciation Accumulated impairment losses Accumulated of RM4.6 million (30 June PPE for charged depreciation the financial period are during plant and equipment (“PPE”) property, the Company’s of Included in additions costs plants, borrowing bearer of RM0.2 million right-of-use assets (30 June 2018: NIL) capitalised in immature for charged 2018: RM9.6 million) and depreciation plants of RM10.0 million bearer capitalised in immature costs of RM0.8 million (30 June 2018: RM2.6 million) and borrowing capitalised in capital work-in-progress (30 June 2018: RM28.3 million). Disposals Net book value 30 June 2018 Value Net Book 2017 1 July At Reclassification Intra group disposals group Intra Additions At 30 June 2018 At Write offs Write At 30 June 2018 At Cost 16.
Annual Report // 6-Month Financial Period Ended 31 December 2018 171 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 - plants plants (3,088) RM’000 RM’000 (15,921) (21,640) 201,287 201,287 494,596 494,596 109,742 109,742 (296,352) (227,917) 7,915,811 7,378,752 7,378,752 7,915,811 7,915,811 (3,038,299) 11,250,462 11,250,462 Total bearer Total - - - Total Total (1,339) (2,226) 14,221 14,221 RM’000 RM’000 (10,002) 201,287 201,287 494,243 494,243 (302,030) 2,641,488 2,641,488 2,237,332 2,237,332 2,641,488 2,641,488 2,651,490 2,651,490 ------120 120 trees trees (2,920) (6,595) Rubber 28,720 28,720 RM’000 RM’000 162,227 162,227 139,982 139,982 162,227 162,227 165,147 165,147 Immature - - - (7,082) (1,339) (2,226) 14,101 14,101 RM’000 RM’000 201,287 201,287 465,523 465,523 Oil palm Oil palm (295,435) 2,479,261 2,479,261 2,097,350 2,097,350 2,479,261 2,479,261 2,486,343 2,486,343
- GROUP 353 353 Total Total (3,088) 95,521 95,521 RM’000 RM’000 (14,582) (19,414) 302,030 302,030 (286,350) (227,917) 5,274,323 5,274,323 5,141,420 5,141,420 5,274,323 5,274,323 8,598,972 8,598,972 (3,038,299) ------223 223 826 826 223 223 8,759 8,759 canes canes (9,362) 98,233 98,233 RM’000 RM’000 (98,010) Growing Growing ------Mature Mature (211) trees trees 6,595 6,595 (1,263) 44,016 44,016 38,895 38,895 44,016 44,016 56,049 56,049 Rubber Rubber RM’000 RM’000 (12,033) - 353 353 (3,088) 94,695 94,695 RM’000 RM’000 (14,582) (19,203) 295,435 295,435 Oil palm Oil palm (286,350) (217,292) 5,230,084 5,230,084 5,093,766 5,093,766 5,230,084 5,230,084 8,444,690 8,444,690 (2,928,256)
financial period financial period Bearer plants plants Bearer canes. and growing trees oil palm, rubber plants comprised Bearer Depreciation charge for the the for charge Depreciation the for Impairment charge impairment losses Accumulated Net book value 31 December 2018 31 December Value Net Book 2018 1 July At Acquisition of a subsidiary Acquisition Additions Reclassification Disposals Exchange differences Exchange Write offs offs Write At 31 December 2018 31 December At At 31 December 2018 31 December At Cost Accumulated depreciation Accumulated PROPERTY, PLANT AND EQUIPMENT (CONTINUED) PROPERTY, (a) 16.
172 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 - 278 278 956 956 (5,162) plants plants 11,640 11,640 (37,324) 945,762 945,762 RM’000 RM’000 (299,397) (118,565) (439,036) (383,864) 7,378,752 7,378,752 7,404,067 7,404,067 7,378,752 7,378,752 (2,843,996) 10,522,145 10,522,145 Total bearer Total - - - - 956 956 Total Total (1,269) 11,640 11,640 (33,730) (33,617) 945,762 945,762 RM’000 RM’000 (834,887) (176,448) 2,237,332 2,237,332 2,325,195 2,325,195 2,237,332 2,237,332 2,271,062 2,271,062 ------trees trees (6,472) 24,235 24,235 Rubber (29,482) (29,598) (27,553) 139,982 139,982 179,370 179,370 139,982 139,982 169,464 169,464 RM’000 RM’000 Immature - - - - 956 956 (4,248) (4,019) (1,269) 11,640 11,640 921,527 921,527 RM’000 RM’000 (807,334) (169,976) Oil palm Oil palm 2,097,350 2,097,350 2,145,825 2,145,825 2,097,350 2,097,350 2,101,598 2,101,598
- - - GROUP 278 278 Total Total (5,162) (84,948) (36,055) 834,887 834,887 RM’000 RM’000 (265,667) (439,036) (207,416) 5,141,420 5,141,420 5,078,872 5,078,872 5,141,420 5,141,420 8,251,083 8,251,083 (2,843,996) ------8,759 8,759 8,759 8,759 canes canes (6,018) 30,088 30,088 95,834 95,834 (15,311) (87,075) RM’000 RM’000 Growing Growing ------
Mature Mature (251) trees trees 38,895 38,895 11,593 11,593 27,553 27,553 38,895 38,895 50,070 50,070 (11,175) Rubber Rubber RM’000 RM’000 - - -
278 278 (5,162) (84,948) (36,055) 807,334 807,334 RM’000 RM’000 (265,667) (423,474) (201,398) Oil palm Oil palm 5,093,766 5,093,766 5,037,191 5,037,191 5,093,766 5,093,766 8,105,179 8,105,179 (2,745,746) non-current assets held for sale held for assets non-current year year other receivables other Bearer plants (continued) Bearer Depreciation charge for the financial the financial for charge Depreciation the financial for Impairment charge - impairment losses Accumulated Net book value 30 June 2018 Value Net Book 2017 1 July At - inventories Transfers from: Transfers Additions - Disposals Reclassification Write offs Write Exchange differences Exchange At 30 June 2018 At At 30 June 2018 At Cost Accumulated depreciation Accumulated PROPERTY, PLANT AND EQUIPMENT (CONTINUED) PROPERTY, (a) 16.
Annual Report // 6-Month Financial Period Ended 31 December 2018 173 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 - plants plants RM’000 RM’000 (45,669) (10,276) 160,411 160,411 (628,279) 2,101,439 2,101,439 2,205,905 2,205,905 2,834,184 2,834,184 2,205,905 2,205,905 Total bearer Total - - Total Total (2,226) RM’000 RM’000 (99,914) 704,240 704,240 762,511 762,511 160,411 160,411 762,511 762,511 762,511 762,511 - - - trees trees (6,595) Rubber 22,154 22,154 RM’000 RM’000 136,195 136,195 151,754 151,754 151,754 151,754 151,754 151,754 Immature - - (2,226) RM’000 RM’000 (93,319) 568,045 568,045 610,757 610,757 138,257 138,257 610,757 610,757 610,757 610,757 Oil palm Oil palm COMPANY COMPANY
- Total Total (8,050) 99,914 99,914 RM’000 RM’000 (45,669) (628,279) 1,397,199 1,397,199 1,443,394 1,443,394 2,071,673 2,071,673 1,443,394 1,443,394 - (211) trees trees 6,595 6,595 (1,263) 38,895 38,895 44,016 44,016 56,049 56,049 44,016 44,016 Rubber RM’000 RM’000 (12,033) Mature Mature
- (7,839) 93,319 93,319 RM’000 RM’000 (44,406) Oil palm Oil palm (616,246) 1,358,304 1,358,304 1,399,378 1,399,378 2,015,624 2,015,624 1,399,378 1,399,378 plants (continued) Bearer Depreciation charge for the financial period for charge Depreciation Reclassification 31 December 2018 31 December Value: Net Book 2018 1 July At At 31 December 2018 31 December At Additions At 31 December 2018 31 December At Cost Write offs Write Accumulated depreciation Accumulated Net book value PROPERTY, PLANT AND EQUIPMENT (CONTINUED) PROPERTY, (a) 16.
174 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 - 278 278 plants plants (83,278) (10,229) 316,335 316,335 RM’000 RM’000 (605,163) 1,878,333 1,878,333 2,101,439 2,101,439 2,706,602 2,706,602 2,101,439 2,101,439 Total bearer Total - - - Total Total (1,269) 733,904 733,904 316,335 316,335 704,240 704,240 704,240 704,240 704,240 704,240 RM’000 RM’000 (344,730) - - - - trees trees 38,364 38,364 Rubber (27,553) 125,384 125,384 136,195 136,195 136,195 136,195 136,195 136,195 RM’000 RM’000 Immature - - - (1,269) 608,520 608,520 277,971 277,971 568,045 568,045 568,045 568,045 568,045 568,045 RM’000 RM’000 (317,177) Oil palm Oil palm COMPANY COMPANY
- 278 278 Total Total (8,960) (83,278) 344,730 344,730 RM’000 RM’000 (605,163) 1,144,429 1,144,429 1,397,199 1,397,199 2,002,362 2,002,362 1,397,199 1,397,199 - - - (251) trees trees 11,593 11,593 27,553 27,553 38,895 38,895 50,070 50,070 38,895 38,895 (11,175) Rubber RM’000 RM’000 Mature Mature
- 278 278 (8,960) (83,027) 317,177 317,177 RM’000 RM’000 (593,988) Oil palm Oil palm 1,132,836 1,132,836 1,358,304 1,358,304 1,952,292 1,952,292 1,358,304 1,358,304
for sale for plants (continued) Bearer Depreciation charge for the financial year for charge Depreciation held assets non-current from Transfers 30 June 2018 Value: Net Book 2017 1 July At Reclassification Additions At 30 June 2018 At Write offs Write At 30 June 2018 At Cost Accumulated depreciation Accumulated Net book value PROPERTY, PLANT AND EQUIPMENT (CONTINUED) PROPERTY, (a) 16.
Annual Report // 6-Month Financial Period Ended 31 December 2018 175 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
16. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
(b) Underlying assets for Islamic financing facilities
(i) In January 2013, the Company entered into a notional sale and leaseback of certain of its plantation land and bearer plants with Sime Darby Global Berhad (“Sime Darby Global”), a special purpose vehicle established by Sime Darby Berhad (“SDB”), the former immediate holding company. This sale and leaseback arrangement is solely to facilitate the issuance of Islamic Trust Certificates (“Sukuk”) by Sime Darby Global and it does not represent a collateralisation nor involve a transfer of registered land title. On 23 May 2017, the Company acquired the entire equity interest of Sime Darby Global.
The carrying amount of the assets used as underlying Sukuk assets amounted to RM265 million, comprised of property, plant and equipment of RM252 million and leasehold land which was reclassified to right-of-use assets subsequent to the early adoption MFRS 16 of RM13 million (30 June 2018: RM267 million).
(ii) During the financial year ended 30 June 2016, a subsidiary of the Company entered into a notional sale and leaseback of certain of its plantation land and bearer plants with SDB. This sale and leaseback arrangement is solely to facilitate the issuance of Perpetual Subordinated Sukuk Programme (“Perpetual Sukuk”) by SDB. The structure does not represent collateralisation and there was no transfer of registered land title. On 23 June 2017, the Perpetual Sukuk was novated from SDB to the Company. The sale and leaseback agreement was similarly novated from SDB to the Company.
The carrying amount of the assets used as underlying Perpetual Sukuk assets amounted to RM111 million (30 June 2018: RM112 million).
(c) Impairment
(i) Group’s property, plant and equipment (“PPE”) in Liberia
During the financial period, the Group has injected additional fund into Sime Darby Plantation (Liberia) Inc. (“SDP Liberia”), a wholly-owned subsidiary as deemed equity for the purposes of supporting the Liberia operations. SDP Liberia did not meet its operating targets due to lower average CPO selling price and incurred higher operating costs which lead to higher losses as compared to the forecast. These were identified as indicators for an impairment test to be performed for Group’s PPE in relation to its Liberia operations.
In the previous financial year, the recoverable amount of the Group’s PPE in Liberia that comprises the oil palm estates and oil palm mill valued as one CGU by CBRE CH Williams Sdn Bhd (“CBRE”), an independent valuer based on the higher of fair value less costs of disposal (“FVLCTS”) and value-in-use (“VIU”). During the financial period, the key assumptions of the previous financial year were re-evaluated and updated by management with CBRE’s assistance to account for the lower CPO prices. Based on the updated assessment performed, the FVLCTS is higher as compared to the VIU.
176 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
16. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
(c) Impairment (continued)
(i) Group’s property, plant and equipment (“PPE”) in Liberia (continued)
The updated valuation, as approved by the Directors during the financial period resulted an impairment loss on PPE in Liberia of RM14.5 million (30 June 2018: RM111.8 million) was recorded during the financial period/year as the carrying amount of the PPE exceeded its FVLCTS of RM242.8 million (30 June 2018: RM269.2 million). Estimate of fair values on the PPE as determined by CBRE were based on the income approach and are within Level 3 of the fair value hierarchy. The sensitivity analysis of each of these assumptions assuming all other variables are held constant are as follows:
Key assumptions 31.12.2018 30.06.2018
CPO price (net of freight costs) USD560 per MT USD610 per MT FFB yields 6 to 22 MT per hectare 6 to 22 MT per hectare Fixed operating costs USD682 per hectare USD682 per hectare Discount rate 12% per annum 12% per annum
Additional impairment Sensitivity analysis: (RM’million)
(i) CPO and PKO price decrease by 10% 97.5 (ii) FFB yields decrease by 1 MT per hectare 30.0 (iii) Average costs increased by 10% 18.7 (iv) Discount rate increased by 200 basis points 26.2
(ii) Rubber development in Indonesia
Difficult operating conditions in a subsidiary, PT Indo Sukses Lestari Makmur (“PT ISLM”) was identified as indicator for an impairment test to be performed for the non-financial assets (including PPE and prepaid lease rental) in relation to the CGU for rubber development in Indonesia. Based on the assessment, the rubber development is unlikely to bring positive economic benefits to the Group due to the various issues faced. As such, the Group made full impairment of the carrying value of RM68.0 million (which comprise RM63.0 million for PPE and RM5.0 million for prepaid lease rental) during the previous financial year.
(iii) Compost plant in Malaysia
During the previous financial year, the Group and the Company carried out an impairment assessment on certain compost plants due to management decision to cease operations of these compost plants. Impairment losses of RM14.0 million and RM11.0 million were recognised by the Group and the Company respectively. The impairments relate to the plant and machinery of these compost plants which are immovable and not transferable for other usage within the Group on the assumption that there is minimal scrap value.
Annual Report // 6-Month Financial Period Ended 31 December 2018 177 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
17. INVESTMENT PROPERTIES
GROUP Freehold land Buildings Total Note RM’000 RM’000 RM’000
31 December 2018 Cost At 1 July 2018 14,234 1,345 15,579 Exchange differences 485 61 546 At 31 December 2018 14,719 1,406 16,125
Accumulated depreciation At 1 July 2018 - 546 546 Charge for the financial period 6(a) - 40 40 Exchange differences - 25 25 At 31 December 2018 - 611 611
Accumulated impairment losses At 1 July 2018 - 323 323 Exchange differences - 15 15 At 31 December 2018 - 338 338 Net book value at 31 December 2018 14,719 457 15,176
30 June 2018 Cost At 1 July 2017 14,614 1,385 15,999 Exchange differences (380) (40) (420) At 30 June 2018 14,234 1,345 15,579
Accumulated depreciation At 1 July 2017 - 485 485 Charge for the financial year 6(a) - 79 79 Exchange differences - (18) (18) At 30 June 2018 - 546 546
Accumulated impairment losses At 1 July 2017 - 334 334 Exchange differences - (11) (11) At 30 June 2018 - 323 323 Net book value at 30 June 2018 14,234 476 14,710
The aggregate direct operating expenses arising from investment properties that did not generate rental income which were recognised during the financial period amounted to RM48,990 (30 June 2018: RM86,226) respectively.
The fair value of investment properties is RM24.2 million (30 June 2018: RM23.3 million) based on the valuation performed by external professional firms of surveyors and valuers. The valuation was performed using the comparable method based on current prices of comparable properties in an active market for all properties within Level 2 of the fair value hierarchy. Level 2 is based on the inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). The latest external valuation was carried out as at 31 December 2018.
178 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
18. BIOLOGICAL ASSETS
GROUP Growing Oil palm canes Livestock Total RM’000 RM’000 RM’000 RM’000
31 December 2018 At 1 July 2018 66,056 40,889 45,297 152,242 Transfers to produce stocks (66,167) (42,319) - (108,486) Fair value changes 34,029 95,925 1,471 131,425 Exchange differences (583) 2,393 1,792 3,602 At 31 December 2018 33,335 96,888 48,560 178,783
30 June 2018 At 1 July 2017 91,817 51,508 55,674 198,999 Transfers to produce stocks (90,524) (48,948) - (139,472) Fair value changes 67,155 41,269 1,314 109,738 Exchange differences (2,392) (2,940) (11,691) (17,023) At 30 June 2018 66,056 40,889 45,297 152,242
COMPANY Total RM’000
Oil Palm
31 December 2018 At 1 July 2018 36,152 Transfers to produced stocks (36,152) Fair value changes 19,007 At 31 December 2018 19,007
30 June 2018 At 1 July 2017 54,580 Transfers to produced stocks (54,580) Fair value changes 36,152 At 30 June 2018 36,152
The Group’s and the Company’s biological assets were fair valued within Level 3 of the fair value hierarchy with the exception of livestock which are on Level 2 basis (inputs are observable indirectly). Fair value assessments have been completed consistently using the same valuation techniques.
There were no transfers between Level 2 and Level 3 of the fair value hierarchy during the financial period.
Annual Report // 6-Month Financial Period Ended 31 December 2018 179 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
18. BIOLOGICAL ASSETS (CONTINUED)
The biological assets have the following maturity periods:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Current Due not later than one year 178,783 152,242 19,007 36,152
The biological assets of the Group and the Company comprise of:
(i) Oil palm
Oil palm represents the fresh fruit bunches (“FFB”) of up to 2 weeks prior to harvest for use in the Group’s and the Company’s palm product operations. During the financial period, the Group and the Company harvested approximately 5,576,000 metric tonnes (“MT”) of FFB (30 June 2018: 10,232,000 MT) and 1,995,000 MT of FFB (30 June 2018: 4,204,000 MT) respectively. The quantity of unharvested FFB of the Group and of the Company as at 31 December 2018 included in the fair valuation of FFB was 370,299 MT (30 June 2018: 388,276 MT) and 142,976 MT (30 June 2018: 147,231 MT) respectively.
The Group and the Company attribute a fair value on the FFB prior to harvest at each statement of financial position date as required under MFRS 141 “Agriculture”. FFB are produce of oil palm trees and are harvested continuously throughout the financial period to be used in the production of crude palm oil (“CPO”). Each FFB takes approximately 22 weeks from pollination to reach maximum oil content to be ready for harvesting. The value of each FFB at each point of the FFB production cycle will vary based on the cumulative oil content in each fruit.
In determining the fair values of FFB, management has considered the oil content of all unripe FFB from the week after pollination to the week prior to harvest. As the oil content accrues exponentially in the 2 weeks prior to harvest, the FFB prior to 2 weeks before harvesting are excluded in the valuation as the fair values are considered negligible.
The valuation model adopted by the Group and the Company is a discounted cash flow model which includes all cash inflows, cash outflows and imputed contributory asset charges where no actual cash flows associated with the use of assets essential to the agricultural activity are accounted for. The net present value of cash flows is then determined with reference to the market value of CPO at the reporting date, adjusted for freight, extraction rates, production, transportation, contributory asset charges and other cost to sell at the point of harvest. Changes to the assumed tonnage included in the valuation will have a direct effect on the reported valuation.
If the Group’s and the Company’s FFB tonnage changes by 10% (30 June 2018: 5%) and 10% (30 June 2018: 13%) respectively, the impact of fair value of FFB would be as follows:
31.12.2018 30.06.2018 RM’000 RM’000
GROUP FFB tonnage increase by 10% (30 June 2018: 5%) 7,389 7,225 FFB tonnage decrease by 10% (30 June 2018: 5%) (7,389) (7,225)
COMPANY FFB tonnage increase by 10% (30 June 2018: 13%) 2,169 8,375 FFB tonnage decrease by 10% (30 June 2018: 13%) (2,169) (8,375)
180 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
18. BIOLOGICAL ASSETS (CONTINUED)
(ii) Growing canes
Growing canes represent the standing canes prior to harvest whereby the values are dependent on the age, sucrose content and condition as at the statement of financial position date. During the financial period, the Group harvested approximately 184,916 MT (30 June 2018: 254,117 MT) of canes. The estimated quantity of unharvested canes as at 31 December 2018 included in the fair valuation of growing canes of the Group was 319,315 MT (30 June 2018: 178,187 MT).
The determination of fair value for the Group’s growing canes requires estimates to be made of the anticipated canes harvest, its age and condition at the statements of financial position date, the sucrose content to be extracted and sugar prices. The anticipated canes harvest is based on management’s historical records, current planting statistics and production forecast. Fair value of the harvested canes is based on the accepted industry benchmark of allocating the fair value of sugar production between the fair value attributable to the canes grower and the value attributable to the miller. The fair value of the growing canes at the statement of financial position date is based on the estimated fair value of the growing canes less further costs to be incurred in growing and harvesting the canes up to the point of harvest and contributory asset charges.
If the estimated harvest volume of canes increased or decreased by 6% (30 June 2018: 6%), fair value changes in growing canes would have increased or decreased by approximately RM2.0 million (30 June 2018: RM1.7 million) accordingly.
(iii) Livestock
Livestock comprise the cattle livestock included within the Group’s beef production operations. Cattle livestock are generally fed for 120 days prior to use for beef production. During the financial period, the Group produced 982.2 tonnes (30 June 2018: 1,968.8 tonnes) of beef. The quantity of cattle as at 31 December 2018 included in the fair values of livestock was 23,527 head (30 June 2018: 26,013 head).
The fair values of livestock are based on the Groups’ assessment of age, average weights and market values of the livestock at the statement of financial position date. If the average weight per cattle increase or decrease by 1% (30 June 2018: 1%), fair value changes in livestock would have increased or decreased by approximately RM485,624 (30 June 2018: RM414,406) respectively.
Annual Report // 6-Month Financial Period Ended 31 December 2018 181 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
19. PREPAID LEASE RENTALS
The prepaid lease rentals are payments for rights to use in respect of the short-term leasehold land.
GROUP 31.12.2018 30.06.2018 Note RM’000 RM’000
Cost At 1 July 2018, as previously stated/1 July 2017 1,246,685 1,305,507 Effect of adoption of MFRS 16 52 (1,246,685) - At 1 July 2018, restated/1 July 2017 - 1,305,507 Additions - 461 Acquisition of a subsidiary - 23,278 Exchange differences - (82,561) At 31 December 2018/30 June 2018 - 1,246,685
Accumulated amortisation At 1 July 2018, as previously stated/1 July 2017 712,875 680,498 Effect of adoption of MFRS 16 52 (712,875) -
At 1 July 2018, restated/1 July 2017 - 680,498 Charge for the financial period/year 6(a) - 37,783 Exchange differences - (5,406) At 31 December 2018/30 June 2018 - 712,875
Accumulated impairment losses At 1 July 2018, as previously stated/1 July 2017 4,920 - Effect of adoption of MFRS 16 52 (4,920) -
At 1 July 2018, restated/1 July 2017 - - Charge for the financial period/year 6(e) - 5,025 Exchange differences - (105) At 31 December 2018/30 June 2018 - 4,920 Net book value at 31 December 2018/30 June 2018 - 528,890
182 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
20. RIGHT-OF-USE ASSETS
Vehicles Leasehold Plant and equipment land Buildings machinery and fixtures Total Note RM’000 RM’000 RM’000 RM’000 RM’000
GROUP 31 December 2018 Net Book Value: At 1 July 2018 - - - - - Effect of adoption of MFRS 16 52 2,081,102 43,101 45,608 7,801 2,177,612 2,081,102 43,101 45,608 7,801 2,177,612 Additions 3,556 4,883 - - 8,439 Disposal (51) - - (188) (239) Depreciation charge for the financial period 6(c) (50,398) (7,570) (5,512) (1,428) (64,908) Acquisition of a subsidiary 44(a) 82,037 225 - - 82,262 Exchange differences 36,423 (13) (370) 6 36,046 At 31 December 2018 2,152,669 40,626 39,726 6,191 2,239,212
At 31 December 2018: Cost 3,293,025 49,845 51,766 8,638 3,403,274 Accumulated depreciation (981,089) (9,219) (12,040) (2,447) (1,004,795) Accumulated impairment (159,267) - - - (159,267) Net book value 2,152,669 40,626 39,726 6,191 2,239,212
COMPANY 31 December 2018 Net Book Value: At 1 July 2018 - - - - - Effect of adoption of MFRS 16 52 279,965 350 7,655 2,401 290,371 279,965 350 7,655 2,401 290,371 Disposal (51) - - - (51) Depreciation charge for the financial period 6(c) (1,723) (150) (267) (703) (2,843) At 31 December 2018 278,191 200 7,388 1,698 287,477
At 31 December 2018: Cost 316,566 350 7,655 2,401 326,972 Accumulated depreciation (38,375) (150) (267) (703) (39,495) Net book value 278,191 200 7,388 1,698 287,477
Annual Report // 6-Month Financial Period Ended 31 December 2018 183 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
21. SUBSIDIARIES
COMPANY 31.12.2018 30.06.2018 RM’000 RM’000
Unquoted shares at cost 7,794,595 7,773,143 Amounts due from subsidiaries - non-interest bearing 2,051,736 2,085,067 Accumulated impairment losses (1,465,048) (1,401,473) 8,381,283 8,456,737
The amounts due from subsidiaries above are deemed as capital contribution to subsidiaries as the repayment of these amounts are neither fixed nor expected.
Movements of impairment losses for investment in subsidiaries are as follows:
COMPANY 31.12.2018 30.06.2018 Note RM’000 RM’000
At 1 July 2018/2017 1,401,473 1,023,332 Charge for the financial period/year 6(e) 136,084 405,692 Reversal for the financial period/year 7 (72,509) (51) Write-off due to dissolution of subsidiaries - (27,500) At 31 December 2018/30 June 2018 1,465,048 1,401,473
A review was carried out over the recoverability of the cost of investment in Sime Darby Plantation (Liberia) Inc. (“SDP Liberia”) as a result of lower CPO selling pricing and higher operational cost resulted in higher losses as compared to the forecast which was identified as the impairment indicator for the investment in SDP Liberia.
The recoverable amount of the investment in SDP Liberia of RM242.8 million (30 June 2018: RM269.2 million) is determined based on fair value less cost of disposal (“FVLCTS”) method (Level 3 of the fair value hierarchy). The fair value was determined by an independent professional valuer via a simulation based on the valuation model as per the independent valuation report dated 28 June 2018. The key assumptions and sensitivity analysis for the impairment assessment are disclosed in Note 16(d)(i) to the financial statements.
As a result of the impairment assessment, an impairment charge on the costs of investments (including the amount due from SDP Liberia which deemed as capital contribution to SDP Liberia) of RM49.6 million (30 June 2018: RM219.1 million) was recorded in the operating expense in the Company’s statement of profit or loss for the current financial period.
A further impairment charge on costs of investment (including the amount due from subsidiaries) of RM86.5 million (30 June 2018: RM186.6 million) was recorded in the Company’s statement of profit or loss for the current financial period relating mainly to Kumpulan Jelei Sdn Bhd (“Kumpulan Jelei”) of RM78.2 million. The cost of investment in Kumpulan Jelei was fully impaired as the company had become dormant and do not generate sufficient cash flows.
During the financial period, a review was carried over the recoverability of the amount due from Sime Darby Oils Zwijndrecht Refinery B.V. (fka Sime Darby Unimills B.V.) (which deemed as capital contribution) as a result of improved operating profit. The recoverable amount was determined based on FVLCTS (level 3 of the fair value hierarchy) by an independent professional valuer. As a result of the assessment, a reversal of impairment of RM 68.6 million was recorded in the Company’s statement of profit or loss.
The Group’s equity interest in the subsidiaries as at 31 December 2018 and 30 June 2018, their principal activities and countries of incorporation are shown in Note 53.
184 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
22. JOINT VENTURES
The Group’s equity interest in the joint ventures as at 31 December 2018 and 30 June 2018, their respective principal activities and countries of incorporation are shown in Note 53.
(a) Share of results of joint ventures
The Group’s share of results of joint ventures are as follows:
GROUP Financial Financial period ended year ended 31.12.2018 30.06.2018 RM’000 RM’000
Share of results for the financial period/year 1,591 (22,855) Currency translation differences 4,872 (13,138) Share of other comprehensive income/(loss) (net of tax) 3,231 (5,637) Share of total comprehensive income/(loss) 9,694 (41,630)
(b) Investments in joint ventures
The Group’s and the Company’s investments in joint ventures are as follows:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Unquoted shares, at cost 375,347 375,538 311,938 312,036 Share of post-acquisition reserves 71,458 61,764 - - 446,805 437,302 311,938 312,036
(c) Material joint ventures
Set out below are the joint ventures of the Group as at 31 December 2018 which, in the opinion of the Directors, are material to the Group.
Place of Group’s business/ effective Country of Name of joint ventures interest (%) incorporation
Emery Oleochemicals (M) Sdn Bhd 50.0 Malaysia Emery Specialty Chemicals Sdn Bhd 50.0 Malaysia
The Group’s investments in joint ventures are in private companies and there are no quoted market prices available for these shares.
There are no contingent liabilities in respect of the Group’s interests in the joint ventures.
Annual Report // 6-Month Financial Period Ended 31 December 2018 185 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
22. JOINT VENTURES (CONTINUED)
(d) Summarised financial information
The summarised statements of comprehensive income of the joint ventures are as follows:
Emery Emery Specialty Oleochemicals Chemicals (M) Sdn Bhd Sdn Bhd Others Total RM’000 RM’000 RM’000 RM’000
For the financial period ended 31 December 2018 Revenue 1,209,604 88,884 61,202 1,359,690 Depreciation and amortisation (38,850) (7,985) (1,122) (47,957) Interest income 6,079 35 471 6,585 Interest expense (20,031) (7,638) (524) (28,193) Profit/(loss) before tax 12,689 (28,833) 1,484 (14,660) Tax expense (9,568) (17) (196) (9,781) Profit/(loss) for the financial period 3,121 (28,850) 1,288 (24,441)
Profit/(loss) for the financial period attributable to owners of: - the joint venture 2,890 (25,277) 1,288 (21,099) - non-controlling interests 231 (3,573) - (3,342) Profit/(loss) for the financial period 3,121 (28,850) 1,288 (24,441)
Other comprehensive income/(loss) - unrealised exchange differences 9,971 (226) - 9,745 - actuarial gain on defined benefit plans 9,679 - - 9,679 - tax expense relating to actuarial loss on defined benefit plans (3,218) - - (3,218) 16,432 (226) - 16,206 Total comprehensive income/(loss) for the financial period 19,553 (29,076) 1,288 (8,235)
Total comprehensive income/(loss) for the financial period attributable to owners of: - the joint venture 19,322 (25,503) 1,288 (4,893) - non-controlling interests 231 (3,573) - (3,342) 19,553 (29,076) 1,288 (8,235)
186 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
22. JOINT VENTURES (CONTINUED)
(d) Summarised financial information (continued)
The summarised statements of comprehensive income of the joint ventures are as follows: (continued)
Emery Emery Specialty Oleochemicals Chemicals (M) Sdn Bhd Sdn Bhd Others Total RM’000 RM’000 RM’000 RM’000
For the financial year ended 30 June 2018 Revenue 2,885,438 164,608 67,653 3,117,699 Depreciation and amortisation (80,252) (13,153) (8,800) (102,205) Interest income 11,671 2,039 44 13,754 Interest expense (41,128) (14,729) (2,679) (58,536) Loss before tax (15,581) (56,561) (18,853) (90,995) Tax (expense)/credit (22,623) (30) 2,261 (20,392) Loss for the financial year (38,204) (56,591) (16,592) (111,387)
Loss for the financial year attributable to owners of: - the joint venture (31,657) (49,440) (16,592) (97,689) - non-controlling interests (6,547) (7,151) - (13,698) Loss for the financial year (38,204) (56,591) (16,592) (111,387)
Other comprehensive loss - unrealised exchange differences (26,276) (376) - (26,652) - actuarial loss on defined benefit plans (5,906) - - (5,906) - tax expense relating to actuarial loss on defined benefit plans (5,367) - - (5,367) (37,549) (376) - (37,925) Total comprehensive loss for the financial year (75,753) (56,967) (16,592) (149,312)
Total comprehensive loss for the financial year attributable to owners of: - the joint venture (69,206) (49,816) (16,592) (135,614) - non-controlling interests (6,547) (7,151) - (13,698) (75,753) (56,967) (16,592) (149,312)
Annual Report // 6-Month Financial Period Ended 31 December 2018 187 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
22. JOINT VENTURES (CONTINUED)
(d) Summarised financial information (continued)
The summarised statements of financial position of the joint ventures are as follows:
Emery Emery Specialty Oleochemicals Chemicals (M) Sdn Bhd Sdn Bhd Others Total RM’000 RM’000 RM’000 RM’000
31 December 2018 Non-current assets 901,951 227,752 191,167 1,320,870 Current assets Cash and cash equivalents 168,761 17,100 6,657 192,518 Other current assets 1,014,017 62,032 75,989 1,152,038 1,182,778 79,132 82,646 1,344,556 Non-current liability Financial liabilities (excluding trade and other payables) (4,859) - (23,828) (28,687) Current liabilities Financial liabilities (excluding trade and other payables) (714,784) (81,071) (35,543) (831,398) Other current liabilities (501,111) (314,456) (114,986) (930,553) (1,215,895) (395,527) (150,529) (1,761,951) Non-controlling interests (49,313) 7,145 - (42,168) Net assets 814,662 (81,498) 99,456 832,620
30 June 2018 Non-current assets 916,711 235,755 192,082 1,344,548 Current assets Cash and cash equivalents 166,366 12,636 4,541 183,543 Other current assets 1,035,371 54,508 37,408 1,127,287 1,201,737 67,144 41,949 1,310,830 Non-current liability Financial liabilities (excluding trade and other payables) (4,724) - (23,330) (28,054) Current liabilities Financial liabilities (excluding trade and other payables) (759,009) (85,658) (66,970) (911,637) Other current liabilities (509,505) (280,381) (49,405) (839,291) (1,268,514) (366,039) (116,375) (1,750,928) Non-controlling interests (49,870) - - (49,870) Net assets 795,340 (63,140) 94,326 826,526
188 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
22. JOINT VENTURES (CONTINUED)
(e) Reconciliations of summarised financial information
Reconciliations of the summarised financial information presented to the carrying amounts of the Group’s interests in joint ventures are as follows:
Emery Emery Specialty Oleochemicals Chemicals (M) Sdn Bhd Sdn Bhd Others Total RM’000 RM’000 RM’000 RM’000
31 December 2018 Net assets At 1 July 2018 795,340 - 94,326 889,666 Total comprehensive income/(loss) 19,322 - 1,288 20,610 Additional investment in existing joint ventures - - 4,500 4,500 Exchange differences - - (658) (658) At 31 December 2018 814,662 - 99,456 914,118
Group’s effective interest 50.0% 50.0% 30.0% - 51.0% 30.0% - 51.0%
Interests in joint ventures 407,331 - 39,474 446,805 Carrying amount at end of the financial period 407,331 - 39,474 446,805
30 June 2018 Net assets At 1 July 2017 864,546 - 113,543 978,089 Total comprehensive loss (69,206) - (16,592) (85,798) Additional investment in existing joint ventures - - 1,350 1,350 Exchange differences - - (3,975) (3,975) At 30 June 2018 795,340 - 94,326 889,666
Group’s effective interest 50.0% 50.0% 30.0% - 51.0% 30.0% - 51.0%
Interests in joint ventures 397,670 - 39,632 437,302 Carrying amount at end of the financial year 397,670 - 39,632 437,302
The Group has capped the recognition of its share of losses incurred by Emery Specialty Chemicals Sdn Bhd (“ESC”) as the Group’s interests in ESC had been reduced to zero in the previous financial years and the Group does not have any obligations or guarantee of any obligations on behalf of ESC. The Group’s share of losses in ESC for the current financial period amounted to RM12.8 million (30 June 2018: RM24.9 million), which had not been equity accounted for. As at 31 December 2018, the unrecognised amounts of the Group’s share of losses in ESC is RM44.6 million (30 June 2018: RM31.8 million).
Annual Report // 6-Month Financial Period Ended 31 December 2018 189 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
23. ASSOCIATES
The Group’s equity interest in the associates as at 31 December 2018 and 30 June 2018, their respective principal activities and countries of incorporation are shown in Note 53.
(a) Share of results of associates
The Group’s share of results of associates are as follows:
GROUP Financial Financial period ended year ended 31.12.2018 30.06.2018 RM’000 RM’000
Share of results for the financial period/year 1,568 (13,932)
(b) Investments in associates
The Group’s and the Company’s investments in associates are as follows:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Unquoted shares, at cost 70,456 195,228 420 420 Share of post-acquisition reserves (28,778) (30,346) - - Impairment loss 6(e) - (126,157) - - 41,678 38,725 420 420
In April 2018, based on the findings of the independent advisors on the commercial viability and economic returns, which are subject to significant risk, the Board of Directors of the Company (“Board”) had decided to cease further investments in Verdezyne, Inc. (“Verdezyne”). Other investors also made the same decision and has decided to liquidate Verdezyne through a member’s voluntary liquidation via Assignment for the Benefits of Creditors process. Following the Board’s decision, the Group recognised a financial impact based on available financial and other current information of RM157.2 million to the Group’s profit or loss as at 30 June 2018 which consists of an impairment of carrying amount of Verdezyne in the Group’s statement of financial position (RM126.2 million), recognition of a corporate guarantee for bank loan granted to Verdezyne (RM22.3 million) and recognition of other estimated liabilities (RM8.7 million).
190 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
23. ASSOCIATES (CONTINUED)
(c) Material associates
Set out below are the associates of the Group as at 31 December 2018, which, in the opinion of the Directors, are material to the Group:
Group’s effective Place of business/ Name of joint ventures interest (%) Country of incorporation
Muang Mai Guthrie Public Company Limited 49.0 Thailand Verdezyne, Inc. 43.5 United States of America
The Group’s investments in associate companies are in private companies and there are no quoted market prices available for these shares.
There are no contingent liabilities in respect of the Group’s interests in the associates.
(d) Summarised financial information
The summarised statements of comprehensive income/(loss) and dividends received from the associates are as follows:
Muang Mai Guthrie Public Company Verdezyne, Limited Inc. Others Total RM’000 RM’000 RM’000 RM’000
For the financial period ended 31 December 2018 Revenue 98,278 - 48,711 146,989 Profit before tax 2,917 - 841 3,758 Tax expense (401) - - (401) Profit for the financial period/Total comprehensive income for the financial period 2,516 - 841 3,357 Dividend received - - - -
For the financial year ended 30 June 2018 Revenue 226,859 284 101,794 328,937 Impairment loss - (94,976) - (94,976) Profit/(loss) before tax 10,135 (144,217) 4,948 (129,134) Tax expense (2,399) - (10) (2,409) Profit/l(loss) for the financial year/Total comprehensive income/(loss) for the financial year 7,736 (144,217) 4,938 (131,543) Dividend received (6,183) - - (6,183)
Annual Report // 6-Month Financial Period Ended 31 December 2018 191 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
23. ASSOCIATES (CONTINUED)
(d) Summarised financial information (continued)
The summarised statements of financial position of the associates are as follows:
Muang Mai Guthrie Public Company Verdezyne, Limited Inc. Others Total RM’000 RM’000 RM’000 RM’000
31 December 2018 Non-current assets 39,625 250,339 54,101 344,065 Current assets Cash and cash equivalents 588 18,901 6,530 26,019 Other current assets 44,591 5,217 12,952 62,760 45,179 24,118 19,482 88,779
Non-current liabilities Financial liabilities (excluding trade and other payables) - (191,998) - (191,998) Other non-current liabilities (695) - (22,334) (23,029) (695) (191,998) (22,334) (215,027) Current liabilities Other current liabilities (25,465) (82,459) (15,774) (123,698) Net assets 58,644 - 35,475 94,119
30 June 2018 Non-current assets 38,738 245,251 52,886 336,875 Current assets Cash and cash equivalents 5,090 18,393 4,996 28,479 Other current assets 49,154 3,446 9,845 62,445 54,244 21,839 14,841 90,924 Non-current liabilities Financial liabilities (excluding trade and other payables) - (186,844) - (186,844) Other non-current liabilities (725) - (29,036) (29,761) (725) (186,844) (29,036) (216,605) Current liabilities Other current liabilities (37,777) (80,246) (8,977) (127,000) Net assets 54,480 - 29,714 84,194
The above information reflects the amounts presented in the financial statements of the associates adjusted for differences in accounting policies between the Group and the associates as well as post-acquisition changes to the fair value adjustments at the acquisition date.
192 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
23. ASSOCIATES (CONTINUED)
(e) Reconciliations of summarised financial information
Reconciliations of the summarised financial information presented to the carrying amounts of the Group’s interests in associates are as follows:
Muang Mai Guthrie Public Company Verdezyne, Limited Inc. Others Total RM’000 RM’000 RM’000 RM’000
31 December 2018 Net assets At 1 July 2018 54,480 - 29,714 84,194 Total comprehensive income 2,516 - 841 3,357 Exchange differences 1,648 - 4,920 6,568
At 31 December 2018 58,644 - 35,475 94,119
Group’s effective interest 49.0% 43.5% 32.0% - 40.0% 32.0% - 49.0%
Interests in associates 28,736 - 12,641 41,377 Goodwill - - 301 301 Carrying amount at end of the financial period 28,736 - 12,942 41,678
30 June 2018 Net assets At 1 July 2017 60,630 11,734 29,301 101,665 Total comprehensive income/(loss) 7,736 (49,241) 4,938 (36,567) Impairment loss - (94,976) - (94,976) Increase in share capital - 123,484 100 123,584 Dividend declared (12,618) - - (12,618) Exchange differences (1,268) 8,999 (4,625) 3,106 At 30 June 2018 54,480 - 29,714 84,194
Group’s effective interest 49.0% 43.5% 32.0% - 40.0% 32.0% - 49.0%
Interests in associates 26,695 - 11,729 38,424 Goodwill - 84,814 301 85,115 Impairment loss - (84,814) - (84,814) Carrying amount at end of the financial year 26,695 - 12,030 38,725
Annual Report // 6-Month Financial Period Ended 31 December 2018 193 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
24. INTANGIBLE ASSETS
GROUP Work-in-progress capitalised Acquired Assets Intellectual Agriculture - agriculture brand usage property Smallholder Customer development development names/ Goodwill rights rights relationship relationship Software costs costs trademarks Total Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2018 At 1 July 2018 2,102,062 889 15,120 553,533 2,972 24,677 79,257 7,396 38,635 2,824,541 Acquisition of a subsidiary 44(a) 9,054 ------9,054 Additions - - - - - 2,084 - 1,420 - 3,504 Write-off 6(e) (193) ------(193) Amortisation 6(a) - (65) (420) (7,464) (693) (6,471) (2,358) - (1,606) (19,077) Exchange differences 58,279 - - 14,860 313 403 73 - 1,086 75,014 At 31 December 2018 2,169,202 824 14,700 560,929 2,592 20,693 76,972 8,816 38,115 2,892,843
Cost 2,174,725 1,927 16,800 612,786 10,260 169,942 88,050 8,816 70,694 3,154,000 Accumulated amortisation - (1,103) (2,100) (51,857) (7,668) (145,817) (11,078) - (30,255) (249,878) Accumulated impairment losses (5,523) - - - - (3,432) - - (2,324) (11,279) Net book value as at 31 December 2018 2,169,202 824 14,700 560,929 2,592 20,693 76,972 8,816 38,115 2,892,843
30 June 2018 At 1 July 2017 2,232,137 1,016 15,960 618,312 4,568 31,054 81,409 8,638 46,147 3,039,241 Additions - - - - - 3,891 16 1,432 34 5,373 Transfers to non-current assets held for sale 34 - - - - - (16) - - - (16) Reclassification ------2,674 (2,674) - - Write-off 6(e) - - - - - (4) - - (1,058) (1,062) Amortisation 6(a) - (127) (840) (15,574) (751) (9,151) (4,657) - (3,586) (34,686) Exchange differences (130,075) - - (49,205) (845) (1,097) (185) - (2,902) (184,309) At 30 June 2018 2,102,062 889 15,120 553,533 2,972 24,677 79,257 7,396 38,635 2,824,541
Cost 2,107,585 1,927 16,800 597,701 9,929 165,346 88,944 7,396 69,382 3,065,010 Accumulated amortisation - (1,038) (1,680) (44,168) (6,957) (137,302) (9,687) - (28,426) (229,258) Accumulated impairment losses (5,523) - - - - (3,367) - - (2,321) (11,211) Net book value as at 30 June 2018 2,102,062 889 15,120 553,533 2,972 24,677 79,257 7,396 38,635 2,824,541
Included in the additions of the Group’s intangible assets during the financial period is borrowing costs capitalised of RM0.1 million (30 June 2018: RM0.4 million).
194 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
24. INTANGIBLE ASSETS
GROUP Work-in-progress capitalised Acquired Assets Intellectual Agriculture - agriculture brand usage property Smallholder Customer development development names/ Goodwill rights rights relationship relationship Software costs costs trademarks Total Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2018 At 1 July 2018 2,102,062 889 15,120 553,533 2,972 24,677 79,257 7,396 38,635 2,824,541 Acquisition of a subsidiary 44(a) 9,054 ------9,054 Additions - - - - - 2,084 - 1,420 - 3,504 Write-off 6(e) (193) ------(193) Amortisation 6(a) - (65) (420) (7,464) (693) (6,471) (2,358) - (1,606) (19,077) Exchange differences 58,279 - - 14,860 313 403 73 - 1,086 75,014 At 31 December 2018 2,169,202 824 14,700 560,929 2,592 20,693 76,972 8,816 38,115 2,892,843
Cost 2,174,725 1,927 16,800 612,786 10,260 169,942 88,050 8,816 70,694 3,154,000 Accumulated amortisation - (1,103) (2,100) (51,857) (7,668) (145,817) (11,078) - (30,255) (249,878) Accumulated impairment losses (5,523) - - - - (3,432) - - (2,324) (11,279) Net book value as at 31 December 2018 2,169,202 824 14,700 560,929 2,592 20,693 76,972 8,816 38,115 2,892,843
30 June 2018 At 1 July 2017 2,232,137 1,016 15,960 618,312 4,568 31,054 81,409 8,638 46,147 3,039,241 Additions - - - - - 3,891 16 1,432 34 5,373 Transfers to non-current assets held for sale 34 - - - - - (16) - - - (16) Reclassification ------2,674 (2,674) - - Write-off 6(e) - - - - - (4) - - (1,058) (1,062) Amortisation 6(a) - (127) (840) (15,574) (751) (9,151) (4,657) - (3,586) (34,686) Exchange differences (130,075) - - (49,205) (845) (1,097) (185) - (2,902) (184,309) At 30 June 2018 2,102,062 889 15,120 553,533 2,972 24,677 79,257 7,396 38,635 2,824,541
Cost 2,107,585 1,927 16,800 597,701 9,929 165,346 88,944 7,396 69,382 3,065,010 Accumulated amortisation - (1,038) (1,680) (44,168) (6,957) (137,302) (9,687) - (28,426) (229,258) Accumulated impairment losses (5,523) - - - - (3,367) - - (2,321) (11,211) Net book value as at 30 June 2018 2,102,062 889 15,120 553,533 2,972 24,677 79,257 7,396 38,635 2,824,541
Annual Report // 6-Month Financial Period Ended 31 December 2018 195 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
24. INTANGIBLE ASSETS (CONTINUED)
COMPANY Work-in- progress capitalised Intellectual Agriculture - agriculture property development development Goodwill rights Software costs costs Total Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2018 At 1 July 2018 1,978,111 15,120 7,643 76,629 7,396 2,084,899 Additions - - 39 - 1,420 1,459 Write-off 6(e) (193) - - - - (193) Amortisation 6(a) - (420) (2,196) (2,125) - (4,741) At 31 December 2018 1,977,918 14,700 5,486 74,504 8,816 2,081,424
Cost 1,977,918 16,800 64,666 84,995 8,816 2,153,195 Accumulated amortisation - (2,100) (59,180) (10,491) - (71,771) Net book value as at 31 December 2018 1,977,918 14,700 5,486 74,504 8,816 2,081,424
30 June 2018 At 1 July 2017 1,978,111 15,960 7,302 78,205 8,638 2,088,216 Additions - - 3,885 - 1,432 5,317 Reclassification - - - 2,674 (2,674) - Transfers from property, plant and equipment 16 - - 250 - - 250 Amortisation 6(a) - (840) (3,794) (4,250) - (8,884) At 30 June 2018 1,978,111 15,120 7,643 76,629 7,396 2,084,899
Cost 1,978,111 16,800 64,627 84,995 7,396 2,151,929 Accumulated amortisation - (1,680) (56,984) (8,366) - (67,030) Net book value as at 30 June 2018 1,978,111 15,120 7,643 76,629 7,396 2,084,899
Included in the additions of the Company’s intangible assets during the financial period is borrowing costs capitalised of RM0.1 million (30 June 2018: RM0.4 million).
196 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
24. INTANGIBLE ASSETS (CONTINUED)
(i) Goodwill
The goodwill in the Group’s consolidated statements of financial position represents mainly the excess of the purchase consideration over the fair value of identifiable assets, liabilities and contingent liabilities recognised upon the Group’s acquisition of New Britain Palm Oil Limited (“NBPOL”) and its subsidiaries of USD517.0 million (RM2,147.6 million) during the financial year ended 30 June 2015.
The Group carries out its annual impairment assessment on the goodwill arising from the acquisition of NBPOL, which for the purposes of impairment testing has been allocated to cash generating units (“CGU”) within the Group, namely NBPOL CGU and PT Minamas Gemilang and its subsidiaries (“Minamas Group CGU”) as the Group believes that Minamas Group’s operations will benefit from the additional synergies arising from the acquisition of NBPOL.
The impairment assessment is carried out on goodwill allocated to NBPOL CGU of USD367 million (equivalent to RM1,524.5 million) (30 June 2018: USD367 million (equivalent to RM1,483.6 million)) and Minamas Group CGU of USD150 million (equivalent to RM623.1 million) (30 June 2018: USD150 million (equivalent to RM606.4 million)).
The recoverable amounts of these two CGUs are based on their respective value-in-use calculations which are derived at using cash flow projections in which the following key assumptions are used:
GROUP 31.12.2018 30.06.2018
NBPOL CGU Projection period A 37.5-year cash flow projection, based A 38-year cash flow projection, based on the on the average remaining lease period of average remaining lease period of land in land in NBPOL NBPOL
FFB yields 24 to 32 MT per hectare (“ha”) 24 to 32 MT per ha
CPO price USD617 to USD653 per MT USD715 to USD947 per MT
Discount rates 9.1% per annum 9.1% per annum
Minamas Group CGU Projection period A 45.5-year cash flow projection, based A 46-year cash flow projection, based on the on the average remaining lease period of average remaining lease period of land in land in Indonesia Indonesia
FFB yields 19 to 30 MT per ha, inclusive of a 1MT 19 to 30 MT per ha, inclusive of a 1MT per ha per ha yield increase from a replanting yield increase from a replanting programme programme with Super Dami seeds with Super Dami seeds
CPO price USD525 to USD708 per MT USD540 to USD718 per MT
Discount rates 9.5% per annum 9.5% per annum
Annual Report // 6-Month Financial Period Ended 31 December 2018 197 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
24. INTANGIBLE ASSETS (CONTINUED)
(i) Goodwill (continued)
The Group’s impairment assessment of both CGUs as outlined above included a sensitivity analysis on the key assumptions used. Based on the results of the sensitivity analysis, no reasonable change in the key assumptions used would result in an impairment charge for current financial period or prior financial year.
Management believes that no impairment charge is required on the goodwill as the recoverable amount calculated based on value-in-use exceeded the carrying value of the goodwill of NBPOL CGU and Minamas Group CGU by a significant margin.
The Company’s goodwill arose from merger exercise of plantation businesses between Sime Darby Berhad, Golden Hope Plantations Berhad and Kumpulan Guthrie Berhad in the financial year 2008. The acquisition of the plantation businesses from this merger exercise resulted in a goodwill of RM1,974.8 million. On 5 October 2016, an additional goodwill of RM3.3 million was recognised as a result of the acquisition of the plantation assets in Yong Peng.
The Company evaluates the recoverable amounts of the goodwill as one CGU based on its value-in-use calculations using cash flow from approved financial budgets covering a 5.5 year period and forecasted growth rates to extrapolate the cash flows in subsequent periods.
COMPANY 31.12.2018 30.06.2018
Discount rates (%) 9 9 CPO price (RM per MT) 2,300 to 2,650 2,500 to 2,650
Based on our assessment, no impairment charge is required on the goodwill as the recoverable amounts exceed the carrying value of the CGUs’ assets and goodwill. The management believes that no reasonable possible change in any of the key assumptions used would result in the carrying amount of the CGU to materially exceed the recoverable amounts.
(ii) Smallholder relationships
The smallholder relationships arose from the acquisition of a controlling interest in a subsidiary. These assets reflect the relationship between the Group and smallholders who cultivate and harvest FFB on land which is owned by the smallholders. The FFB is subsequently purchased by the Group for processing as palm oil. These assets are initially recognised at fair value and thereafter amortised over the remaining lease term of the Group’s land of 45 years.
(iii) Work-in-progress capitalised - agriculture development costs
Capitalised agriculture development costs comprise of expenditure incurred relating to the development of oil palm genomic data and techniques, as well as clonal technology with the objective to increase yields and profit streams from the Group’s plantation. Once the development enters into commercial production, the asset will be amortised over its estimated useful life of 5 to 20 years.
(iv) Intellectual property rights
The Company acquired intellectual property rights (“IP rights”) on the genome base data from a third party, Synamatix Sdn Bhd for RM16.8 million. The Company had assessed that the IP rights have a finite life. As a result, the Company amortised the IP rights on a straight line basis, over a period of 20 years.
(v) Acquired brand names/trademarks
This mainly consists of fair value of brands in relation to the Group’s beef, sugar and seed production operations which arose from the acquisition of NBPOL. The brands are initially recognised at fair value and thereafter amortised on a straight-line basis over the estimated useful lives of 20 years.
198 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
25. AVAILABLE-FOR-SALE INVESTMENTS
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Non-current Unquoted shares At 1 July 2018, as previously stated/1 July 2017 28,090 110,389 26,588 26,733 Effect of adoption of MFRS 9 26 (28,090) - (26,588) - At 1 July 2018, restated/1 July 2017 - 110,389 - 26,733 Net changes in fair value - (59,529) - (145) Impairment loss for the financial period/year 6(e) - (22,424) - - Exchange differences - (346) - - At 31 December 2018/30 June 2018 - 28,090 - 26,588
The unquoted non-current available-for-sale investments as at 30 June 2018 consist of the following investments:
(a) The Level 2 investment comprise of the Group’s investment in an investment property company. The value of the investment is measured based on the fair value less cost of disposal of its property, plant and equipment which is based on external valuation report carried out by independent valuers.
(b) The Level 3 investments consist of:
(i) An investment in unquoted shares, whereby the fair value is determined using a valuation technique with reference made to quoted market prices for companies with similar business.
(ii) An investment in unquoted shares (i.e. Biosynthetic Technologies LLC (“Biosynthetic”)), whereby the fair value was deemed to approximate its cost. On 23 March 2018, Biosyn Merger Sub, LLC has merged with Biosynthetic (“the Merger”) pursuant to the Note Purchase and Agreement and Plan of Merger dated 21 February 2018. As a result of the Merger, each issued and outstanding unit of membership interest in Biosynthetic was cancelled without payment of any consideration. Therefore, the shareholding interest of the Group in Biosynthetic has become nil and an impairment loss of RM22.4 million had been recognised in the Group’s statement of profit or loss for the financial year ended 30 June 2018.
26. INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (“FVOCI”)
GROUP COMPANY 31.12.2018 31.12.2018 Note RM’000 RM’000
Non-current Unquoted shares At 1 July 2018, as previously stated - - Effect of adoption of MFRS 9 25 28,090 26,588 At 1 July 2018, restated 28,090 26,588 Net changes in fair value 1,204 (839) At 31 December 2018 29,294 25,749
Annual Report // 6-Month Financial Period Ended 31 December 2018 199 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
26. INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (“FVOCI”) (CONTINUED)
The unquoted non-current investments at FVOCI of the Group and of the Company were categorised under Level 3 investment, of which the fair value is determined using a valuation technique with reference made to quoted market prices for companies with similar business.
The Group and the Company have irrevocably elected non-trading equity securities above at initial recognition to present its fair value changes in OCI. The Group and the Company consider the classification to be more relevant as these instruments are strategic investments of the Group and the Company and not held for trading purposes.
In the prior financial year, the Group and the Company have designated investments as available for sale as disclosed in Note 25. Refer to Note 2 (a)(i) for explanations of changes in accounting policy and reclassification of investment in non-trading equities from available for sale to FVOCI.
27. DEFERRED TAX
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority.
The following amounts, determined after appropriate offsetting, are shown in the statements of financial position:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Deferred tax assets 508,991 518,896 - - Deferred tax liabilities (2,653,870) (2,497,457) (710,406) (704,379) (2,144,879) (1,978,561) (710,406) (704,379)
The unutilised tax losses and deductible temporary differences for which no deferred tax assets are recognised in the consolidated financial statements are as follows:
GROUP 31.12.2018 30.06.2018 RM’000 RM’000
Unutilised tax losses - Expiring within 10 years 1,233,711* 1,086,941 - No expiry period 21,029 37,290 1,254,740 1,124,231
Deductible temporary differences - No expiry period 20,596 21,549 1,275,336 1,145,780
* Under the Malaysia Finance Act 2018 which was gazetted on 27 December 2018, the Group’s unutilised tax losses with no expiry period amounting to RM39.3 million as at 31 December 2018 will be imposed with a time limit of utilisation. Any accumulated unutilised tax losses brought forward from year of assessment 2018 can be carried forward for another 7 consecutive years of assessment (i.e. from year of assessments 2019 to 2025).
200 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
27. DEFERRED TAX (CONTINUED)
Deferred tax assets are not recognised by certain subsidiaries in respect of the above temporary differences as the Directors are of the view it is not probable that sufficient taxable profits will be available to allow the deferred tax assets to be utilised.
The components and movements of the deferred tax assets and liabilities during the financial period/year are as follows:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
At 1 July 2018, as previously stated/1 July 2017 (1,978,561) (1,954,845) (704,379) (618,453) Effect of adoption of MFRS 9 52 2,884 - 975 - At 1 July 2018, as restated/1 July 2017 (1,975,677) (1,954,845) (703,404) (618,453)
(Credited)/charged to profit or loss 12 - property, plant and equipment (35,286) (39,743) (15,378) (57,818) - biological assets 11,913 10,287 4,115 4,422 - future tax on unrealised fair value adjustments 4,212 8,871 - - - agricultural produce (3,274) 978 - - - unutilised tax losses (26,042) 18,927 - - - retirement benefits 2,410 8,088 401 1,048 - impairments and provisions (20,257) (51,511) 2,997 (33,748) - others (6,118) (62,154) 837 1,121 (72,442) (106,257) (7,028) (84,975)
(Credited)/charged to other comprehensive income 15 (449) (5,154) 26 (951) Transfers to non-current assets held for sale 34 - (9,092) - - Acquisition of a subsidiary 44(a) (68,279) - - - Exchange differences (28,032) 96,787 - - At 31 December 2018/30 June 2018 (2,144,879) (1,978,561) (710,406) (704,379)
Annual Report // 6-Month Financial Period Ended 31 December 2018 201 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
27. DEFERRED TAX (CONTINUED)
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Deferred tax assets (before offsetting) - unutilised tax losses 214,930 218,784 - - - retirement benefits 56,528 53,093 12,073 11,672 - impairments and provisions 148,617 166,097 20,069 17,072 - agricultural produce 121,502 125,165 - - - others 113,943 112,433 - - 655,520 675,572 32,142 28,744 Offsetting (146,529) (156,676) (32,142) (28,744) Deferred tax assets (after offsetting) 508,991 518,896 - -
Deferred tax liabilities (before offsetting) - property, plant and equipment (2,243,948) (2,145,757) (735,111) (719,733) - biological assets (26,743) (33,493) (4,562) (8,677) - intangible assets (220,919) (219,702) - - - future tax on unrealised fair value adjustments (265,404) (220,753) - - - others (43,385) (34,428) (2,875) (4,713) (2,800,399) (2,654,133) (742,548) (733,123) Offsetting 146,529 156,676 32,142 28,744 Deferred tax liabilities (after offsetting) (2,653,870) (2,497,457) (710,406) (704,379)
Deferred tax is not recognised on the unremitted earnings of overseas subsidiaries where the Group is able to control the timing of the remittance and it is probable that there will be no remittance in the foreseeable future. If these earnings were remitted, tax of RM472.0 million (30 June 2018: RM451.0 million) would have been payable.
202 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
28. TAX RECOVERABLE
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Non-current Corporate income taxes recoverable 28(a) 178,832 148,831 - - Value added tax recoverable 28(b) 100,144 112,717 - - Other taxes recoverable 11,436 13,880 - - 290,412 275,428 - -
Current Corporate income taxes recoverable 28(a) 113,435 34,351 93,372 28,974 Value added tax recoverable 28(b) 189,011 273,115 - - 302,446 307,466 93,372 28,974
Note: (a) Certain subsidiaries within the Minamas Group have received corporate income tax assessments from the local tax authorities in Indonesia for various years of assessment. These subsidiaries disagreed with certain of these assessments and have filed objections, appeals and judicial reviews.
During the financial period, the Group received tax refund of IDR77 billion (RM22 million) (30 June 2018: IDR373 billion (RM105 million)) and paid tax assessments of IDR167 billion (RM48 million) (30 June 2018: IDR269 billion (RM76 million)).
(b) No value added tax (“VAT”) recoverable was reclassified from other receivables to tax recoverable as there is no submission of claim restitution to the local tax authorities in Indonesia (30 June 2018: IDR479 billion (RM135 million)), whilst approved VAT refund of IDR476 billion (RM136 million) (30 June 2018: IDR531 billion (RM149 million)) was reclassified from tax recoverable to other receivables. During the financial period, the Group has received VAT refund of IDR80 billion (RM23 million) (30 June 2018: IDR284 billion (RM80 million)) out of the approved VAT refund of IDR476 billion (RM136 million) (30 June 2018: IDR531 billion (RM149 million)). Subsequently in January 2019, the Group has also received a total VAT refund of IDR396 billion (RM113 million).
The non-current tax recoverable includes additional tax assessments paid and value added taxes, which would normally take more than a year to resolve with the relevant tax authorities.
Annual Report // 6-Month Financial Period Ended 31 December 2018 203 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
29. TRADE AND OTHER RECEIVABLES
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Non-current Advances for plasma plantation projects 138,588 129,655 - - Accumulated impairment losses 50(c)(iii) (23,466) (20,315) - - 115,122 109,340 - -
Current Trade receivables 1,431,891 1,599,688 143,621 238,830 Other receivables 255,249 217,386 20,042 8,460 Goods and services tax/value added tax receivable 267,643 166,014 11,312 9,679 Prepayments 218,166 282,591 17,195 18,602 Deposits 17,385 17,158 8,833 7,394 Amounts due from associates 3,046 2,347 774 882 Amounts due from joint ventures 52,159 51,066 40,858 40,029 Interest receivable 11,499 8,865 - - 2,257,038 2,345,115 242,635 323,876
Accumulated impairment losses: Trade receivables 50(c)(iii) (33,099) (29,422) (3,846) (3,545) Other receivables 50(c)(iii) (3,459) (1,134) (4,417) (349) Amounts due from associates 50(c)(iii) (618) (618) (618) (618) Amounts due from joint ventures 50(c)(iii) (16,723) (12,500) (14,913) (12,500) (53,899) (43,674) (23,794) (17,012) 2,203,139 2,301,441 218,841 306,864
Credit terms for trade receivables of the Group and of the Company ranges from 7 to 120 days (30 June 2018: 7 to 120 days).
The amounts due from associates and joint ventures are trade in nature, unsecured, interest free and repayable within 30 days (30 June 2018: 30 days).
As at 31 December 2018, no trade and other receivables pledged as security for borrowings (30 June 2018: RM19.7 million).
The Group’s and the Company’s currency exposure profile and concentration of credit risk are disclosed in Note 50(c)(i) and 50(c)(iii).
204 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
30. INVENTORIES
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Produce inventories: - palm oil products 393,759 260,591 36,189 19,986 - sugar stocks 47,020 26,207 - - - rubber 10,564 2,567 7,784 2,567 Trading inventories 11,422 43,272 - - Raw materials and consumable stores 764,675 786,214 60,452 39,454 Refined inventories: - work-in-progress 298,469 325,008 105,182 69,484 - finished goods 155,867 126,718 9,923 14,574 1,681,776 1,570,577 219,530 146,065
The carrying amounts of inventories of the Group of RM124.7 million (30 June 2018: RM111.4 million) and the Company of RM29.5 million (30 June 2018: RM9.8 million) are stated at net realisable value.
Annual Report // 6-Month Financial Period Ended 31 December 2018 205 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
31 AMOUNTS DUE FROM/(TO) SUBSIDIARIES AND RELATED PARTIES
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Non-current Amount due from a subsidiary - interest bearing (non-trade) - - 49,080 56,679
Amount due to a subsidiary - interest bearing (non-trade) - - (504,707) (490,463)
Current Amounts due from subsidiaries - interest bearing (non-trade) - - 156,494 133,444 - non-interest bearing (non-trade) - - 135,118 161,896 - non-interest bearing (trade) - - 231,369 287,891 - - 522,981 583,231
Amounts due from related parties - non-interest bearing (trade) 2,171 2,559 2,903 4,228
Amounts due to subsidiaries - interest bearing (non-trade) - - (7,058) (6,878) - non-interest bearing (trade) - - (993,255) (1,086,359) - - (1,000,313) (1,093,237)
Amounts due to related parties - non-interest bearing (trade) (61,020) (54,104) (36,826) (31,454)
206 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
31 AMOUNTS DUE FROM/(TO) SUBSIDIARIES AND RELATED PARTIES (CONTINUED)
COMPANY 31.12.2018 30.06.2018 % %
Interest rates per annum
Non-current Amount due from a subsidiary 4.27 - 4.45 4.13 - 4.45 Amount due to a subsidiary 3.29 3.29
Current Amounts due from subsidiaries 4.02 - 4.45 4.02 - 4.45
The non-cash transactions as set out in Note 49(g) were entered during the financial year ended 30 June 2018 as a settlement against the amount due to a former fellow subsidiary, Sime Darby Holding Berhad.
The amounts due (to)/from subsidiaries and related parties are unsecured whilst the non-current amounts are payable after 12 months and all current amounts are repayable on demand. The amounts due from subsidiaries and related parties are neither past due nor impaired.
The Group’s and the Company’s currency exposure profile and concentration of credit risk are disclosed in Note 50(c)(i) and 50(c)(iii).
Annual Report // 6-Month Financial Period Ended 31 December 2018 207 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
32. DERIVATIVES
The Group’s and the Company’s derivatives are as follows:
GROUP Contract/ Fair value notional amount Assets Liabilities RM’000 RM’000 RM’000
31 December 2018 Current Cash flow hedges: - forward foreign exchange contracts 94,075 944 (1,375) - interest rate swap contracts 1,130,407 18,536 - 1,224,482 19,480 (1,375)
Non-hedging derivatives: - forward foreign exchange contracts 783,619 7,333 (2,727) - commodities futures contracts 645,645 31,851 (17,096) 1,429,264 39,184 (19,823) 2,653,746 58,664 (21,198)
30 June 2018 Current Cash flow hedges: - forward foreign exchange contracts 749,342 4,892 (11,427) - interest rate swap contracts 1,257,470 24,723 - 2,006,812 29,615 (11,427)
Non-hedging derivatives: - forward foreign exchange contracts 574,039 7,618 (4,569) - commodities futures contracts 584,583 19,993 (8,506) 1,158,622 27,611 (13,075) 3,165,434 57,226 (24,502)
208 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
32. DERIVATIVES (CONTINUED)
The Group’s and the Company’s derivatives are as follows: (continued)
COMPANY Contract/ Fair value notional amount Assets Liabilities RM’000 RM’000 RM’000
31 December 2018 Current Cash flow hedges: - interest rate swap contracts 1,130,407 18,536 - 1,130,407 18,536 -
Non-hedging derivatives: - forward foreign exchange contracts 261 - (1) - commodities futures contracts 326,203 2,324 (8,882) 326,464 2,324 (8,883) 1,456,871 20,860 (8,883)
30 June 2018 Current Cash flow hedges: - forward foreign exchange contracts 51,665 196 (986) - interest rate swap contracts 1,257,470 24,723 - 1,309,135 24,919 (986)
Non-hedging derivatives: - forward foreign exchange contracts 37,862 - (1,275) - commodities futures contracts 271,390 3,049 (5,888) 309,252 3,049 (7,163) 1,618,387 27,968 (8,149)
Annual Report // 6-Month Financial Period Ended 31 December 2018 209 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
32. DERIVATIVES (CONTINUED)
The Group and the Company have forward foreign exchange contracts in place with a notional value that are designated and effected as cash flow hedge. These contracts are expected to cover the Group’s exposures ranging from 2 month to 12 months (30 June 2018: 1 month to 12 months) and the Company’s exposures ranging from 1 month to 6 months (30 June 2018: 1 month to 6 months).
The interest rate swap contracts require settlement of net interest receivable or payable every 6 months. The settlement dates coincide with the dates on which interest is payable on the underlying debt and settlement occurs on a net basis.
These derivatives are entered into to hedge certain risks as described in Note 50(c). Whilst all derivatives entered into provide economic hedges to the Group, non-hedging derivatives are instruments that do not qualify for the application of hedge accounting under the specific rules in MFRS 139.
(a) Forward foreign exchange contracts
As at end of the financial period/year, forward foreign exchange contracts have been entered into with the following notional amounts and maturities:
Within 1 year 31.12.2018 30.06.2018 RM’000 RM’000
GROUP
Forward contracts used to hedge anticipated sales - United States Dollar 233,235 232,390 - European Union Euro 7,743 5,737 - United Kingdom Pound - 9,756
Forward contracts used to hedge receivables - United States Dollar 322,704 546,315 - European Union Euro 9,765 7,730 - United Kingdom Pound - 10,000
Forward contracts used to hedge anticipated purchases - United States Dollar 266,807 478,757 - European Union Euro 16,541 9,025
Forward contracts used to hedge payables - United States Dollar 20,899 23,672 877,694 1,323,382
210 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
32. DERIVATIVES (CONTINUED)
(a) Forward foreign exchange contracts (continued)
As at end of the financial period/year, forward foreign exchange contracts have been entered into with the following notional amounts and maturities: (continued)
Within 1 year 31.12.2018 30.06.2018 RM’000 RM’000
COMPANY
Forward contracts used to hedge anticipated sales - United States Dollar 261 17,660
Forward contracts used to hedge receivables - United States Dollar - 66,088
Forward contracts used to hedge payables - United States Dollar - 5,779 261 89,527
(b) Commodities futures contracts
As at end of the financial period/year, the notional amounts and maturity of commodities futures contracts that are not held for the purpose of physical delivery are as follows:
Within 1 year 31.12.2018 30.06.2018 RM’000 RM’000
GROUP
Commodities contracts - buying - Ringgit Malaysia 158,399 262,422 - United States Dollar 97,640 21,421
Commodities contracts - selling - Ringgit Malaysia 10,401 56,313 - United States Dollar 379,205 244,427 645,645 584,583
COMPANY
Commodities contracts - buying - Ringgit Malaysia 167,107 216,342
Commodities contracts - selling - Ringgit Malaysia 159,096 55,048 326,203 271,390
Annual Report // 6-Month Financial Period Ended 31 December 2018 211 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
32. DERIVATIVES (CONTINUED)
(c) Interest rate swap contracts
As at the end of the financial period, the notional amounts and terms of the interest rate swap contracts for the Group and the Company are as follows:
Range of weighted average rate per Notional amount in Notional amount in Type of annum (%) original currency Ringgit equivalent interest With Without At At At At rate swap Effective period swap swap 31.12.2018 30.06.2018 31.12.2018 30.06.2018
17.08.2018 to Plain vanilla 1.89 3.61 58,313 - 242,230 - 19.02.2019 17.08.2018 to Plain vanilla 1.84 3.61 58,313 - 242,230 - 19.02.2019 17.08.2018 to Plain vanilla 1.75 3.61 38,875 - 161,487 - 19.02.2019 17.08.2018 to Plain vanilla 1.78 3.61 58,313 - 242,230 - 19.02.2019 17.08.2018 to Plain vanilla 1.78 3.61 58,313 - 242,230 - 19.02.2019
20.02.2018 to Plain vanilla 1.89 3.21 - 66,656 - 269,458 17.08.2018 20.02.2018 to Plain vanilla 1.84 3.21 - 66,656 - 269,458 17.08.2018 20.02.2018 to Plain vanilla 1.75 3.21 - 44,438 - 179,638 17.08.2018 20.02.2018 to Plain vanilla 1.78 3.21 - 66,656 - 269,458 17.08.2018 20.02.2018 to Plain vanilla 1.78 3.21 - 66,656 - 269,458 17.08.2018
The notional amount, fair value and maturity periods of the interest rate swap contracts are as follows:
GROUP/COMPANY 31.12.2018 30.06.2018 RM’000 RM’000
Notional amount
Maturity periods: - due not later than one year 1,130,407 1,257,470
Fair value asset/(liabilities)
Maturity periods: - due not later than one year 18,536 24,723
212 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
33. BANK BALANCES, DEPOSITS AND CASH
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Deposits with licensed banks 63,428 84,110 30,032 35,032 Cash and bank balances 427,614 279,128 35,661 33,252 491,042 363,238 65,693 68,284
Effective annual interest rates applicable during the financial period/year are as follows: % % % % Deposits with licensed banks 4.23 3.14 3.19 3.20
The maturity period for deposits with licensed banks of the Group and the Company range from 1 to 90 days (30 June 2018: 1 to 47 days) and 3 days (30 June 2018: 3 days) respectively.
Bank balances are non-interest bearing deposits held at call with banks.
The currency exposure profile is disclosed in Note 50(c)(i).
34. ASSETS AND LIABILITIES HELD FOR SALE
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Non-current assets held for sale - property, plant and equipment 34(a) 14 43,714 14 28,504 Disposal group held for sale - property, plant and equipment 34(b) 78,633 82,335 - - - other assets 34(b) 46,028 92,915 - - 124,675 218,964 14 28,504 Disposal group held for sale - liabilities 34(b) (21,133) (45,993) - - 103,542 172,971 14 28,504
(a) Proposed disposal of property, plant and equipment
(i) On 29 May 2017, the Company’s Board of Directors approved a proposed disposal of an oil mill with a net book value of RM29 million. On 8 December 2017, the Company entered into a business asset purchase agreement with a third party to dispose of the oil mill for a total consideration of RM48.9 million. The disposal was completed during the financial period.
(ii) On 29 March 2018, the Board of Directors of the Group approved the disposal of an aircraft with a carrying value of RM15.2 million. The Group engaged a broker to assist on the disposal of the aircraft. The disposal has been completed during the financial period.
(iii) On 8 May 2018, the Company accepted the offer to dispose off two plots of freehold land for a total consideration of RM2.6 million. The sale and purchase agreements for the respective plot of land were signed on 28 August 2018. The condition precedents are expected to be fulfilled within the next 12 months after the financial period end.
Annual Report // 6-Month Financial Period Ended 31 December 2018 213 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
34. ASSETS AND LIABILITIES HELD FOR SALE (CONTINUED)
(b) Proposed divestment of subsidiaries
(i) On 22 February 2017, the Board of Directors approved a proposed divestment of the 65% equity interest in PT Mitra Austral Sejahtera (“PT MAS”), a subsidiary of the Group. During the financial year ended 30 June 2018, the Group acquired the remaining 35% of the equity interest in PT MAS. On 26 February 2019, the Group has entered into a Sales and Purchase Agreement to dispose the entire 100% equity interest in PT MAS. Subject to satisfaction of certain conditions precedents, the disposal is expected to be completed within the next 12 months subsequent to the financial period end.
(ii) On 29 November 2018 the Group completed the divestment of the 65% equity interest in Golden Hope- Nha Be Edible Oils Ltd. (“GHN”), a former subsidiary of the Group for a consideration of RM8.2 million (equivalent to 45.9 billion Vietnamese Dong). As at 31 December 2018, part of the consideration of RM4.1 million (equivalent to 23.0 billion Vietnamese Dong) has been retained in an escrow account which shall be released after 2 years.
Upon disposal of GHN, the Group received a corporate guarantee from the new shareholder of GHN primarily on the outstanding trade receivables due primarily from GHN of RM48.2 million (which aged more than 360 days). As the trade receivables are secured by the corporate guarantee, these receivables are not provided for.
Details of the assets, liabilities and net cash flow arising from the disposal of the subsidiary are as follows:
Note RM’000
Property, plant and equipment 5,443 Receivables 15,139 Inventories 18,604 Deferred tax assets 665 Cash and cash equivalents 1,490 Payables (61,584) Non-controlling interest 36 (1,165) Net liabilities disposed (21,408) Gain on disposal of a subsidiary 29,624 Proceeds from disposal, net of transaction costs 8,216 Less: Cash and cash equivalent in a subsidiary (1,490) Net cash inflow from disposal of a subsidiary 6,726
(iii) During the financial period, the Board of Directors approved a proposed divestment of the entire equity interest in PT Indo Sukses Lestari Makmur (“PT ISLM”), a subsidiary of the Group. The disposal of the entire equity interest in PT ISLM is expected to be completed within the next 12 months subsequent to the financial period end.
214 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
34. ASSETS AND LIABILITIES HELD FOR SALE (CONTINUED)
(b) Proposed divestment of subsidiaries (continued)
The movements during the financial period/year relating to net assets held for sale are as follows:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
At 1 July 2018/2017 172,971 168,199 28,504 108,107 Change in value of disposal group (48,888) 13,991 - - Transfers (to)/from: - property, plant and equipment 16 - 6,664 - (580) - intangible assets 24 - 16 - - - inventories 390 11,032 - - - trade and other receivables - 15,827 - - - deferred tax assets 27 - 9,092 - - - trade and other payables (1,086) (28,814) - - - retirement benefits 39 - (463) - - - bank balances, deposits and cash - 5,322 - - Disposals (22,293) (13,158) (28,490) (79,023) Exchange differences 2,448 (14,737) - - At 31 December 2018/30 June 2018 103,542 172,971 14 28,504
35. SHARE CAPITAL
GROUP/COMPANY Number of shares Amount 31.12.2018 30.06.2018 31.12.2018 30.06.2018 ’000 ’000 RM’000 RM’000
Issued and fully paid ordinary shares:
At 1 July 2018/2017 6,800,839 600,000 1,100,000 600,000 Shares Issue - 7,703 - 500,000 Shares Split - 6,193,136 - - At 31 December 2018/30 June 2018 6,800,839 6,800,839 1,100,000 1,100,000
On 13 November 2017, the Company increased its issued share capital from RM600 million to RM1,100 million via issuance of 7,703,197 ordinary shares credited as fully paid in the capital of the Company to Sime Darby Berhad (“SDB”), the former immediate holding company by capitalising the amount due to Sime Darby Holding Berhad, a wholly-owned subsidiary of SDB (“Share Issue”). Subsequently on 14 November 2017, the Company undertook to subdivide every 1 existing ordinary share into 11.19 new ordinary shares to achieve a total of 6,800,839,377 ordinary shares in the Company (“Share Split”).
Annual Report // 6-Month Financial Period Ended 31 December 2018 215 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
36. RESERVES
GROUP Attributable to equity holders of the Company Investments Available Non- Hedging Capital at FVOCI for sale Exchange Merger Retained Perpetual controlling reserve reserve reserve reserve reserve reserve earnings Total Sukuk interests Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2018 At 1 July 2018, as previously stated 44,949 13,361 - 25,569 449,658 (17,696) 12,058,846 12,574,687 2,230,717 408,398 15,213,802 Effect of adoption of MFRS 9 - - 25,569 (25,569) - - (8,275) (8,275) - - (8,275) At 1 July 2018, as restated 44,949 13,361 25,569 - 449,658 (17,696) 12,050,571 12,566,412 2,230,717 408,398 15,205,527
Profit for the financial period ------243,508 243,508 62,661 5,626 311,795 Total other comprehensive (loss)/income for the financial period (13,492) - 850 - 168,091 - 1,798 157,247 - 5,446 162,693 Transactions with equity holders: - distribution to Perpetual Sukuk holders ------(61,980) - (61,980) - dividends ------(952,117) (952,117) - (24,557) (976,674) Disposal of a subsidiary - (3,787) - - 2,856 - 4,330 3,399 - 1,165 4,564 At 31 December 2018 31,457 9,574 26,419 - 620,605 (17,696) 11,348,090 12,018,449 2,231,398 396,078 14,645,925
GROUP Attributable to equity holders of the Company Available Non- Hedging Capital for sale Exchange Merger Retained Perpetual controlling reserve reserve reserve reserve reserve earnings Total Sukuk interests Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
30 June 2018 At 1 July 2017 (3,810) 13,361 75,537 1,158,197 (17,696) 10,632,495 11,858,084 2,231,384 433,887 14,523,355 Profit for the financial year - - - - - 1,727,479 1,727,479 124,300 33,624 1,885,403 Total other comprehensive income/(loss) for the financial year 48,759 - (49,968) (708,539) - 9,252 (700,496) - (41,548) (742,044) Transactions with equity holders: - distribution to Perpetual Sukuk holders ------(124,967) - (124,967) - dividends - - - - - (238,029) (238,029) - (72,184) (310,213) - acquisition of shares from non-controlling interests - - - - - (72,351) (72,351) - 54,619 (17,732) At 30 June 2018 44,949 13,361 25,569 449,658 (17,696) 12,058,846 12,574,687 2,230,717 408,398 15,213,802
216 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
36. RESERVES
GROUP Attributable to equity holders of the Company Investments Available Non- Hedging Capital at FVOCI for sale Exchange Merger Retained Perpetual controlling reserve reserve reserve reserve reserve reserve earnings Total Sukuk interests Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2018 At 1 July 2018, as previously stated 44,949 13,361 - 25,569 449,658 (17,696) 12,058,846 12,574,687 2,230,717 408,398 15,213,802 Effect of adoption of MFRS 9 - - 25,569 (25,569) - - (8,275) (8,275) - - (8,275) At 1 July 2018, as restated 44,949 13,361 25,569 - 449,658 (17,696) 12,050,571 12,566,412 2,230,717 408,398 15,205,527
Profit for the financial period ------243,508 243,508 62,661 5,626 311,795 Total other comprehensive (loss)/income for the financial period (13,492) - 850 - 168,091 - 1,798 157,247 - 5,446 162,693 Transactions with equity holders: - distribution to Perpetual Sukuk holders ------(61,980) - (61,980) - dividends ------(952,117) (952,117) - (24,557) (976,674) Disposal of a subsidiary - (3,787) - - 2,856 - 4,330 3,399 - 1,165 4,564 At 31 December 2018 31,457 9,574 26,419 - 620,605 (17,696) 11,348,090 12,018,449 2,231,398 396,078 14,645,925
GROUP Attributable to equity holders of the Company Available Non- Hedging Capital for sale Exchange Merger Retained Perpetual controlling reserve reserve reserve reserve reserve earnings Total Sukuk interests Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
30 June 2018 At 1 July 2017 (3,810) 13,361 75,537 1,158,197 (17,696) 10,632,495 11,858,084 2,231,384 433,887 14,523,355 Profit for the financial year - - - - - 1,727,479 1,727,479 124,300 33,624 1,885,403 Total other comprehensive income/(loss) for the financial year 48,759 - (49,968) (708,539) - 9,252 (700,496) - (41,548) (742,044) Transactions with equity holders: - distribution to Perpetual Sukuk holders ------(124,967) - (124,967) - dividends - - - - - (238,029) (238,029) - (72,184) (310,213) - acquisition of shares from non-controlling interests - - - - - (72,351) (72,351) - 54,619 (17,732) At 30 June 2018 44,949 13,361 25,569 449,658 (17,696) 12,058,846 12,574,687 2,230,717 408,398 15,213,802
Annual Report // 6-Month Financial Period Ended 31 December 2018 217 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
36. RESERVES (CONTINUED)
COMPANY Investments at FVOCI Available for Hedging Retained reserve sale reserve reserve earnings Total RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2018 At 1 July 2018, as previously stated - 25,483 26,030 9,080,993 9,132,506 Effect of adoption of MFRS 9 25,483 (25,483) - (4,459) (4,459) At 1 July 2018, as restated 25,483 - 26,030 9,076,534 9,128,047
Loss for the financial period - - - (199,204) (199,204) Other comprehensive (loss)/income: Items that will be reclassified subsequently to profit or loss: Net changes in fair value: - investments at FVOCI (839) - - - (839) - cash flow hedge - - (7,198) - (7,198) Tax expenses relating to cash flow hedge - - 26 - 26
Total comprehensive loss for the financial period (839) - (7,172) (199,204) (207,215)
Transactions with equity holders: - dividends paid - - - (952,117) (952,117) At 31 December 2018 24,644 - 18,858 7,925,213 7,968,715
218 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
36. RESERVES (CONTINUED)
COMPANY Available for Hedging Retained sale reserve reserve earnings Total RM’000 RM’000 RM’000 RM’000
30 June 2018 At 1 July 2017 25,628 1,399 8,030,343 8,057,370
Profit for the financial year - - 1,286,297 1,286,297 Other comprehensive (loss)/income: Items that will be reclassified subsequently to profit or loss: Net changes in fair value: - available-for-sale investments (145) - - (145) - cash flow hedge - 24,830 - 24,830 Tax expenses relating to cash flow hedge - (199) - (199) Items that will not be reclassified subsequently to profit or loss: Actuarial gain of defined benefit pension plans - - 3,134 3,134 Tax expenses relating to actuarial gain - - (752) (752)
Total comprehensive (loss)/ income for the financial year (145) 24,631 1,288,679 1,313,165
Transactions with equity holders: - dividends paid - - (238,029) (238,029) At 30 June 2018 25,483 26,030 9,080,993 9,132,506
Annual Report // 6-Month Financial Period Ended 31 December 2018 219 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
37. PERPETUAL SUKUK
GROUP/COMPANY 31.12.2018 30.06.2018 RM’000 RM’000
At 1 July 2018/2017 2,230,717 2,231,384 Profit attributable to Perpetual Sukuk holders 62,661 124,300 Distribution to Perpetual Sukuk holders (61,980) (124,967) At 31 December 2018/30 June 2018 2,231,398 2,230,717
On 23 June 2017, the RM2.2 billion nominal value of Perpetual Subordinated Sukuk (“Perpetual Sukuk”) was novated by Sime Darby Berhad, the former immediate holding company to the Company. The Perpetual Sukuk is rated AAIS by the Malaysian Rating Corporation Berhad.
The Perpetual Sukuk is accounted for as an equity instrument as there is no contractual obligation to redeem the instrument and pay periodic distribution. The salient features of the Perpetual Sukuk are as follows:
a. Unsecured and is issued under the Islamic principle of Wakalah Bi Al-Istithmar (“Sukuk Wakalah”) where the Company is to manage a Wakalah portfolio on behalf of the Perpetual Sukuk holders. The Wakalah portfolio comprises certain assets of the Group (see Note 16(b)(ii)) and investments in commodities in accordance with the Shariah Principle of Ijarah and Murabahah.
b. Carries an initial fixed periodic distribution rate of 5.65% per annum payable on a semi-annual basis in arrears. The periodic distribution rate will be reset on 24 March 2026 to the then prevailing 10-year Malaysian Government Securities (“MGS”) benchmark rate plus 1.75% (“Initial Spread”) and 1.00% (“Step-Up Margin”) and at every 10 year thereafter.
c. No fixed redemption date but the Company has the option to redeem at the end of the tenth year from the date of issue and on each subsequent semi-annual periodic distribution date.
d. The expected periodic distribution amount may be deferred by the Company to perpetuity as long as no discretionary dividend distribution or other payment has been declared by the Company in respect of any of the Company’s ordinary shares.
e. The Company also has the option to redeem the Perpetual Sukuk under the following circumstances:
(i) Accounting Event – if the Perpetual Sukuk is or will no longer be recorded as equity as a result of changes to accounting standards;
(ii) Tax Event – if the Company is or will become obliged to pay additional amount due to changes in tax laws or regulations;
(iii) Tax Deductibility Event – if distribution made would not be fully deductible for income tax purposes as a result of changes in tax laws or regulations or changes to official interpretation or pronouncement that provides for a position with respect to such laws or regulations; and
(iv) Rating Event – if the equity credit is lower than initially assigned to the Perpetual Sukuk as a result of changes in equity credit criteria, guidelines or methodology of rating agency.
The Perpetual Sukuk holders do not have any voting rights in the Company and rank in priority to holders of ordinary shares, but subordinated to the claims of present and future creditors of the Company.
220 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
38. NON-CONTROLLING INTERESTS
The subsidiaries of the Group that have non-controlling interests, which, in the opinion of the Directors, are material to the Group are as follows:
Proportion of equity Place of business/ held by owners of Country of non-controlling interests (%) incorporation Name of subsidiaries 31.12.2018 30.06.2018
Subsidiaries consolidated under PT Minamas Gemilang: - PT Kartika Inti Perkasa 40.0 40.0 Indonesia - PT Sritijaya Abaditama 40.0 40.0 Indonesia - PT Asricipta Indah 10.0 10.0 Indonesia - PT Bersama Sejahtera Sakti 8.9 8.9 Indonesia - PT Laguna Mandiri 11.4 11.4 Indonesia - PT Indotruba Tengah 50.0 50.0 Indonesia - PT Tunggal Mitra Plantations 40.0 40.0 Indonesia - PT Tamaco Graha Krida 10.0 10.0 Indonesia - PT Bahari Gembira Ria 0.7 0.7 Indonesia - PT Indo Sukses Lestari Makmur 5.0 5.0 Indonesia
Subsidiaries consolidated under New Britain Palm Oil Limited: - PT Timbang Deli Indonesia 51.0 51.0 Indonesia - Guadalcanal Plains Palm Oil Limited 20.0 20.0 Solomon Islands - Verdant Bioscience Pte Ltd 48.0 48.0 Singapore
Wangsa Mujur Sdn Bhd 27.5 27.5 Malaysia
There are no significant restrictions on the ability of these subsidiaries to transfer funds to the Group in the form of cash dividends.
The summarised financial information of the subsidiaries that has non-controlling interests to the Group is based on amounts before intercompany elimination.
Annual Report // 6-Month Financial Period Ended 31 December 2018 221 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
38. NON-CONTROLLING INTERESTS (CONTINUED)
Summarised financial information
The summarised statements of comprehensive income and dividends paid by each subsidiary that has non-controlling interests to the Group are as follows:
Subsidiaries Subsidiaries of of New Britain Wangsa PT Minamas Palm Oil Mujur Gemilang Limited Sdn Bhd Others Total RM’000 RM’000 RM’000 RM’000 RM’000
Financial period ended 31 December 2018 Revenue 2,141,974 1,108,719 24,287 972,779 4,247,759 Profit for the financial period 55,070 85,267 2,151 4,149 146,637 Other comprehensive income 3,758 1,668 - 27 5,453 Total comprehensive income 58,828 86,935 2,151 4,176 152,090
Profit/(loss) allocated to non-controlling interests 9,801 (1,299) 143 (3,019) 5,626
Dividends paid to non-controlling interests (22,238) - (1,549) (770) (24,557)
Financial year ended 30 June 2018 Revenue 4,257,874 2,232,037 61,047 2,207,505 8,758,463 Profit for the financial year 265,929 249,574 11,373 87,429 614,305 Other comprehensive income/(loss) 15,143 - 122 (59,804) (44,539) Total comprehensive income 281,072 249,574 11,495 27,625 569,766
Profit allocated to non-controlling interests 20,810 2,014 3,128 7,672 33,624
Dividends paid to non-controlling interests (56,095) (6,166) - (9,923) (72,184)
222 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
38. NON-CONTROLLING INTERESTS (CONTINUED)
Summarised financial information (continued)
The summarised statements of financial position of each subsidiary that has non-controlling interests to the Group are as follows:
Subsidiaries Subsidiaries of of New Britain Wangsa PT Minamas Palm Oil Mujur Gemilang Limited Sdn Bhd Others Total RM’000 RM’000 RM’000 RM’000 RM’000
Financial period ended 31 December 2018 Non-current assets 5,292,599 4,957,135 187,896 365,728 10,803,358 Current assets 1,976,136 2,088,030 15,765 502,629 4,582,560 Non-current liabilities (1,566,379) (1,458,338) (28,198) (174,783) (3,227,698) Current liabilities (1,624,735) (1,201,819) (9,347) (357,508) (3,193,409) Net assets 4,077,621 4,385,008 166,116 336,066 8,964,811 Non-controlling interests’ share of net assets 246,929 65,736 61,529 21,884 396,078
Financial year ended 30 June 2018 Non-current assets 4,924,095 4,343,523 176,225 457,885 9,901,728 Current assets 2,292,389 1,892,354 32,620 508,786 4,726,149 Non-current liabilities (1,337,148) (1,031,867) (28,715) (183,305) (2,581,035) Current liabilities (1,904,425) (1,032,592) (8,865) (372,939) (3,318,821) Net assets 3,974,911 4,171,418 171,265 410,427 8,728,021 Non-controlling interests’ share of net assets 255,608 65,375 62,935 24,480 408,398
Annual Report // 6-Month Financial Period Ended 31 December 2018 223 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
38. NON-CONTROLLING INTERESTS (CONTINUED)
Summarised financial information (continued)
The summarised statements of cash flows of each subsidiary that has non-controlling interests that are material to the Group are as follows:
Subsidiaries Subsidiaries of of New Britain Wangsa PT Minamas Palm Oil Mujur Gemilang Limited Sdn Bhd RM’000 RM’000 RM’000
31 December 2018 Cash flows from operating activities Cash generated from operations 216,018 220,064 21,561 Tax paid (38,100) (82,401) (9) Net cash from operating activities 177,918 137,663 21,552 Net cash used in investing activities (474,307) (392,803) (13,980) Net cash generated from/(used in) financing activities 308,176 257,245 (7,300) Net increase in cash and cash equivalents 11,787 2,105 272 Exchange differences 1,685 18,394 - Cash and cash equivalents at beginning of the financial period 99,961 67,586 234 Cash and cash equivalents at end of the financial period 113,433 88,085 506
30 June 2018 Cash flows from operating activities Cash generated from operations 509,423 549,713 18,356 Tax paid (134,666) (147,012) (118) Net cash from operating activities 374,757 402,701 18,238 Net cash used in investing activities (482,021) (306,569) (50,590) Net cash generated from/(used in) financing activities 37,223 (221,776) (14) Net decrease in cash and cash equivalents (70,041) (125,644) (32,366) Exchange differences (19,761) (10,768) - Cash and cash equivalents at beginning of the financial year 189,763 203,998 32,600 Cash and cash equivalents at end of the financial year 99,961 67,586 234
224 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
39. RETIREMENT BENEFITS
The Group operates unfunded final salary defined benefit plans for its employees in Malaysia, Thailand, Netherlands and Vietnam, and funded defined benefit plans for its employees in Indonesia.
The employees in Malaysia are covered under collective agreements with the following unions:
- All Malayan Estates Staff Union (“AMESU”) - National Union of Commercial Workers (“NUCW”) - Sabah Plantation Industry Employees Union (“SPIEU”)
Subsidiary companies in Indonesia operate a funded defined benefit scheme for qualified permanent employees in accordance with Labour Law No. 13 Year 2003.
Subsidiaries in Thailand operate a wholly unfunded defined benefit scheme, in respect of the Statutory Severance Pay Plan prescribed under Section 118, Chapter 11 of the Labour Protection Act B.E. 2541 (1998).
One of the Group’s subsidiary in Netherlands has a defined benefit scheme for non-active participants only, managed by Aegon N.V. (“AEGON”). The conditions of the Dutch Pension Act are applicable to the scheme.
The latest actuarial valuations of the plans in Malaysia and Indonesia were carried out on 21 September 2017 and 30 July 2018, respectively.
The movements during the financial period/year in the amounts recognised in the statements of financial position are as follows:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Non-current At 1 July 2018/2017 213,209 237,850 48,633 46,119 Charge for the financial period/year 12,838 20,508 4,262 9,492 Actuarial loss/(gain) recognised in other comprehensive income 2,100 (21,155) - (3,134) Contributions and benefits paid (2,793) (7,379) (2,589) (3,844) Transfers to non-current assets held for sale 34 - (160) - - Transfers from current retirement benefits 2,935 - - - Acquisition of a subsidiary 44(a) 55 - - - Exchange differences 1,465 (16,455) - - At 31 December 2018/30 June 2018 229,809 213,209 50,306 48,633
Current At 1 July 2018/2017 10,485 - - - Charge for the financial period/year - 10,855 - - Transfers to non-current assets held for sale 34 - (303) - - Transfers to non-current retirement benefits (2,935) - - - Exchange differences 234 (67) - - At 31 December 2018/30 June 2018 7,784 10,485 - -
Annual Report // 6-Month Financial Period Ended 31 December 2018 225 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
39. RETIREMENT BENEFITS (CONTINUED)
The amounts recognised on the statements of financial position are determined as follows:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Present value of funded obligations 39(a) 155,071 142,492 - - Fair value of plan assets 39(b) (415,651) (396,524) - - (260,580) (254,032) - - Present value of unfunded obligations 39(a) 498,173 477,726 50,306 48,633 Net liabilities 237,593 223,694 50,306 48,633
The expenses recognised in statements of profit or loss are analysed as follows:
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Current service cost 7,777 23,007 1,466 2,832 Past service cost - 1,944 - - Interest cost 6,907 13,462 1,141 2,170 Expected return on plan assets (3,792) (7,204) - - Contracted gratuity 2,371 154 1,655 4,490 Curtailment (425) - - - Total included in employee benefits expense 6(d) 12,838 31,363 4,262 9,492
(a) Changes in the present value of defined benefit (funded and unfunded) obligations
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
At 1 July 2018/2017 620,218 615,363 48,633 46,119 Acquisition of a subsidiary 44(a) 55 - - - Current service cost 7,777 23,007 1,466 2,832 Past service cost - 1,944 - - Interest cost 6,907 13,462 1,141 2,170 Contracted gratuity 2,371 154 1,655 4,490 Curtailment (425) - - - Benefits paid (7,496) (12,482) (2,589) (3,844) Actuarial losses/(gains) recognised in other comprehensive income 16,447 12,204 - (3,134) Transfer to non-current assets held for sale 34 - (463) - - Exchange differences 7,390 (32,971) - - At 31 December 2018/30 June 2018 653,244 620,218 50,306 48,633
226 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
39. RETIREMENT BENEFITS (CONTINUED)
(b) Changes in the fair value of plan assets
GROUP 31.12.2018 30.06.2018 RM’000 RM’000
At 1 July 2018/2017 396,524 377,513 Expected return on plan assets 3,792 7,204 Actuarial gains due to actual experience 14,347 33,359 Benefits paid (4,703) (5,103) Exchange differences 5,691 (16,449) At 31 December 2018/30 June 2018 415,651 396,524
The range of principal assumptions used in respect of the Group’s and the Company’s defined benefit plans are as follows:
GROUP 31.12.2018 30.06.2018 % %
Expected return on plan assets (per annum) 1.9 - 8.5 2.0 - 8.3 Discount rates (per annum) 1.9 - 8.3 2.0 - 8.3 Expected rate of salary increases (per annum) 1.5 - 6.5 1.5 - 6.5
COMPANY 31.12.2018 30.06.2018 % %
Discount rates (per annum) 5.2 5.2 Expected rate of salary increases (per annum) 6.0 6.0
Annual Report // 6-Month Financial Period Ended 31 December 2018 227 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
40. BORROWINGS
Group Company 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Non-current Unsecured - Term loans 3,032,785 3,000,500 2,814,335 2,963,658 - Revolving credit 1,495,440 1,455,300 1,495,440 1,455,300 - Bonds 475,405 468,627 - - - Multi-Currency Sukuk 508,869 495,210 - - - Unamortised Deferred Financing Expenses (19,924) (24,433) (17,249) (21,191) 5,492,575 5,395,204 4,292,526 4,397,767
Current Secured - Trade Facilities - 19,673 - -
Unsecured - Term loans 588,106 525,589 532,133 519,728 - Revolving credit 1,216,233 548,932 442,310 - 1,804,339 1,094,194 974,443 519,728 Total borrowings 7,296,914 6,489,398 5,266,969 4,917,495
The currency exposure profile is disclosed in Note 50(c)(i).
The breakdown of the unamortised deferred financing expenses is as follows:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
At 1 July 2018/2017 24,433 29,775 21,191 29,775 Drawdown during the financial period 700 - 700 - Reclassification from other receivables - 4,548 - - Amortised during the financial period/year 10 (5,209) (9,890) (4,642) (8,584) At 31 December 2018/30 June 2018 19,924 24,433 17,249 21,191
228 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
40. BORROWINGS (CONTINUED)
(a) Term loans
The term loans include the following:
i. RM500 million 7-year unsecured term loan repayable over nine semi-annual instalments from 36 months after the first drawdown date of 26 June 2012.
ii. USD500 million 7-year unsecured multi-currency term loan repayable over eight semi-annual instalments of 11.125%, commencing 36 months from the first drawdown date of 17 February 2015 and one final payment of 11% on the final maturity date.
iii. USD300 million 3-year unsecured term loan under commodity murabahah financing-i facility repayable in full from 36 months after the first drawdown date of 22 June 2017.
iv. USD100 million 3-year unsecured term loan repayable in full from 36 months after the first drawdown date of 22 June 2017.
v. THB432.5 million 10-year unsecured term loan repayable in equal quarterly instalments commencing from the first repayment date of 1 March 2017.
vi. USD60 million term loan credit facility. Loan drawdown on 23 August 2018. Interest basis LIBOR plus 1.10%. Outstanding balance as at 31 December 2018 USD56 million.
(b) Revolving credits
The revolving credits include the following:
i. USD360 million 3-year unsecured term loan under revolving credit-i facility repayable at maturity on 19 June 2020.
ii. USD60 million multi-currency revolving credit facility for advances of 1 week, 1 month, 3 months or 6 months tenor, or any other period agreeable to the bank commencing from the effective date of 12 January 2015. Outstanding balance as at 31 December 2018 was USD34.7 million (30 June 2018: USD33 million).
iii. EUR15 million uncommitted short-term revolving loans facility for period not exceeding 1 month or 3 months with availability period of up to one year with annual extension subject to annual review by the bank. Outstanding balance as at 31 December 2018 was EUR15 million (30 June 2018: EUR15 million).
iv. Facility limit of IDR1 trillion or its equivalent in other currency with availability period of up to 12 months from the signing date. The loan agreement expired on 15 January 2018 and has been renewed on 15 January 2018 from the period up to 15 January 2019. Outstanding balance as at 31 December 2018 was IDR0.98 trillion (30 June 2018: IDR1 trillion).
v. USD40 million uncommitted short-term revolving loans facility for a period up to one year and automatically extended for a continuous one year period after each expiry date. Outstanding balance as at 31 December 2018 was USD40 million (30 June 2018: USD15.3 million).
vi. RM150 million under revolving Ringgit time loan facility with first drawdown date 2 July 2018. Tenure is up to a maximum of one year, as may be agreed by Citibank from time to time.
vii. RM700 million multi-currency revolving credit facility, with first drawdown 16 August 2018. Facility has a maximum tenure of 5 years.
viii. Facility limit of IDR800 billion or its equivalent to USD, with availability period of up to 12 months from the signing date subject to Maturity by Origination. The loan agreement expired on 1 August 2018 and has been renewed to the period up to 31 July 2019. Outstanding balance as at 31 December 2018 was USD15.8 million (30 June 2018: Nil).
Annual Report // 6-Month Financial Period Ended 31 December 2018 229 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
40. BORROWINGS (CONTINUED)
(b) Revolving credits (continued)
The revolving credits include the following: (continued)
ix. Facility limit of IDR500 billion or its equivalent to USD, with availability period of up to 12 months from the signing date subject to Maturity by Origination. The loan agreement expired on 5 May 2018 and has been renewed to the period up to 5 May 2019. Outstanding balance as at 31 December 2018 was USD6.5 million (30 June 2018: Nil).
x. USD15 million revolving credit facility. Outstanding balance as at 31 December 2018 was USD5 million (30 June 2018: Nil).
(c) Multi-currency Sukuk
On 11 January 2013, Sime Darby Berhad (“SDB”) had established a Multi-currency Sukuk Programme (“Sukuk Programme”) with a programme limit of USD1,500 million (or its equivalent in other currencies). Sime Darby Global Berhad (“Sime Darby Global”), a subsidiary of SDB is the issuer of the Sukuk Programme structured under the Shariah Principle of Ijarah, which is a sale and leaseback arrangement. On 29 January 2013, Sime Darby Global issued two tranches of USD400 million Sukuk each with a tenure of 60 months (“2018 Sukuk”) and 120 months (“2023 Sukuk”) respectively.
On 18 April 2017, SDB invited eligible sukukholders to tender for its purchase of the outstanding Sukuk (the “Sukuk Tender Offer”) and to consent to the substitution of the Company in place of SDB in its capacities as Obligor, Seller and Lessee in respect of both tranches of the Sukuk (hereinafter referred to as “the consent solicitation”). Pursuant to the Sukuk Tender Offer, SDB has repurchased in part the 2018 Sukuk and 2023 Sukuk in an aggregate principal amount of USD350.4 million and USD277.5 million.
At the meetings of the sukukholders held on 16 May 2017, consents were received for substitution of the Company to replace SDB. On 23 May 2017, the Company acquired all of the shareholding in Sime Darby Global, as part of SDB’s corporate restructuring.
On 29 January 2018, the 2018 Sukuk has matured and Sime Darby Global has fully paid off the principal amount of USD49.6 million (RM195.6 million) to the sukukholders.
Details of the Sukuk Programme that remains outstanding are as follows:
31 December 2018
Nominal value At At At Periodic Tenure 01.07.2018 31.12.2018 31.12.2018 distribution Maturity Date of issuance (month) RM’000 RM’000 USD’000 (per annum) date
29.01.2013 120 495,210 508,869 122,501 3.29% 29.01.2023
230 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
40. BORROWINGS (CONTINUED)
(c) Multi-currency Sukuk (continued)
30 June 2018
Nominal value At At At Periodic Tenure 01.07.2018 31.12.2018 31.12.2018 distribution Maturity Date of issuance (month) RM’000 RM’000 USD’000 (per annum) date
29.01.2013 60 221,758 - - 2.05% 29.01.2018
29.01.2013 120 525,959 495,210 122,501 3.29% 29.01.2023 747,717 495,210 122,501
The Sukuk Programme has been accorded ratings of BBB+ and Baa1 by Fitch Ratings on 15 November 2018 and Moody’s Investors Service on 18 October 2018 respectively.
(d) Other borrowings
The N-bonds amounting to EUR100 million shall be repayable at a nominal amount on 12 August 2030. For trade facilities, the factoring agreement is entered into with maximum limit of EUR75 million with availability period of up to 12 months from the signing date, and is renewable for the same period of time, unless the agreement is terminated by one of the parties.
(e) Other information
(i) Secured financing
As at 30 June 2018, RM19.7 million are secured by fixed charge on trade receivables of the Group. The carrying amounts of trade receivables that the Group pledged as collateral for the borrowings are as follows:
GROUP 31.12.2018 30.06.2018 RM’000 RM’000
Trade receivables - 19,673
Annual Report // 6-Month Financial Period Ended 31 December 2018 231 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
40. BORROWINGS (CONTINUED)
(e) Other information (continued)
(ii) The average annual effective interest rates by currency profile of the borrowings, analysed into their respective currency profiles are as follows:
GROUP 31.12.2018 30.06.2018 % %
Floating interest rates
Term loans - Ringgit Malaysia 4.68 4.36 - United States Dollar 2.68 - 3.55 2.13 - 2.55 - Thailand Baht 3.36 3.34
Revolving credit - Ringgit Malaysia 4.21 - 4.74 - - United States Dollar 2.00 - 4.00 1.95 - 2.55 - Indonesia Rupiah - 6.70 - European Union Euro 0.50 0.50
Trade facilities - European Union Euro - 0.45
Fixed interest rates
Bonds - European Union Euro 2.90 2.90
Distribution rate
Multi-currency Sukuk - United States Dollar 3.29 2.05 - 3.29
232 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
40. BORROWINGS (CONTINUED)
(e) Other information (continued)
(ii) The average annual effective interest rates by currency profile of the borrowings, analysed into their respective currency profiles are as follows: (continued)
COMPANY 31.12.2018 30.06.2018 % %
Floating interest rates
Term loans - Ringgit Malaysia 4.68 4.42 - United States Dollar 3.20 - 3.55 2.47 - 2.77
Revolving credit - Ringgit Malaysia 4.21 - 4.74 - - United States Dollar 2.69 - 3.25 2.49
(iii) The maturity periods of borrowings are as follows:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Not later than 1 year 1,804,339 1,094,194 974,443 519,728 Later than 1 year but not later than 2 years 3,664,114 3,506,698 3,610,238 3,513,444 Later than 2 years but not later than 5 years 1,307,517 1,409,722 682,288 884,323 More than 5 years 520,944 478,784 - - 7,296,914 6,489,398 5,266,969 4,917,495
The fair values of borrowings approximate their carrying values as the impact of discounting is not significant. It is estimated based on discounted cash flows using prevailing market rates for borrowings with similar risk profile and is within Level 2 of the fair value hierarchy.
Annual Report // 6-Month Financial Period Ended 31 December 2018 233 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
41. LEASE LIABILITIES
GROUP COMPANY 31.12.2018 31.12.2018 RM’000 RM’000
Non-current 165,433 7,478 Current 27,122 1,919 192,555 9,397
Minimum lease payments: - not later than 1 year 34,939 2,491 - later than 1 year and not later than 5 years 91,015 3,812 - later than 5 years 172,352 7,553 298,306 13,856 Less: unexpired finance charges (105,751) (4,459) 192,555 9,397
Present value of lease liabilities: - not later than 1 year 27,122 1,919 - later than 1 year and not later than 5 years 80,398 1,888 - later than 5 years 85,035 5,590 192,555 9,397
As explained in Note 2 to the financial statements, the Group and the Company have changed its accounting policies for leases. The new policy and the impact of the change are as described in Note 3(v) and Note 52 to the financial statements respectively.
42. DEFERRED INCOME
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Non-current Government grant 446 601 - -
Current Deferred freight income 28,536 19,275 42 36
The government grants are received in relation to the purchase of property, plant and equipment and right-of-use leasehold land of certain subsidiaries.
234 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
42. DEFERRED INCOME (CONTINUED)
Significant changes of the deferred freight income during the financial period/year are as follows:
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Revenue recognised that was deferred from previous financial year 19,275 26,707 36 138
Consideration received for freight services that are partially or fully unsatisfied at the end of the period/year 28,536 19,275 42 36
43. TRADE AND OTHER PAYABLES
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 Note RM’000 RM’000 RM’000 RM’000
Non-current Other payables 62,664 59,772 - - Financial guarantee contracts 43(a) 783 1,041 139,939 61,969 63,447 60,813 139,939 61,969
Current Trade payables 710,434 729,892 98,281 110,636 Accruals 294,921 444,201 98,181 98,139 Other payables 301,364 262,377 59,289 107,550 Employee related payables 106,443 92,881 57,905 36,682 Interest payable 45,470 48,597 22,594 21,787 Goods and services tax/value added tax payable 7,225 9,433 - - Financial guarantee contracts 43(a) 688 721 27,317 5,983 1,466,545 1,588,102 363,567 380,777
Annual Report // 6-Month Financial Period Ended 31 December 2018 235 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
43. TRADE AND OTHER PAYABLES (CONTINUED)
Credit terms for trade payables of the Group and of the Company range from 1 to 90 days (30 June 2018: 1 to 90 days).
(a) Financial guarantee contracts
The gross financial guarantees provided by the Group and the Company at the end of the financial period/year are as follows:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Guarantees in respect of credit facilities granted to: - joint ventures 6,443 6,655 6,443 6,655 - subsidiaries - - 1,167,211 694,992 - plasma stakeholders 45,165 49,832 - -
44. ACQUISITIONS
Acquisition of subsidiaries
New Britain Palm Oil Limited (“NBPOL”), a wholly-owned subsidiary of the Company, had on 23 August 2018, completed the acquisition of a 100% equity interest in Markham Farming Company Limited (“MFCL”) for a total cash consideration of USD55.0 million (equivalent to approximately RM230.0 million), from Markham Agro Pte. Ltd. (“MAPL”) pursuant to a Share Sale and Purchase Agreement (“SPA”) entered into between NBPOL and MAPL on 23 August 2018 (“the Acquisition”).
The valuation of material assets (land, building, plant and machinery) of the subsidiary acquired were carried out by independent professional firms, to arrive at fair value of identifiable assets and liabilities at the date of acquisition.
As allowed under MFRS 3 “Business Combinations”, the Group has exercised the option to finalise the purchase price allocation (“PPA”) within 12-month period from acquisition date. As such, on finalisation of the PPA, there may be changes in the provisional fair values of the net assets acquired and, consequently the residual goodwill. The provisional goodwill of RM9.1 million arising from the acquisition consists largely the cost of entry into coconut oil production, synergies and economies of scale expected from combining the oil palm operations of the Group and the subsidiary acquired.
236 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
44. ACQUISITIONS (CONTINUED)
Acquisition of subsidiaries (continued)
(a) The provisional fair value of net identifiable assets including residual goodwill recognised in the financial statements of the Group are as follows:
GROUP As at 31.12.2018 Note RM’000
Property, plant and equipment 16 244,114 Right-of-use assets 20 82,262 Trade and other receivables 2,219 Inventories 2,039 Cash and cash equivalents 1,521 Retirement benefits 39(a) (55) Deferred tax liabilities 27 (68,279) Trade and other payables (8,666) Borrowings (34,806) Net assets acquired 220,349 Purchase consideration (229,403) Goodwill 24 (9,054)
(b) The cash outflow on the acquisition is as follows:
Outflow of cash to acquire subsidiary, net of cash acquired Cash consideration 229,403 Less: Bank balances acquired (1,521) Net cash outflow from acquisition of a subsidiary 227,882
On 24 November 2017, Mulligan International B.V, an indirect wholly-owned subsidiary of the Company, has completed the acquisition of 90% equity interest in PT Tamiyang Sumber Rezeki (“PT TSR”) for a total cash consideration of IDR77.5 billion (equivalent to approximately RM23.7 million). PT TSR was incorporated in Indonesia as a limited liability company and has been granted with the Hak Izin Lokasi and the Izin Usaha Perkebunan on 20,000 hectares of greenfield land in Kebupaten Barito Timur, Kalimantan Tengah, Indonesia. The acquisition is an acquisition of an asset, which is a prepaid lease rental on leasehold land.
Annual Report // 6-Month Financial Period Ended 31 December 2018 237 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
45. SEGMENT INFORMATION - GROUP
The Company is a globally integrated plantation company which is involved in the entire span of the palm oil value chain, from upstream to downstream activities, research and development (“R&D”), renewables and agribusiness. The Group is also involved in rubber and sugar cane plantations as well as beef cattle industry.
The management of the Group has determined the operating segments based on information reviewed by the Group’s Plantation Leadership Committee (“PLC”) which consists of the Group’s Managing Director (“MD”), Group Chief Financial Officer (“CFO”), Chief Operating Officer (Upstream), Chief Operating Officer (Downstream), Chief Research & Development Officer, Chief Strategy & Innovation Officer, Chief Human Resources Officer and Chief Sustainability Officer and other key management personnel for the purposes of allocating resources and assessing performance.
Management separately evaluates the performance of the upstream segment by geographical locations. Although the Upstream Liberia segment does not meet the quantitative threshold as a reportable segment, the segment remains closely monitored by the PLC.
The downstream segment is evaluated based on the nature of the products and services, specific expertise and technologies requirement of individual operating units. These operating units have been reported as a single segment as the disaggregation does not meet the quantitative thresholds for separate disclosures, and may exceed the practical limit of a reportable segment. The other business activities of the Group are excluded from the reportable operating segment as they are individually insignificant.
Segments comprised:
Upstream Malaysia developing, cultivating and managing oil palm and rubber plantation estates and milling of fresh fruit bunches (“FFB”) into crude palm oil (“CPO”) and palm kernel (“PK”), processing and sales of rubber
Upstream Indonesia developing, cultivating and managing oil palm plantation estates and milling of FFB into CPO and PK
Upstream Papua New developing, cultivating and managing oil palm and sugar cane plantation estates; milling of FFB into Guinea and Solomon CPO and PK, processing and sales sugar cane; cattle rearing and beef production Islands (“PNG/SI”)
Upstream Liberia developing, cultivating and managing oil palm plantation estates and milling of FFB into CPO and PK
Downstream crushing of PK to crude palm kernel oil (“CPKO”) and palm kernel expeller (“PKE”); production and sales of refined oils and fats (which includes specialty and end-user oils and fats); production and sales of coconut oils; and production and sales of biodiesel products and derivatives
Other operations other operations including trading of agricultural products and services, production and/or sale of oil palm seeds and seedlings, sales of oleochemical products, research and breeding programmes of oil palm and rubber with special focus on genome science; and renewables business with a focus on development of green technology and renewable energy which includes bio-based chemicals, biogas and composting
Note:
(i) FFB, being the oil palm fruits which grow in bunches on oil palm trees, from which CPO and PK are obtained. (ii) CPO, which is the oil extracted from the fibrous outer layer (mesocarp) of the oil palm fruit.
Transactions between segments are carried out on agreed terms between both parties. The effects of such inter-segment transactions are eliminated on consolidation.
238 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 - Total Total 3,159 3,159 8,473 8,473 RM’000 RM’000 558,559 558,559 311,795 555,400 555,400 457,047 457,047 (109,985) (145,252) 6,542,548 6,542,548 6,542,548 6,542,548 ------Inter- RM’000 RM’000 segment segment (4,444,620) (4,444,620) elimination elimination 275 275 Other 3,159 3,159 8,765 8,765 (4,826) (3,176) (1,650) 11,924 11,924 29,562 29,562 RM’000 RM’000 (15,375) 144,872 144,872 174,434 174,434 operations operations
- 2,262 2,262 (8,627) RM’000 RM’000 (26,249) 176,270 176,270 143,656 176,270 176,270 169,905 169,905 4,952,723 4,952,723 2,125,135 2,125,135 7,077,858 7,077,858 Downstream Downstream - - - - - 24,227 24,227 24,227 24,227 Liberia Liberia RM’000 RM’000 (55,511) (55,511) (55,511) (55,511) Upstream Upstream - 46 (4,171) 56,629 56,629 37,954 56,629 56,629 52,504 52,504 RM’000 RM’000 (14,550) PNG/SI PNG/SI 584,225 584,225 213,490 213,490 797,715 797,715 Upstream Upstream - 4,100 4,100 (1,349) 67,880 67,880 11,891 67,880 67,880 70,631 70,631 RM’000 RM’000 (58,740) 468,626 468,626 654,466 654,466 Indonesia Indonesia Upstream Upstream 1,123,092 1,123,092 - 1,790 1,790 RM’000 RM’000 (80,463) (44,063) 301,367 301,367 178,631 483,185 483,185 301,367 301,367 222,694 222,694 Malaysia Malaysia Upstream Upstream 1,306,657 1,306,657 1,789,842 1,789,842
31 December 2018 31 December and associates Segment results For the financial period ended the financial period ended For ventures of joint of results Share tax and interest before Profit/(loss) the financial period for Profit/(loss) Segment revenue External Finance income Inter-segment Finance costs Segment results profit/(loss) Operating Profit/(loss) before tax before Profit/(loss) Tax expense Tax SEGMENT INFORMATION - GROUP (CONTINUED) - GROUP SEGMENT INFORMATION (a) 45.
Annual Report // 6-Month Financial Period Ended 31 December 2018 239 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 Total Total (7,813) 29,716 29,716 RM’000 RM’000 (81,647) 609,105 609,105 - - - - Inter- RM’000 RM’000 segment segment elimination elimination - - - Other 9,751 9,751 RM’000 RM’000 operations operations
2,772 2,772 (2,978) 56,961 56,961 RM’000 RM’000 (30,345) Downstream Downstream - - 16,534 16,534 10,497 10,497 Liberia Liberia RM’000 RM’000 Upstream Upstream (107) 2,926 2,926 (2,312) RM’000 RM’000 PNG/SI PNG/SI 245,195 245,195 Upstream Upstream (474) (315) 5,220 5,220 RM’000 RM’000 110,268 110,268 Indonesia Indonesia Upstream Upstream 2,264 2,264 (2,208) RM’000 RM’000 (50,721) 176,433 176,433 Malaysia Malaysia Upstream Upstream 7 7 6(a) 6(e) Notes
equipment, trade and other receivables receivables and other trade equipment, plasma plantation and advances for and advances receivables and other plasma plantation projects for assets equipment and non-current 31 December 2018 (continued) 31 December are: projects sale held for Segment results (continued) Segment results For the financial period ended the financial period ended For and amortisation Depreciation plant and of property, Impairment losses trade of of impairment losses Reversal plant and Gains on disposals of property, Included in the operating (profit)/loss (profit)/loss the operating Included in SEGMENT INFORMATION - GROUP (CONTINUED) - GROUP SEGMENT INFORMATION (a) 45.
240 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 - Total Total 24,433 24,433 (36,787) RM’000 RM’000 (183,460) (491,547) 2,535,977 2,535,977 1,885,403 2,572,764 2,572,764 2,376,950 2,376,950 14,368,888 14,368,888 14,368,888 14,368,888 ------Inter- RM’000 RM’000 segment (5,414,610) (5,414,610) elimination elimination 9,527 9,527 Other Other (36,787) (32,992) (87,448) (23,971) 118,009 118,009 262,608 262,608 380,617 380,617 RM’000 RM’000 (124,235) (171,671) (147,700) operations operations
- 3,123 3,123 (8,834) (35,952) 267,417 267,417 225,754 144,127 144,127 267,417 267,417 261,706 261,706 RM’000 RM’000 10,559,809 10,559,809 10,703,936 10,703,936 Downstream Downstream - - - - - 33,062 33,062 33,062 33,062 Liberia Liberia RM’000 RM’000 (183,753) (183,753) (183,753) (183,753) Upstream Upstream - 42 (2,098) (42,790) 191,235 191,235 146,389 784,919 784,919 191,235 191,235 189,179 189,179 RM’000 RM’000 PNG/SI PNG/SI 1,569,466 1,569,466 2,354,385 2,354,385 Upstream Upstream - - 6,109 6,109 295,864 295,864 174,525 791,003 791,003 295,864 295,864 301,973 301,973 RM’000 RM’000 (127,448) 1,035,802 1,035,802 1,826,805 1,826,805 Indonesia Indonesia Upstream Upstream - 5,632 5,632 RM’000 RM’000 (139,536) (261,386) Malaysia Malaysia 2,089,449 2,089,449 1,694,159 1,297,539 1,297,539 3,187,154 3,187,154 4,484,693 4,484,693 2,089,449 2,089,449 1,955,545 1,955,545 Upstream Upstream
30 June 2018 and associates Segment results (continued) Segment results For the financial year ended ended the financial year For ventures of joint of results Share tax and interest before Profit/(loss) the financial period for Profit/(loss) Segment revenue External Finance income Inter-segment Finance costs Segment results profit/(loss) Operating Profit/(loss) before tax before Profit/(loss) Tax expense Tax SEGMENT INFORMATION - GROUP (CONTINUED) - GROUP SEGMENT INFORMATION (a) 45.
Annual Report // 6-Month Financial Period Ended 31 December 2018 241 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 Total Total (5,332) 364,051 364,051 RM’000 RM’000 (901,351) 1,153,647 1,153,647 - - - - Inter- RM’000 RM’000 segment segment elimination elimination (70) (27) Other Other 17,305 17,305 149,218 149,218 RM’000 RM’000 operations operations 6,146 6,146 (1,879) (10,894) 103,650 103,650 RM’000 RM’000 Downstream Downstream - - 17,413 17,413 Liberia Liberia 111,800 111,800 RM’000 RM’000 Upstream Upstream 545 545 (730) (1,405) 458,188 458,188 RM’000 RM’000 PNG/SI PNG/SI Upstream Upstream (78) (1,928) 69,248 69,248 212,688 212,688 RM’000 RM’000 Indonesia Indonesia Upstream Upstream (93) 27,094 27,094 344,403 344,403 RM’000 RM’000 (889,579) Malaysia Malaysia Upstream Upstream 7 7 6(a) 6(e) Note
and equipment, trade and other and other trade and equipment, lease rentals, prepaid receivables, plasma plantation advances for and in associates, investment projects, investments available-for-sale and advances receivables and other plasma plantation projects for assets equipment and non-current are: sale held for 30 June 2018 (continued) Segment results (continued) Segment results For the financial year ended ended the financial year For (profit)/loss the operating Included in and amortisation Depreciation plant of property, Impairment losses trade of of impairment losses Reversal plant and Gains on disposals of property, SEGMENT INFORMATION - GROUP (CONTINUED) - GROUP SEGMENT INFORMATION (a) 45.
242 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 Total Total 21,133 21,133 RM’000 RM’000 124,675 124,675 488,483 488,483 843,575 843,575 2,648,010 2,648,010 2,626,877 2,626,877 27,524,453 27,524,453 26,911,295 26,911,295 ------Inter- RM’000 RM’000 segment segment elimination elimination - - Other Other 14,921 14,921 86,178 86,178 86,178 86,178 RM’000 RM’000 488,483 488,483 751,837 751,837 263,354 263,354 operations operations
- - 74 52,321 52,321 RM’000 RM’000 395,549 395,549 395,549 395,549 4,625,895 4,625,895 4,625,821 4,625,821 Downstream Downstream - - - 2,553 2,553 33,167 33,167 33,167 33,167 Liberia Liberia RM’000 RM’000 287,798 287,798 287,798 287,798 Upstream Upstream - - - RM’000 RM’000 PNG/SI PNG/SI 141,576 141,576 241,694 241,694 241,694 241,694 Upstream Upstream 8,164,513 8,164,513 8,164,513 8,164,513 - 21,133 21,133 RM’000 RM’000 124,587 124,587 262,412 262,412 597,292 597,292 576,159 576,159 Indonesia Indonesia Upstream Upstream 4,526,283 4,526,283 4,401,696 4,401,696 - - 14 RM’000 RM’000 369,792 369,792 Malaysia Malaysia Upstream 9,168,127 9,168,127 1,294,130 1,294,130 9,168,113 9,168,113 1,294,130 1,294,130 non-current assets held for sale held for assets non-current as follows: Segment assets and liabilities and additions to non-current assets to non-current and liabilities additions Segment assets Joint ventures and associates ventures Joint sale held for assets Non-current with associated Liabilities directly are assets to non-current Additions Capital expenditure 31 December 2018 31 December Segment assets assets Operating Segment liabilities Liabilities SEGMENT INFORMATION - GROUP (CONTINUED) - GROUP SEGMENT INFORMATION (b) 45.
Annual Report // 6-Month Financial Period Ended 31 December 2018 243 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 Total Total 45,993 45,993 218,964 218,964 476,027 476,027 RM’000 RM’000 1,581,656 1,581,656 2,017,084 2,017,084 1,971,091 1,971,091 26,389,885 26,389,885 25,694,894 25,694,894 ------Inter- RM’000 RM’000 segment segment elimination elimination - - Other Other 53,782 53,782 94,391 94,391 94,391 94,391 475,927 475,927 747,088 747,088 271,161 271,161 RM’000 RM’000 operations operations
- 38,684 38,684 28,814 28,814 79,456 79,456 492,189 492,189 463,375 463,375 RM’000 RM’000 4,226,386 4,226,386 4,187,702 4,187,702 Downstream Downstream - - - 16,165 16,165 27,768 27,768 27,768 27,768 Liberia Liberia 304,532 304,532 304,532 304,532 RM’000 RM’000 Upstream Upstream - - - 303,558 303,558 178,202 178,202 178,202 178,202 RM’000 RM’000 PNG/SI PNG/SI 7,834,656 7,834,656 7,834,656 7,834,656 Upstream Upstream - 17,179 17,179 136,566 136,566 453,008 453,008 612,793 612,793 595,614 595,614 RM’000 RM’000 4,282,037 4,282,037 4,145,471 4,145,471 Indonesia Indonesia Upstream Upstream - 100 100 43,714 43,714 675,687 675,687 611,741 611,741 611,741 611,741 RM’000 RM’000 Malaysia Malaysia 8,995,186 8,995,186 8,951,372 8,951,372 Upstream non-current assets held for sale held for assets non-current as follows: Segment assets and liabilities and additions to non-current assets (continued) assets to non-current and liabilities additions Segment assets Joint ventures and associates ventures Joint sale held for assets Non-current with associated Liabilities directly are assets to non-current Additions Capital expenditure 30 June 2018 Segment assets assets Operating Segment liabilities Liabilities SEGMENT INFORMATION - GROUP (CONTINUED) - GROUP SEGMENT INFORMATION (b) 45.
244 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
45. SEGMENT INFORMATION - GROUP (CONTINUED)
(b) Segment assets and liabilities and additions to non-current assets (continued)
Capital expenditure consists of the following:
31.12.2018 30.06.2018 RM’000 RM’000
Property, plant and equipment 831,632 1,575,822 Right-of-use assets 8,439 - Prepaid lease rentals - 461 Intangible assets other than goodwill 3,504 5,373 843,575 1,581,656
Reconciliations of segment assets and liabilities to total assets and total liabilities are as follows:
31.12.2018 30.06.2018 RM’000 RM’000
Assets: Segment total 27,524,453 26,389,885 Tax assets 1,101,849 1,101,790 28,626,302 27,491,675
Liabilities: Segment total 2,648,010 2,017,084 Tax liabilities 2,742,898 2,657,966 Borrowings 7,296,914 6,489,398 Lease liabilities 192,555 - Finance lease obligations - 13,425 12,880,377 11,177,873
Annual Report // 6-Month Financial Period Ended 31 December 2018 245 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
45. SEGMENT INFORMATION - GROUP (CONTINUED)
(c) Segment by geography
Revenue by location of customers is analysed as follows:
Financial Financial period ended year ended 31.12.2018 30.06.2018 RM’000 RM’000
Malaysia 1,495,248 3,340,457 Europe 1,227,976 3,218,309 India 1,489,702 2,760,473 Indonesia 447,252 952,426 Thailand 544,604 1,123,264 Other countries in South East Asia 184,178 454,252 South Africa 282,666 679,978 Papua New Guinea and Solomon Islands 245,587 358,075 China 106,163 378,661 Liberia 24,227 33,062 Other countries (which are individually insignificant) 494,945 1,069,931 6,542,548 14,368,888
Non-current assets, other than financial instruments and tax assets, by location of the Group’s operations are analysed as follows:
31.12.2018 30.06.2018 RM’000 RM’000
Malaysia 11,997,659 9,691,118 Indonesia 3,546,698 3,963,942 Papua New Guinea and Solomon Islands 5,996,536 6,924,120 Liberia 251,332 268,664 Thailand 274,080 254,056 China 23,911 24,841 Europe 536,994 447,542 South Africa 12,577 11,925 22,639,787 21,586,208
246 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
45. SEGMENT INFORMATION - GROUP (CONTINUED)
(c) Segment by geography (continued)
Reconciliations of non-current assets, other than financial instruments and tax assets to the total non-current assets are as follows:
31.12.2018 30.06.2018 RM’000 RM’000
Non-current assets other than financial instruments and tax assets 22,639,787 21,586,208 Investments at FVOCI (previously classified as available-for-sale-investments) 29,294 28,090 Deferred tax assets 508,991 518,896 Tax recoverable 290,412 275,428 Receivables 115,122 109,340 23,583,606 22,517,962
The Group’s operations are diverse in terms of the range of products and services it offers and the geographical coverage. There is no single customer that contributed 10% or more to the Group’s revenue.
46. CONTINGENT LIABILITIES
Other than those disclosed in Note 48, there are no significant contingent liabilities as at the period/year end.
47. COMMITMENTS
(a) Capital commitments
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Authorised capital expenditure not provided for in the financial statements:
Contracted - property, plant and equipment 330,636 255,910 105,403 66,056
Not contracted - bearer plants 681,400 1,208,442 255,903 146,109 - property, plant and equipment 68,924 112,362 119,281 68,045 1,080,960 1,576,714 480,587 280,210
Annual Report // 6-Month Financial Period Ended 31 December 2018 247 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
47. COMMITMENTS (CONTINUED)
(b) Leases
GROUP COMPANY 30.06.2018 30.06.2018 RM’000 RM’000
Commitments under non-cancellable operating leases: - expiring not later than 1 year 44,344 17,934 - expiring later than 1 year but not later than 5 years 84,238 27,254 - expiring later than 5 years 127,881 - 256,463 45,188
As explained in Note 2 to the financial statements, the Group and the Company have changed its accounting policies for leases. The new policies are as described in Note 3(v). The impact of the change and the reconciliation for the differences between operating lease commitments disclosed as at 30 June 2018 and lease liabilities recognised at the date of initial application of 1 July 2018 are diclosed in Note 52 to the financial statement.
(c) Plasma plantation
The Group is committed to develop a total of 56,722 (30 June 2018: 56,722) hectares of oil palm plantation for plasma farmers in Indonesia. A total of 47,004 (30 June 2018: 46,884) hectares have been developed of which approximately 37,113 (30 June 2018: 37,113) hectares have been transferred/handed over to plasma farmers.
48. MATERIAL LITIGATION
Material litigation against the Group are as follows:
(a) PT Sajang Heulang (“PT SHE”) vs. PT Anzawara Satria (“PT AS”)
On 11 May 2006, PT SHE, a wholly-owned subsidiary of the Group, filed legal action against PT AS in the District Court of Kotabaru (“District Court”), claiming for the surrender of around 60 Ha of land forming part of the Right to Cultivate (Hak Guna Usaha) Certificate No. 35 dated 14 May 2002 (“HGU 35”) belonging to PT SHE on which PT AS had allegedly carried out illegal coal mining activities. PT SHE’s HGU 35 measures about 2,218 Ha. If it loses this claim, PT SHE could potentially lose HGU 35, the NBV of which is about IDR29.0 billion (equivalent to around RM8.3 million). In addition, PT SHE would also lose the potential income from HGU 35.
On 5 December 2006, the District Court ruled in favour of PT AS and declared that HGU 35 was defective and had no force of law and that PT AS had the right to conduct mining activities on the said land (“District Court Decision”). PT SHE appealed to the Banjarmasin High Court against the District Court Decision. On 4 December 2007, the Banjarmasin High Court upheld the District Court Decision (“1st High Court Decision”). On 12 February 2008, PT SHE appealed to the Supreme Court of Indonesia (“Supreme Court”) against the 1st High Court Decision. On 10 March 2011, the Supreme Court ruled in favour of PT AS and ordered PT SHE to surrender 2,000 Ha of land in Desa Bunati forming part of HGU 35 to PT AS (“1st Judicial Review Decision”).
248 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
48. MATERIAL LITIGATION (CONTINUED)
Material litigation against the Group are as follows: (continued)
(a) PT Sajang Heulang (“PT SHE”) vs. PT Anzawara Satria (“PT AS”) (continued)
Meanwhile, on 24 May 2006, PT AS claimed in the State Administration Court of Banjarmasin (“State Court”) for an order that the mining rights held by PT AS superseded the HGU 35 held by PT SHE and that the said HGU 35 was improperly issued to PT SHE. On 26 September 2006, the State Court ruled in favour of PT SHE and dismissed PT AS’s claim (“State Court Decision”). PT AS appealed to the Jakarta High Court of State Administration (“Jakarta High Court”) against the State Court Decision. On 19 February 2007, the Jakarta High Court ruled in favour of PT AS and nullified PT SHE’s HGU 35 (“2nd High Court Decision”). On 9 December 2009, PT SHE appealed to the Supreme Court against the 2nd High Court Decision. On 26 October 2010, the Supreme Court declared PT SHE as the lawful owner of HGU 35 (“2nd Judicial Review Decision”).
On 7 November 2011, PT SHE filed judicial review proceedings (“3rd Judicial Review”) before the Supreme Court seeking a decision on the conflicting decisions of the 1st Judicial Review Decision and 2nd Judicial Review Decision. On 28 December 2012, the Supreme Court dismissed the 3rd Judicial Review on the grounds that the application cannot be determined by another judicial review decision.
On 27 March 2013, PT AS commenced execution of the 1st Judicial Review Decision and in carrying out the execution proceedings, oil palm were cut down and buildings and infrastructure were destroyed, resulting in damages on around 1,500 Ha of land. On 23 April 2014, PT SHE filed a claim at the District Court of Batulicin against PT AS for the sum of IDR672.8 billion (equivalent to around RM191.8 million) for loss and/or damage caused by PT AS in executing the 1st Judicial Review Decision.
On 20 January 2015, the District Court of Batulicin decided in favour of PT SHE and awarded damages in the sum of IDR69.9 billion (equivalent to around RM19.9 million) to be paid by PT AS and on 13 February 2015 issued a written decision (“Batulicin District Court Decision”). On 29 January 2015, PT AS filed an appeal to the Banjarmasin High Court against the Batulicin District Court Decision.
On 19 November 2015, the Banjarmasin High Court ruled in favour of PT AS based on the grounds that the 1st Judicial Review Decision had been deliberated and decided by the Banjarmasin High Court and Supreme Court. Thus, PT SHE is not entitled to bring the same action before the District Court of Batulicin (“3rd High Court Decision”).
On 22 February 2016, PT SHE filed an appeal to the Supreme Court against the 3rd High Court Decision. On 28 March 2016, PT AS filed its reply to PT SHE’s appeal. The Supreme Court has rejected PT SHE’s appeal and following that, on 5 March 2018, PT SHE filed a judicial review against the decision of the Supreme Court. As at the report date, the decision of the judicial review is pending.
In February 2018, PT SHE received a copy of a notice from the Provincial Land Office in Kalimantan Selatan dated 3 January 2018 addressed to the Central Land Office in Jakarta on an application to annul PT SHE’s HGU 35. PT SHE has filed a written objection to the Central Land Office in Jakarta in respect of the said application. As at the report date, the said application to annul PT SHE’s HGU 35 is still pending.
Annual Report // 6-Month Financial Period Ended 31 December 2018 249 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
48. MATERIAL LITIGATION (CONTINUED)
Material litigation against the Group are as follows: (continued)
(b) New Britain Palm Oil Limited (“NBPOL”) vs. Masile Incorporated Land Group (“Masile”), Rikau Incorporated Land Group (“Rikau”) & Meloks Incorporated Land Group (“Meloks”) (collectively, “Defendants”)
Prior to the Group’s acquisition of NBPOL (which was completed on 2 March 2015), a wholly-owned subsidiary, NBPOL, had on 31 August 2011 initiated three separate legal actions against the Defendants in the National Court of Justice at Waigani, Papua New Guinea (“Court”). All three actions relate to the same cause of action whereby the Defendants had defaulted in their obligations to surrender their Special Agricultural Business Leases (“SABL”) to NBPOL for registration of the sub-leases despite having received benefits from NBPOL under the sub-lease agreements (“SLAs”). Such benefits received by the Defendants include rental paid by NBPOL for 3,720 Ha of land under the SABL (“Land”), royalties for the fresh fruit bunches harvested from the Land, and 31,250 ordinary shares in NBPOL respectively issued to each of the Defendants.
The term of the sub-leases is 25 years commencing from 2005 and expiring in 2030. NBPOL could potentially lose access to and possession over these sub-leases if it loses these claims. The potential loss to the Group is the value of the Land, which is around PGK71.3 million (equivalent to around RM88.0 million) based on the NBV of buildings, infrastructures and bearer plants on the Land. In addition, NBPOL would also lose the potential income from the Land.
NBPOL sought orders for specific performance requiring the Defendants to deliver to NBPOL their SABL to enable the sub-leases to be registered in accordance with the Land Registration Act 1981 of PNG. In the alternative, NBPOL also claimed for compensation for costs incurred by NBPOL in developing the Land into an oil palm estate totalling around PGK30.7 million (equivalent to around RM37.9 million), compensation for the appreciation of the value of the Land due to the development done by NBPOL, and compensation for the 31,250 ordinary shares in NBPOL respectively issued to each of the Defendants pursuant to the SLAs.
The Defendants in turn cross-claimed, among others, that the SLAs were unfair and inequitable, and should be declared invalid, void and of no effect. The Defendants also claimed for damages for environmental damage and trespass to property by NBPOL. The Group is of the view that the Defendants’ cross-claims are unlikely to succeed.
Trial relating to NBPOL’s claims against Meloks was concluded on 2 November 2016. During the submissions stage, NBPOL advised the Court that it will not pursue the alternate reliefs of compensation claimed against Meloks.
On 25 June 2018, the Court rendered its decision on NBPOL’s claims against Meloks in NBPOL’s favour. In its decision, the Court declared the SLA entered into between NBPOL and Meloks to be valid and an order of specific performance was made against Meloks to deliver the SABL to NBPOL and to do all acts and things necessary to enable NBPOL to register the SLA entered into between NBPOL and Meloks. The Court dismissed Meloks’ cross-claims. On 10 October 2018, Meloks surrendered the SABL to NBPOL, however, in view that Meloks had laminated the SABL, Meloks executed an application for the official copy of the SABL which was lodged with the registrar of titles on 10 January 2019. NBPOL will make the application for registration of the SLA entered into between NBPOL and Meloks after it has obtained the official copy of the SABL.
NBPOL’s claims against Rikau and Masile are pending trial which the parties agreed to be decided after the decision on NBPOL’s claims against Meloks is delivered by the Court. Masile and Rikau are now considering whether to continue defending NBPOL’s claims in view of the Court’s decision on the trial relating to NBPOL’s claims against Meloks.
250 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
48. MATERIAL LITIGATION (CONTINUED)
Material litigation against the Group are as follows: (continued)
(c) PT Mulia Agro Persada (“PT MAP”) and PT Palma Sejahtera (“PT PS”) vs. PT Minamas Gemilang (“PT MGG”), PT Anugerah Sumbermakmur (“PT ASM”) and PT Indotruba Tengah (“PT ITH”)
PT MGG and PT ASM, wholly-owned subsidiaries of the Group, and PT ITH, a subsidiary of the Group, are involved in a lawsuit brought by PT MAP and PT PS, on the legal basis of unlawful act for non-fulfilment of rights of PT MAP as a shareholder in PT ITH. PT MGG and PT ASM are shareholders of PT ITH, each holding 25% equity interest.
PT MAP became the shareholder of PT ITH after purchasing 6,200 ordinary shares of PT ITH (representing 50% equity interest in PT ITH as of December 2008, which was funded by PT PS) from Yayasan Kartika Eka Paksi (“YKEP”). Once the former officers of YKEP for the term of 2004 to 2009 was dismissed, the newly elected officer of YKEP realised that the transfer of shares from YKEP to PT MAP is a violation of the prohibition for any direct or indirect transfer of assets of a foundation (Yayasan) to its affiliated parties. The former officers of YKEP who entered into the earlier sale was PT MAP’s shareholder and member of the Board of Directors and Board of Commissioners.
In response, the newly elected officer of YKEP tried to repurchase such shares which had already been sold to PT MAP with the same price as when PT MAP purchased it from YKEP. However, PT MAP refused such offer. YKEP then filed a lawsuit to invalidate and nullify this transfer of shares. On 31 May 2016, the Supreme Court had issued a decision that invalidated and nullified the transfer of the ordinary shares of PT ITH from YKEP to PT MAP (“Judicial Review Decision”).
In that regard, YKEP then filed a petition to execute the Judicial Review Decision to the Central Jakarta District Court, demanding that (i) the 6,200 ordinary shares in PT ITH be returned to YKEP and (ii) PT MAP and the former officers of YKEP to pay compensation for damages to YKEP in the amount of IDR 200.0 billion (equivalent to around RM57.0 million). YKEP’s petition was granted under a Warning Letter (Surat Aanmaning) issued by the Central Jakarta District Court which obligates PT MAP and the former officers of YKEP to comply with the Judicial Review Decision.
In response, the former officers of YKEP (some of them were represented by their heirs) filed a Third Party Opposition (Gugatan Perlawan) registered under case number 537/PDT.PLW/2017/PN.Jkt.Pst dated 18 October 2017, seeking nullification towards the Warning Letter (Surat Aanmaning) issued by the Central Jakarta District Court and the execution of the Judicial Review Decision, on the basis that (i) the 6,200 ordinary shares in PT ITH are currently owned by YKEP; (ii) YKEP has also received dividends as a shareholder of PT ITH; and (iii) there is conflicting decision on the matter of legality of transfer of the 6,200 shares in PT ITH between (i) the Judicial Review Decision No. 196 PK/Pdt/2016, which nullified such transfer of shares and (ii) the Decision of East Jakarta District Court No. 130/Pdt.G/2015/PN.Jkt.tim dated 7 July 2015 (“Decision of East Jakarta District Court”), which declared the transfer of 6,200 ordinary shares in PT ITH from YKEP to PT MAP as legally valid. However, neither YKEP, PT ITH, PT MGG nor PT ASM was included as parties under the Decision of East Jakarta District Court. On 12 April 2018, the Central Jakarta District Court rejected the Third Party Opposition (Gugatan Perlawanan) by the former officers of YKEP. The former officers have since filed an appeal against the decision of the Central Jakarta District Court and as the report date, the appeal is on-going.
Despite the existence of the Judicial Review Decision, PT MAP and PT PS still filed a lawsuit seeking compensation from all defendants, individually or jointly and severally, namely (i) PT ITH as Defendant I; (ii) PT MGG as Defendant II; (iii) PT ASM as Defendant III; (iv) Razman Bin Abdul Rahman as Defendant IV; (v) Ir. Achmad Ansori, S.H as Defendant V; (vi) Minwar Hidayat as Defendant VI; (vii) Ismail Bin Ali as Defendant VII; (viii) Ir. Safwani as Defendant VIII; (ix) Hersuhasto as Defendant IX; (x) Ir. Kurniawanto Setiadi as Defendant X; and (xi) YKEP as Defendant XI.
Annual Report // 6-Month Financial Period Ended 31 December 2018 251 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
48. MATERIAL LITIGATION (CONTINUED)
Material litigation against the Group are as follows: (continued)
(c) PT Mulia Agro Persada (“PT MAP”) and PT Palma Sejahtera (“PT PS”) vs. PT Minamas Gemilang (“PT MGG”), PT Anugerah Sumbermakmur (“PT ASM”) and PT Indotruba Tengah (“PT ITH”) (continued)
The compensation sought by PT MAP and PT PS comprise: (i) material damages (direct loss) in the amount of IDR247.0 billion (equivalent to around RM70.4 million) with an interest of 3% per month of the amount of IDR137.2 billion (equivalent to around RM39.1 million) until the payment is made to PT MAP and PT PS; (ii) fine (dwangsom) in the amount of IDR250 billion (equivalent to around RM71.3 million); and (iii) immaterial damages (indirect loss) in the amount of IDR500 billion (equivalent to around RM142.5 million). The potential exposure of PT MGG, PT ASM and PT ITH could be up to IDR997.0 billion (equivalent to around RM284.2 million), being the total sum of the above material damages (excluding the 3% interest), fine and immaterial damages claimed by PT MAP and PT PS from all the 11 defendants, individually or jointly and severally. The term “individually or jointly and severally” means that one or more defendants can be pursued to pay all amounts demanded. In other words, PT MAP and PT PS may recover all the damages from any of the defendants regardless of their individual share of the liability.
To that extent, South Jakarta District Court and Jakarta High Court, which previously adjudicated and examined this case, had rejected PT MAP and PT PS’s lawsuit by referring to the Judicial Review Decision. In response, PT MAP and PT PS filed an appeal to the Supreme Court but the Supreme Court rejected PT MAP and PT PS’ appeal. PT MAP, PT PS and 3 others have filed a judicial review in the Supreme Court of Jakarta against the Supreme Court’s decision.
(d) Chantico Ship Management Ltd (“Chantico”) vs. Sime Darby Oils Zwijndrecht Refinery B.V. (fka Sime Darby Unimills B.V.) (“SDOZR”)
SDOZR, a wholly-owned subsidiary of the Group, is involved in litigation in respect of a vessel known as the mv Geraki (formerly known as mv Cap Thanos). This vessel was carrying vegetable oils for 9 different cargo owners (7 European cargo owners and 2 Algerian cargo owners). One of the 9 cargo owners is SDOZR. The percentage of SDOZR’s cargo on board was about 14.4%. The voyage of this vessel was interrupted in Greece in June 2010, when the vessel owners declared themselves unable to continue the voyage to Bejaia, Barcelona, Lisbon and Rotterdam due to financial reasons, and the vessel was anchored in Psachna, Greece. The vessel was auctioned and in April 2011 sold to Chantico Shipmanagement Ltd. All cargoes were eventually discharged in May/April 2013. Beginning in 2012 Chantico started various proceedings against cargo owners.
The following 2 lawsuits are still pending:
(i) Proceedings before the Court of Piraeus, started in October 2014 (“Lawsuit 1”), which replaced the previous proceedings that commenced in 2012.
The writ was served on only 4 European (including SDOZR) and 2 Algerian cargo owners so far and has yet to be served on the 3 other cargo owners. The claims by Chantico are based on alleged actions in tort (i.e. alleged delay of discharge of cargo) and the total amount claimed from all 9 cargo owners (one of which is SDOZR), jointly and severally, was initially EUR11.3 million (equivalent to around RM53.7 million). However Chantico subsequently dropped some of their claims and this amount was reduced to EUR6.0 million (equivalent to around RM28.5 million). In addition, Chantico claimed a storage fee from each cargo owner based on Chantico’s alleged management of cargo owner’s assets, and the total amount claimed from SDOZR was EUR8.4 million (equivalent to around RM39.9 million). The claim for the storage fee was also subsequently dropped by Chantico. The potential exposure of SD Unimills (and of the other 8 cargo owners, jointly and severally) under Lawsuit is around EUR6.0 million (equivalent to around RM28.5 million), being the total of Chantico’s reduced claims under Lawsuit 1. The hearing in respect of the 4 European cargo owners that have been served with a writ commenced on 12 June 2018 before the Court of Piraeus and was continued on 25 September 2018. Following the hearing on 25 September 2018, the final submissions for the case was drafted and filed with the Court of Piraeus.
252 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
48. MATERIAL LITIGATION (CONTINUED)
Material litigation against the Group are as follows: (continued)
(d) Chantico Ship Management Ltd (“Chantico”) vs. Sime Darby Oils Zwijndrecht Refinery B.V. (fka Sime Darby Unimills B.V.) (“SDOZR”) (continued)
The following 2 lawsuits are still pending: (continued)
(ii) Proceedings before the Court of Piraeus, started in December 2015 (“Lawsuit 2”) and filed against the same 9 cargo owners, including SDOZR, and a third party.
The writ has been served on SDOZR and the other cargo owners. The claim in these proceedings is based on alleged damage to the vessel and loss of profit caused by alleged actions in tort during transhipment and heating of the cargo. The claim against the 9 cargo owners and the third party, jointly and severally, amounts to EUR9.3 million (equivalent to around RM44.2 million) and an additional claim was filed against all cargo owners, jointly and severally, of EUR380,000.00 (equivalent to around RM1.8 million) for port and anchorage dues. The hearing for these proceedings commenced on 12 June 2018 and was continued on 25 September 2018. Following the hearing on 25 September 2018, the final submissions for the case was drafted and filed with the Court of Piraeus. The potential exposure of SDOZR (and of the other 8 cargo owners, jointly and severally) under Lawsuit 2 could be up to around EUR9.7 million (equivalent to around RM46.1 million), being the total of Chantico’s claims under Lawsuit 2. Also in this case, any full payment by SDOZR of any adjudged part of the joint and several EUR9.7 million claim, would give SDOZR the right to claim in recourse from the other Defendants their contribution.
Settlement negotiations in respect of Lawsuit 1 and Lawsuit 2 thus far have not led to fruitful results.
The cargo underwriters for the 7 European cargo owners, including SDOZR, had in January 2014 raised doubts on the coverage under the cargo insurance certificates for the claims under Lawsuit 1 and Lawsuit 2, but are still prepared to contribute to a settlement in Lawsuit 1 with a total sum of EUR583,000 (equivalent to around RM2.8 million) for the 7 European cargo owners, of which SDOZR’s share is 27.25% or EUR158,867.50 (equivalent to around RM755,264). The Group’s Greek counsel estimates the exposure of SDOZR (and of the other 8 cargo owners, jointly and severally) at EUR2.1 million including interest (equivalent to around RM10.0 million) for Lawsuit 1 and EUR145,000.00 including interest (equivalent to around RM689,337) for Lawsuit 2.
49. DISCLOSURES OF SIGNIFICANT RELATED PARTY TRANSACTIONS
The immediate and ultimate holding companies of the Company are Permodalan Nasional Berhad (“PNB”) and Yayasan Pelaburan Bumiputra (“YPB”), which are incorporated in Malaysia.
Transactions entered into for the respective financial period/year under review, with companies in which PNB and YPB have significant interest, include the sales and purchases of goods and services.
These related party transactions were entered into in the ordinary course of business on negotiated trade terms and conditions and do not require the approval of shareholders.
Annual Report // 6-Month Financial Period Ended 31 December 2018 253 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
49. DISCLOSURES OF SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTINUED)
In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions and balances:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
(a) Transactions with former fellow subsidiaries
(i) Payroll, accounting and IT processing costs - Sime Darby Global Services Centre Sdn Bhd - 23,192 - 10,511
(ii) Management fees payable - Sime Darby Holdings Berhad - 14,036 - 14,036
(iii) Interest expenses - Sime Darby Holdings Berhad - 17,558 - 17,558
(iv) Purchase of heavy equipment, spare parts and services - Sime Darby Industrial Holdings Sdn Bhd - 21,077 - 7,780 - Sime Kubota Sdn Bhd - 3,336 - 2,942
(v) Corporate social responsibility donation paid - Yayasan Sime Darby - 72,939 - 72,939
(vi) Proceeds on sale of land - Sime Darby Property Berhad - 689,587 - 689,587 - Kumpulan Sime Darby Berhad - 612 - 612
The purchase consideration for the sale of lands to Sime Darby Property Berhad during the financial year ended 30 June 2018 amounting to RM689.6 million was arrived at after considering their market values as determined by independent external professional valuers.
254 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
49. DISCLOSURES OF SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTINUED)
In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions and balances: (continued)
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
(b) Transactions with former immediate holding company (prior to demerger in November 2017)
(i) Issuance of new ordinary shares - 500,000 - 500,000
(c) Transactions with joint ventures
(i) Sale of goods and tolling services - Emery Oleochemicals (M) Sdn Bhd 16,618 41,000 15,957 38,811 - Rizhao Sime Darby Oils & Fats Co. Ltd. 19,268 - - -
(ii) Advances to a joint venture - Guangzhou Keylink Chemicals Co., Ltd. - 21,978 - 21,978
(d) Transactions with associates
(i) Purchase of latex concentrate - Thai Eastern Trat Co., Ltd. 29,989 73,734 - -
(ii) Repayment of convertible notes of an associate - Verdezyne, Inc. - 12,340 - -
(iii) Repayment of bank loans on behalf of an associate - Verdezyne, Inc. - 22,300 - 22,300
(e) Transactions with subsidiaries
(i) Sales of goods - Sime Darby Oils Trading (Labuan) Limited (fka Sime Darby Global Trading (Labuan) Limited) - - 423,946 313,462 - Sime Darby Oils Trading Sdn Bhd (fka Sime Darby Futures Trading Sdn Bhd) - - 834 144,117 - Sime Darby Oils Biodiesel Sdn Bhd (fka Sime Darby Biodiesel Sdn Bhd) - - 63,721 137,929 - Sime Darby Oils Zwijndrecht Refinery B.V. (fka Sime Darby Unimills B.V.) - - 39,108 124,919 - Sime Darby Foods & Beverages Marketing Sdn Bhd - - 35,899 112,902 - Sime Darby Oils Pasir Gudang Sdn Bhd (fka Sime Darby Kempas Sdn Bhd) - - 41,402 105,326 - The China Engineers (Malaysia) Sdn Bhd - - 17,234 63,478 - Sime Darby Oils South Africa (Pty) Ltd. (fka Sime Darby Hudson And Knight (Pty) Ltd.) - - 7,143 12,087
(ii) Research expenses - Sime Darby Technology Centre Sdn Bhd - - 14,594 27,941 - Sime Darby Research Sdn Bhd - - 33,482 61,886
Annual Report // 6-Month Financial Period Ended 31 December 2018 255 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
49. DISCLOSURES OF SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTINUED)
In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions and balances: (continued)
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
(e) Transactions with subsidiaries (continued)
(iii) Commission on purchase of FFB and sale of palm products - Sime Darby Oils Trading Sdn Bhd (fka Sime Darby Futures Trading Sdn Bhd) - - 18,506 49,094
(iv) Management fees income - Sime Darby Plantation (Sabah) Sdn Bhd - - 6,843 13,678
(v) Interest income/(expenses) - Guthrie Industries Malaysia Sendirian Berhad - - 4,313 8,088 - Mulligan International B.V. - - 2,814 5,353 - Sime Darby Global Berhad - - (8,291) (18,944)
(vi) Purchases of goods - The China Engineers (Malaysia) Sdn Bhd - - 61,362 260,231 - Sime Darby Agri-Bio Sdn Bhd - - 49,658 83,610 - Sime Darby Oils Bintulu Sdn Bhd (fka Sime Darby Austral Sdn Bhd) - - 38,318 11,298 - Sime Darby Oils Trading Sdn Bhd (fka Sime Darby Futures Trading Sdn Bhd) - - 14,212 17,954 - Sanguine (Malaysia) Sdn Bhd - - 2,799 8,038 - PT Aneka Inti Persada - - 6,406 - - PT Teguh Sempurna - - 12,793 -
(vii) Dividend income - Chermang Development Sdn Bhd - - - 51,725
(viii) Capital contribution to subsidiaries/(repayment of capital contribution) - Sime Darby Plantation (Liberia) Inc. - - 23,214 84,194 - Sime Darby Plantation (Europe) Ltd - - (51,120) -
(ix) Advances to subsidiaries - Sime Darby Oils Trading (Labuan) Limited (fka Sime Darby Global Trading (Labuan) Limited) - - 61,774 112,527 - Sime Darby Agri-Bio Sdn Bhd - - - 49,370
(x) Guarantees in respect of credit facilities granted to subsidiaries - Industrial Enterprises Co., Ltd. - - 48,175 49,692 - Sime Darby Oils Netherlands B.V. (fka Sime Darby Netherlands B.V.) - - 640,846 645,299 - New Britain Palm Oil Limited - - 478,190 -
(xi) Purchase of compost plant - Sime Darby Agri-Bio Sdn Bhd - - 10,446 -
256 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
49. DISCLOSURES OF SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTINUED)
In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions and balances: (continued)
(f) Transactions with shareholders and Government
PNB and the funds managed by its subsidiary, Amanah Saham Nasional Berhad, together owns 55.93% as at 31 December 2018 (30 June 2018: 53.08%) of the issued share capital of the Company. PNB is an entity controlled by the Malaysian Government through YPB. The Group considers that, for the purpose of MFRS 124 “Related Party Disclosures”, the Malaysian Government are in the position to exercise significant influence over it. As a result, the Malaysian Government and Malaysian Government’s controlled bodies (collectively referred to as government related entities) are related parties of the Group and of the Company.
Transactions entered into during the financial period include the following:
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Transactions with related parties
(i) Payroll, accounting and IT processing costs* - Sime Darby Global Services Centre Sdn Bhd 32,628 51,954 12,062 20,666
(ii) Purchase of heavy equipment, spare parts and services* - Sime Darby Industrial Holdings Sdn Bhd 25,311 24,367 11,364 13,336 - Sime Kubota Sdn Bhd 13,584 9,327 12,608 7,887
(iii) Purchase of properties - Sime Darby Holiday Homes Sdn Bhd - 12,450 - 12,450
(iv) Sale and transfer of redeemable loan stocks in Prolintas Expressway Sdn Bhd - Permodalan Nasional Berhad - 333,244 - -
Transactions with associate
(i) Corporate social responsibility donation paid* - Yayasan Sime Darby 20,000 20,000 20,000 20,000
* Prior to demerger of Sime Darby Berhad in November 2017, these transactions and related balances were previously included as transaction with former fellow subsidiaries in Note 49(a).
Apart from the individually significant transactions as disclosed in elsewhere in the financial statements, the Group and the Company have collectively, but not individually, significant transactions with other government- related entities which include but not limited to the following:
(i) Purchasing of goods and services, including use of public utilities and amenities; and (ii) Placement of bank deposits with government-related financial institutions
All the transactions entered into by the Group and the Company with the government-related entities are conducted in the ordinary course of the Group’s and the Company’s businesses on negotiated terms or terms comparable to those with other entities that are not government-related.
Annual Report // 6-Month Financial Period Ended 31 December 2018 257 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
49. DISCLOSURES OF SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTINUED)
In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions and balances: (continued)
(g) Significant non-cash transactions
The significant non-cash related party transactions as set out below were entered into during the financial year ended 30 June 2018 to settle the amount due to Sime Darby Holdings Berhad, a former fellow subsidiary:
GROUP/COMPANY 31.12.2018 30.06.2018 Note RM’000 RM’000
(i) Settlement of the net amount owing to Sime Darby Holdings Berhad via proceeds from sales of MVV Land to: - Sime Darby Property Berhad, a former wholly-owned subsidiary of SDB 49(a) - 689,587 - Kumpulan Sime Darby Berhad, a wholly-owned subsidiary of SDB 49(a) - 612
(ii) Settlement of the net amount owing to Sime Darby Holdings Berhad via issuance of new ordinary shares to SDB 34 - 500,000
(iii) Assignment of debt payable to SDB to Sime Darby Holdings Berhad - 145,392
(h) Remuneration of Directors and key management personnel
GROUP/COMPANY Financial Financial period ended year ended 31.12.2018 30.06.2018 RM’000 RM’000
Remuneration of key management personnel The aggregate amount of emoluments received/receivable by key management personnel of the Group and the Company during the financial period/year are as follows: - Salaries, fees and other emoluments 10,232 20,485 - Defined contribution pension plans 1,361 2,437 - Estimated monetary value of benefits by way of usage of the Group’s and the Company’s assets 177 123 11,770 23,045
Key management personnel comprise all Plantation Leadership Committee (“PLC”) members and Plantation Management Committee (“PMC”) members, having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly.
(i) The outstanding balances with related companies within the PNB Group are shown in Note 31. The significant outstanding balances with other related parties are as follows:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Amounts due from joint ventures - Rizhao Sime Darby Oils & Fats Co. Ltd. 7,432 - 327 - - Guangzhou Keylink Chemicals Co., Ltd. 44,715 31,258 25,606 27,174
All outstanding balances are unsecured and repayable within the normal credit periods.
258 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS
(a) Financial instruments by category
Financial assets and financial liabilities are categorised as follows:
GROUP Financial Derivatives Financial assets at Financial used for assets at amortised assets at hedging FVTPL cost FVOCI Total RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2018 NON-CURRENT ASSETS Investments at FVOCI - - - 29,294 29,294 Trade and other receivables - - 115,122 - 115,122
CURRENT ASSETS Trade and other receivables - - 1,717,330 - 1,717,330 Amounts due from related parties - - 2,171 - 2,171 Derivatives 19,480 39,184 - - 58,664 Bank balances, deposits and cash - - 491,042 - 491,042 Total financial assets 19,480 39,184 2,325,665 29,294 2,413,623
Financial Derivatives Financial Financial liabilities at used for liabilities at guarantee amortised hedging FVTPL contracts cost Total RM’000 RM’000 RM’000 RM’000 RM’000
NON-CURRENT LIABILITIES Borrowings - - - 5,492,575 5,492,575 Other payables - - 783 62,664 63,447
CURRENT LIABILITIES Trade and other payables - - 688 1,458,632 1,459,320 Borrowings - - - 1,804,339 1,804,339 Amounts due to related parties - - - 61,020 61,020 Dividend payable - - - 748,092 748,092 Derivatives 1,375 19,823 - - 21,198 Total financial liabilities 1,375 19,823 1,471 9,627,322 9,649,991
Annual Report // 6-Month Financial Period Ended 31 December 2018 259 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(a) Financial instruments by category (continued)
Financial assets and financial liabilities are categorised as follows: (continued)
GROUP Fair value through Loans and Available- Derivatives profit or loss receivables for-sale used for - held for at amortised financial hedging trading cost assets Total RM’000 RM’000 RM’000 RM’000 RM’000
30 June 2018 NON-CURRENT ASSETS Available-for-sale investments - - - 28,090 28,090 Trade and other receivables - - 109,340 - 109,340
CURRENT ASSETS Trade and other receivables - - 1,852,836 - 1,852,836 Amounts due from related parties - - 2,559 - 2,559 Derivatives 29,615 27,611 - - 57,226 Bank balances, deposits and cash - - 363,238 - 363,238 Total financial assets 29,615 27,611 2,327,973 28,090 2,413,289
Fair value through Financial Derivatives profit or loss Financial liabilities at used for - held for guarantee amortised hedging trading contracts cost Total RM’000 RM’000 RM’000 RM’000 RM’000
NON-CURRENT LIABILITIES Borrowings - - - 5,395,204 5,395,204 Other payables - - 1,041 59,772 60,813
CURRENT LIABILITIES Trade and other payables - - 721 1,577,948 1,578,669 Borrowings - - - 1,094,194 1,094,194 Amounts due to related parties - - - 54,104 54,104 Derivatives 11,427 13,075 - - 24,502 Total financial liabilities 11,427 13,075 1,762 8,181,222 8,207,486
260 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(a) Financial instruments by category (continued)
Financial assets and financial liabilities are categorised as follows: (continued)
COMPANY Financial Derivatives Financial assets at Financial used for assets at amortised assets at hedging FVTPL cost FVOCI Total RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2018 NON-CURRENT ASSETS Investments at FVOCI - - - 25,749 25,749 Amount due from a subsidiary - - 49,080 - 49,080
CURRENT ASSETS Trade and other receivables - - 190,334 - 190,334 Amounts due from subsidiaries - - 522,981 - 522,981 Amounts due from related parties - - 2,903 - 2,903 Derivatives 18,536 2,324 - - 20,860 Bank balances, deposits and cash - - 65,693 - 65,693 Total financial assets 18,536 2,324 830,991 25,749 877,600
Financial Financial Financial liabilities at liabilities at guarantee amortised FVTPL contracts cost Total RM’000 RM’000 RM’000 RM’000
NON-CURRENT LIABILITIES Amount due to a subsidiary - - 504,707 504,707 Borrowings - - 4,292,526 4,292,526 Other payables - 139,939 - 139,939
CURRENT LIABILITIES Trade and other payables - 27,317 336,250 363,567 Borrowings - - 974,443 974,443 Amounts due to subsidiaries - - 1,000,313 1,000,313 Amounts due to related parties - - 36,826 36,826 Dividend payable - - 748,092 748,092 Derivatives 8,883 - - 8,883 Total financial liabilities 8,883 167,256 7,893,157 8,069,296
Annual Report // 6-Month Financial Period Ended 31 December 2018 261 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(a) Financial instruments by category (continued)
Financial assets and financial liabilities are categorised as follows: (continued)
COMPANY Fair value through Available- Available Derivatives profit or loss receivables for-sale used for - held for at amortised financial hedging trading cost assets Total RM’000 RM’000 RM’000 RM’000 RM’000
30 June 2018 NON-CURRENT ASSETS Available-for-sale investments - - - 26,588 26,588 Amount due from a subsidiary - - 56,679 - 56,679
CURRENT ASSETS Trade and other receivables - - 278,583 - 278,583 Amounts due from subsidiaries - - 583,231 - 583,231 Amounts due from related parties - - 4,228 - 4,228 Derivatives 24,919 3,049 - - 27,968 Bank balances, deposits and cash - - 68,284 - 68,284 Total financial assets 24,919 3,049 991,005 26,588 1,045,561
Fair value through Financial Derivatives profit or loss Financial liabilities at used for - held for guarantee amortised hedging trading contracts cost Total RM’000 RM’000 RM’000 RM’000 RM’000
NON-CURRENT LIABILITIES Amount due to a subsidiary - - - 490,463 490,463 Borrowings - - - 4,397,767 4,397,767 Other payables - - 61,969 - 61,969
CURRENT LIABILITIES Trade and other payables - - 5,983 374,794 380,777 Borrowings - - - 519,728 519,728 Amounts due to subsidiaries - - - 1,093,237 1,093,237 Amounts due to related parties - - - 31,454 31,454 Derivatives 986 7,163 - - 8,149 Total financial liabilities 986 7,163 67,952 6,907,443 6,983,544
262 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 (97) 315 315 Total Total 7,498 7,498 4,140 4,140 8,473 8,473 (3,440) (5,768) RM’000 RM’000 (127,437) (116,316) ------cost cost RM’000 RM’000 (127,437) (127,437) Financial amortised amortised liabilities at liabilities at ------FVOCI FVOCI RM’000 RM’000 assets at at assets Financial - - (97) 315 315 cost cost 7,498 7,498 8,473 8,473 6,981 6,981 (3,440) (5,768) RM’000 RM’000 assets at at assets Financial Financial amortised amortised ------GROUP swap swap RM’000 RM’000 Interest rate rate Interest ------3,268 3,268 3,268 3,268 RM’000 RM’000 forward forward contracts contracts Commodities Commodities ------Financial assets at FVTPL Financial assets 8,838 8,838 8,838 8,838 foreign foreign RM’000 RM’000 Forward Forward contracts contracts exchange exchange ------(7,966) (7,966) foreign foreign RM’000 RM’000 hedging hedging used for used for Forward Forward contracts contracts exchange exchange Derivatives Derivatives
plantation projects receivables other for plasma plantation projects for impairment of trade and other and other trade impairment of plasma impairment of advances for and trade of impairment reversal of impairment advances reversal
receivables 31 December 2018 31 December bad debts written off bad debts written net change in fair value net change in fair Income, expenses, gains and losses on financial instruments gains and losses expenses, Income, as follows: the financial instruments are on gains and losses expenses, Income, - - - - For the financial period the financial period For expenses Operating - Other gains and losses Other - Other operating income income operating Other Finance income Finance costs FINANCIAL INSTRUMENTS (CONTINUED) FINANCIAL INSTRUMENTS (b) 50.
Annual Report // 6-Month Financial Period Ended 31 December 2018 263 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 Total Total 3,404 3,404 1,928 (1,248) (1,103) 24,433 24,433 (22,424) (14,504) (12,828) RM’000 RM’000 (228,478) (250,820) ------cost cost RM’000 RM’000 (228,478) (228,478) Financial Financial amortised amortised liabilities at liabilities at ------assets assets (22,424) (22,424) RM’000 RM’000 for-sale for-sale financial financial Available- Available- - - - 3,404 3,404 1,928 (1,248) (1,103) 24,433 24,433 12,910 12,910 (14,504) RM’000 RM’000 Loans and Loans and receivables receivables ------GROUP swap swap RM’000 RM’000 Interest rate rate Interest ------(22,479) (22,479) RM’000 RM’000 forward forward contracts contracts Commodities Commodities - held for trading trading - held for ------(18,031) (18,031) foreign foreign Fair value through profit or loss loss or profit through value Fair RM’000 RM’000 Forward Forward contracts contracts exchange exchange ------27,682 27,682 27,682 27,682 foreign foreign RM’000 RM’000 hedging hedging used for used for Forward Forward contracts contracts exchange exchange Derivatives Derivatives
plantation projects receivables other plasma plantation projects for available-for-sale investment available-for-sale impairment of trade and other and other trade impairment of plasma impairment of advances for and trade of impairment reversal of impairment advances reversal receivables 30 June 2018 impairment of investment in in impairment of investment net change in fair value net change in fair bad debts written off bad debts written Income, expenses, gains and losses on financial instruments (continued) gains and losses expenses, Income, (continued) as follows: the financial instruments are on gains and losses expenses, Income, - - - - Operating expenses Operating For the financial year the financial year For - Other gains and losses Other - - Finance income Other operating income operating Other Finance costs FINANCIAL INSTRUMENTS (CONTINUED) FINANCIAL INSTRUMENTS (b) 50.
264 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 Total Total 8,934 8,934 (2,724) (2,470) RM’000 RM’000 (11,795) (100,269) (108,324) - - - - cost cost RM’000 RM’000 (100,269) (100,269) Financial amortised amortised liabilities at liabilities at ------FVOCI FVOCI RM’000 RM’000 assets at at assets Financial - - cost cost 8,934 8,934 (2,724) (5,585) RM’000 RM’000 (11,795) assets at at assets Financial amortised amortised
------COMPANY COMPANY swap swap RM’000 RM’000 Interest rate rate Interest
- - - - (3,849) (3,849) RM’000 RM’000 forward forward contracts contracts Commodities Commodities - - - - Financial assets at FVTPL Financial assets 1,112 1,112 1,112 1,112 foreign foreign RM’000 RM’000 Forward Forward contracts contracts exchange exchange - - - - 267 267 267 267 foreign foreign RM’000 RM’000 hedging hedging used for used for Forward Forward contracts contracts exchange exchange Derivatives Derivatives
impairment of trade and other and other trade impairment of impairment of amounts due from receivables subsidiaries 31 December 2018 31 December net change in fair value net change in fair Income, expenses, gains and losses on financial instruments (continued) gains and losses expenses, Income, (continued) as follows: the financial instruments are on gains and losses expenses, Income, - - For the financial period the financial period For expenses Operating Other gains and losses Other - Finance income Finance costs FINANCIAL INSTRUMENTS (CONTINUED) FINANCIAL INSTRUMENTS (b) 50.
Annual Report // 6-Month Financial Period Ended 31 December 2018 265 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 Total Total 2,531 2,531 18,908 18,908 (13,106) (61,658) (27,866) RM’000 RM’000 (190,999) (272,190) - - - - - cost cost RM’000 RM’000 (190,999) (190,999) Financial amortised amortised liabilities at ------assets assets RM’000 RM’000 for-sale financial financial Available-
- - 2,531 2,531 18,908 18,908 (13,106) (61,658) (53,325) RM’000 RM’000 Loans and Loans and receivables receivables
------COMPANY COMPANY swap swap RM’000 RM’000 Interest rate rate Interest - - - - - (26,305) (26,305) RM’000 RM’000 forward forward contracts contracts Commodities Commodities - held for trading trading - held for - - - - - (1,183) (1,183) foreign foreign Fair value through profit or loss loss or profit through value Fair RM’000 RM’000 Forward Forward contracts contracts exchange exchange - - - - - (378) (378) foreign foreign RM’000 RM’000 hedging hedging used for used for Forward Forward contracts contracts exchange exchange Derivatives Derivatives
due from subsidiaries due from impairment of trade and other and other trade impairment of impairment of amounts due from of impairment amounts reversal receivables subsidiaries
30 June 2018 net change in fair value net change in fair Income, expenses, gains and losses on financial instruments (continued) gains and losses expenses, Income, (continued) as follows: the financial instruments are on gains and losses expenses, Income, - - - Operating expenses Operating For the financial year the financial year For Other gains and losses Other - Other operating income operating Other Finance income Finance costs FINANCIAL INSTRUMENTS (CONTINUED) FINANCIAL INSTRUMENTS (b) 50.
266 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies
The Group’s activities expose it to a variety of financial risks, including foreign currency exchange risk, interest rate risk, credit risk, liquidity risk, cash flow risk and price risk. The Group’s financial risk management objective is to ensure that the Group creates value for its shareholders. Financial risk management is carried out through risk reviews, internal control systems, insurance programmes and adherence to the Group’s financial risk management policies. The Board regularly reviews these risks and approves the policies covering the management of these risks. The Group uses derivative financial instruments such as foreign exchange contracts, forward commodities contract and interest rate swaps to hedge certain exposures.
Whilst all derivatives entered into provide economic hedges to the Group, certain derivatives do not qualify for the application of hedge accounting under the specific rules in MFRS 9. Changes in the fair value of these derivatives are recognised in profit or loss, whilst changes in the fair value of those derivatives that qualify for cash flow hedge accounting are recognised in other comprehensive income.
(i) Foreign currency exchange risk
The Group and the Company are exposed to currency risk as a result of the foreign currency transactions entered into by the Group and the Company. The Group’s and the Company’s revenue were transacted in the following currencies:
GROUP Other than Functional functional Total currency currency revenue RM’000 RM’000 RM’000
For the financial period ended 31 December 2018 Transacted currency
Ringgit Malaysia 1,435,087 - 1,435,087 United States Dollar 2,292,390 256,949 2,549,339 Indonesian Rupiah 425,498 4,402 429,900 European Union Euro 706,447 16,682 723,129 Singapore Dollar 759 8,572 9,331 Thailand Baht 535,229 - 535,229 Vietnamese Dong 77,965 - 77,965 South African Rand 282,025 - 282,025 United Kingdom Pound - 301,499 301,499 Papua New Guinea Kina - 199,044 199,044 5,755,400 787,148 6,542,548
Annual Report // 6-Month Financial Period Ended 31 December 2018 267 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(i) Foreign currency exchange risk (continued)
The Group and the Company are exposed to currency risk as a result of the foreign currency transactions entered into by the Group and the Company. The Group’s and the Company’s revenue were transacted in the following currencies: (continued)
GROUP Other than Functional functional Total currency currency revenue RM’000 RM’000 RM’000
For the financial year ended 30 June 2018 Transacted currency
Ringgit Malaysia 3,324,620 - 3,324,620 United States Dollar 3,327,661 2,182,793 5,510,454 Indonesian Rupiah 952,426 7,027 959,453 European Union Euro 1,719,402 36,765 1,756,167 Singapore Dollar 28,054 - 28,054 Thailand Baht 1,084,009 - 1,084,009 Vietnamese Dong 228,007 - 228,007 South African Rand 664,126 - 664,126 United Kingdom Pound 434,454 58,814 493,268 Papua New Guinea Kina - 319,921 319,921 Other currencies - 809 809 11,762,759 2,606,129 14,368,888
COMPANY Other than Functional functional Total currency currency revenue RM’000 RM’000 RM’000
For the financial period ended 31 December 2018 Transacted currency
Ringgit Malaysia 1,057,738 - 1,057,738 United States Dollar - 594,225 594,225 European Union Euro - 77 77 1,057,738 594,302 1,652,040
268 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(i) Foreign currency exchange risk (continued)
The Group and the Company are exposed to currency risk as a result of the foreign currency transactions entered into by the Group and the Company. The Group’s and the Company’s revenue were transacted in the following currencies: (continued)
COMPANY Other than Functional functional Total currency currency revenue RM’000 RM’000 RM’000
For the financial year ended 30 June 2018 Transacted currency
Ringgit Malaysia 3,084,334 - 3,084,334 United States Dollar - 1,093,763 1,093,763 European Union Euro - 713 713 3,084,334 1,094,476 4,178,810
Where the transacted currencies differ from the Company’s and subsidiaries’ functional currency, the Group is exposed to currency translation risk. The risk also extends to purchases denominated in currency other than the subsidiaries’ functional currency.
Where possible, the Group will apply natural hedge by selling and purchasing in the same currency. Otherwise, the Group enters into forward foreign exchange contracts to limit its exposure on foreign currency receivables and payables, and on cash flows generated from anticipated transactions denominated in foreign currencies. These derivatives are normally contracted through centralised treasury in order to achieve the benefits of netting within the Group and to manage the cost of hedging effectively.
The Group’s policy on the extent of a foreign currency transaction or balance to be hedged is dependent on the duration to the settlement date. In terms of forecast transaction, exposure is hedged only if it is expected to be cost effective.
The Group does not hedge its cash, deposits and borrowings denominated in other than functional currency.
The Group is also exposed to currency translation risk arising from its net investments in foreign subsidiaries. The investments in foreign subsidiaries are not hedged due to the long-term nature of those investments, except for the net investments in NBPOL group whereby the foreign currency borrowings related to the acquisition of the subsidiary of USD1,626.6 million (equivalent to RM6,756.8 million) (30 June 2018: USD1,639.0 million (equivalent to RM6,625.7 million)) are designated as a natural hedge against the net investment. The unrealised foreign currencies exchange losses of RM145.9 million (30 June 2018: unrealised foreign currencies exchange gains of RM374.2 million) in relation to the net investment hedge was adjusted to other comprehensive income. There was no ineffectiveness to be recorded from net investment in NBPOL group hedge.
Annual Report // 6-Month Financial Period Ended 31 December 2018 269 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(i) Foreign currency exchange risk (continued)
Currency profile of monetary financial assets and financial liabilities are as follows:
GROUP Denominated United European in functional States Dollar Union Euro Others currencies Total RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2018 Investments at FVOCI - non-current - - - 29,294 29,294 Trade and other receivables (net) - non-current - - - 115,122 115,122 - current 181,475 2,336 84,146 1,449,373 1,717,330 Bank balances, deposits and cash 12,837 34,698 73,253 370,254 491,042 Amounts due from related parties - - - 2,171 2,171 Derivatives assets 21,720 220 - 36,724 58,664 Long-term borrowings (4,801,745) - - (690,830) (5,492,575) Short-term borrowings (1,062,507) - - (741,832) (1,804,339) Dividend payables - - - (748,092) (748,092) Amounts due to related parties - - - (61,020) (61,020) Trade and other payables - non-current - - - (63,447) (63,447) - current (34,778) (147) (396) (1,423,999) (1,459,320) Derivatives liabilities (2,417) (117) - (18,664) (21,198) (5,685,415) 36,990 157,003 (1,744,946) (7,236,368)
270 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(i) Foreign currency exchange risk (continued)
Currency profile of monetary financial assets and financial liabilities are as follows: (continued)
GROUP Denominated United European in functional States Dollar Union Euro Others currencies Total RM’000 RM’000 RM’000 RM’000 RM’000
30 June 2018 Available-for-sale investments - non-current - - - 28,090 28,090 Trade and other receivables (net) - non-current - - - 109,340 109,340 - current 84,159 416 42,882 1,725,379 1,852,836 Bank balances, deposits and cash 13,503 400 2 349,333 363,238 Amounts due from related parties - - - 2,559 2,559 Derivatives assets 53,510 45 94 3,577 57,226 Long-term borrowings (4,397,767) - - (997,437) (5,395,204) Short-term borrowings (646,246) - - (447,948) (1,094,194) Amounts due to related parties - - - (54,104) (54,104) Trade and other payables - non-current 739 - (54,063) (7,489) (60,813) - current (14,053) - (78,715) (1,485,901) (1,578,669) Derivatives liabilities (17,466) (29) (70) (6,937) (24,502) (4,923,621) 832 (89,870) (781,538) (5,794,197)
Annual Report // 6-Month Financial Period Ended 31 December 2018 271 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(i) Foreign currency exchange risk (continued)
Currency profile of monetary financial assets and financial liabilities are as follows: (continued)
COMPANY Denominated United European in functional States Dollar Union Euro Others currencies Total RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2018 Investments at FVOCI - non-current - - - 25,749 25,749 Trade and other receivables (net) 43,918 - 40,549 105,867 190,334 Bank balances, deposits and cash 20,447 85 - 45,160 65,692 Amounts due from related parties - - - 2,903 2,903 Amounts due from subsidiaries - non-current - - - 49,080 49,080 - current 1,253 157,347 14,408 349,973 522,981 Derivatives assets 18,536 - - 2,324 20,860 Long-term borrowings (4,292,526) - - - (4,292,526) Short-term borrowings (524,443) - - (450,000) (974,443) Amounts due to related parties - - - (36,826) (36,826) Amounts due to subsidiaries - non-current (504,707) - - - (504,707) - current (27,961) - (66,781) (905,571) (1,000,313) Dividend payables - - - (748,092) (748,092) Trade and other payables - non-current (75,524) (58,262) (6,081) (72) (139,939) - current (19,703) (5,113) (28,992) (309,759) (363,567) Derivatives liabilities (1) - - (8,882) (8,883) (5,360,711) 94,057 (46,897) (1,878,146) (7,191,697)
272 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(i) Foreign currency exchange risk (continued)
Currency profile of monetary financial assets and financial liabilities are as follows: (continued)
COMPANY Denominated United European in functional States Dollar Union Euro Others currencies Total RM’000 RM’000 RM’000 RM’000 RM’000
30 June 2018 Available-for-sale investments - non-current - - - 26,588 26,588 Trade and other receivables (net) 46,892 - 27,174 204,517 278,583 Bank balances, deposits and cash 13,487 200 19 54,578 68,284 Amounts due from related parties - - - 4,228 4,228 Amounts due from subsidiaries - non-current - - - 56,679 56,679 - current 146,692 1,489 10,942 424,108 583,231 Derivatives assets 19,532 - - 8,436 27,968 Long-term borrowings (4,397,767) - - - (4,397,767) Short-term borrowings (449,728) - - (70,000) (519,728) Amounts due to related parties - - - (31,454) (31,454) Amounts due to subsidiaries - non-current (490,463) - - - (490,463) - current (27,667) (77,612) (62,066) (925,892) (1,093,237) Trade and other payables - non-current - (55,814) (5,991) (164) (61,969) - current (10,571) (16) (137) (370,053) (380,777) Derivatives liabilities - - - (8,149) (8,149) (5,149,593) (131,753) (30,059) (626,578) (5,937,983)
Annual Report // 6-Month Financial Period Ended 31 December 2018 273 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(i) Foreign currency exchange risk (continued)
The following table illustrates the effects of changes in exchange rate on the translation of foreign currency monetary items against the functional currency at 31 December 2018 and 30 June 2018, both before and after taking into account the hedge instruments. If the major currencies strengthened by the following percentage at the end of the reporting period/year, the Group’s and the Company’s profit after tax will improve/(decline) by:
GROUP Impact on profit after tax Net Strengthened monetary Before After against item Hedged hedge hedge Major currency RM by RM’000 RM’000 RM’000 RM’000
For the financial period ended 31 December 2018 United States Dollar - Assets 3% 216,032 322,704 6,481 (3,200) - Liabilities 3% (5,901,447) (20,899) (177,043) (176,416)
European Union Euro - Assets 1% 37,254 9,765 373 275 - Liabilities 1% (264) - (3) (3)
For the financial year ended 30 June 2018 United States Dollar - Assets 6% 151,172 546,315 9,070 (23,709) - Liabilities 6% (5,074,793) (23,672) (304,488) (303,067)
European Union Euro - Assets 4% 861 7,730 34 (275) - Liabilities 4% (29) - (1) (1)
274 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(i) Foreign currency exchange risk (continued)
The following table illustrates the effects of changes in exchange rate on the translation of foreign currency monetary items against the functional currency at 31 December 2018 and 30 June 2018, both before and after taking into account the hedge instruments. If the major currencies strengthened by the following percentage at the end of the reporting period/year, the Group’s and the Company’s profit after tax will improve/(decline) by: (continued)
COMPANY Impact on profit after tax Net Strengthened monetary Before After against item Hedged hedge hedge Major currency RM by RM’000 RM’000 RM’000 RM’000
For the financial period ended 31 December 2018 United States Dollar - Assets 3% 84,154 - 2,525 2,525 - Liabilities 3% (627,896) - (18,837) (18,837)
European Union Euro - Assets 1% 157,432 - 1,574 1,574 - Liabilities 1% (63,375) - (634) (634)
For the financial year ended 30 June 2018 United States Dollar - Assets 6% 226,603 66,088 13,596 9,631 - Liabilities 6% (5,376,196) (5,779) (322,572) (322,225)
European Union Euro - Assets 4% 1,689 - 68 68 - Liabilities 4% (133,442) - (5,338) (5,338)
Annual Report // 6-Month Financial Period Ended 31 December 2018 275 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(i) Foreign currency exchange risk (continued)
Net monetary items balances are higher than hedged as the Group and the Company do not hedge its foreign currency denominated bank balances, deposits and cash and amount due from subsidiaries.
A similar percentage decrease in the exchange rate would have an equal but opposite effect. Changes in exchange rate will also result in changes to the fair value of forward foreign exchange contracts used to hedge forecast transactions. No sensitivity is performed as the Group’s exposure in those contracts is limited.
The table below illustrates the effects of changes in exchange rate on the translation of foreign operations’ profit or loss. If the currency of foreign operations strengthened by the following percentage during the financial period/year and at the end of the reporting period, the Group’s profit after tax and equity will improve/(decline) by:
GROUP Strengthened Impact on Profit after against profit after tax RM by tax Currency of foreign operations RM’000 RM’000
For the financial period ended 31 December 2018 Indonesian Rupiah 54,222 2% 1,084 United States Dollar 62,252 3% 1,868
For the financial year ended 30 June 2018 Indonesian Rupiah 265,929 13% 34,571 United States Dollar 249,574 6% 14,974
A similar percentage decrease in the exchange rate would have an equal but opposite effect.
(ii) Interest rate risk
The Group’s and the Company’s income and operating cash flows are substantially independent of changes in market interest rates. Interest rate exposure which arises from certain of the Group’s and the Company’s borrowings is managed through the use of floating debt and derivative financial instruments. Derivative financial instruments are used, where appropriate, to generate the desired interest rate profile.
276 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(ii) Interest rate risk (continued)
The percentages of fixed rate borrowings, both before and after taking into account the interest rate swap contracts, to the total borrowings at the end of the financial period/year are as follows:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Total borrowings 7,296,914 6,489,398 5,266,969 4,917,495
Fixed rate borrowings 984,274 963,837 - - Floating rate borrowings (swapped to fixed) 1,130,407 1,257,470 1,130,407 1,257,470 Total fixed rate after swaps 2,114,681 2,221,307 1,130,407 1,257,470
Percentage of fixed rate borrowings over total borrowings:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018 % % % %
- before swaps 13 15 - - - after swaps 29 34 21 26
As at 31 December 2018, all of the Group’s and the Company’s floating rate borrowings (after interest swap contracts) stood at RM5,182.2 million (30 June 2018: RM4,268.1 million) and RM4,136.6 million (30 June 2018: RM3,660.0 million) respectively. The following tables demonstrate the effects of changes in interest rate on floating rate borrowings. If the interest rate increased by 0.5% (30 June 2018: 1.0%), the Group’s and the Company’s profit after tax will be lower by:
GROUP COMPANY Financial Financial Financial Financial period ended year ended period ended year ended 31.12.2018 30.06.2018 31.12.2018 30.06.2018 RM’000 RM’000 RM’000 RM’000
Profit after tax (25,911) (42,681) (20,683) (36,600)
A 0.5% (30 June 2018: 1.0%) decrease in interest rate would have an equal but opposite effect.
Annual Report // 6-Month Financial Period Ended 31 December 2018 277 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(ii) Interest rate risk (continued)
The following table demonstrates the effect of changes in interest rate on the fair value of the interest rate swap contracts which are designated as cash flow hedge. If the interest rate increased by 0.5% (30 June 2018: 1.0%), the Group’s and the Company’s hedging reserve will be higher by:
GROUP/COMPANY 31.12.2018 30.06.2018 RM’000 RM’000
Hedging reserve 11,115 27,518
A 0.5% (30 June 2018: 1.0%) decrease in interest rate would have an equal but opposite effect.
(iii) Credit risk
Credit risk arises on sales made on credit terms, derivatives with positive fair value and deposits with banks.
(A) Risk management
The Group and the Company seek to control credit risk by dealing with customers and joint venture partners of appropriate credit history and transact and deposit with bank and financial institution with good credit ratings. Third party agencies’ ratings are considered, if available. In addition, the customers’ most recent financial statements, payment history and other relevant information are considered in the determination of credit risk. Customers are assessed at least annually and more frequently when information on significant changes in the customers’ financial position becomes known. Credit terms and limit are set based on the assessment. Where appropriate, guarantees or securities are obtained to limit credit risk. Sales to customers are usually suspended when earlier amounts are overdue exceeding 180 days.
278 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(iii) Credit risk (continued)
(B) Collateral
The Group and the Company receive collateral at the end of the reporting period, summarised as follows:
GROUP COMPANY Collateral Collateral Maximum and credit Maximum and credit exposure enhancement exposure enhancement RM’000 RM’000 RM’000 RM’000
31 December 2018 Trade and other receivables (net) - non-current 115,122 - - - - current 1,717,330 507,115 190,334 - Amounts due from subsidiaries - - 572,061 - Amounts due from related parties 2,171 - 2,904 - Derivatives 58,664 - 20,860 - Bank balances, deposits and cash 491,042 - 65,693 - Guarantees in respect of credit facilities granted to: - a joint venture 6,443 - 6,443 - - subsidiaries - - 1,167,211 - - plasma stakeholders 45,165 - - - 2,435,937 507,115 2,025,506 -
30 June 2018 Trade and other receivables (net) - non-current 109,340 - - - - current 1,852,836 454,203 278,583 5,520 Amounts due from subsidiaries - - 639,910 - Amounts due from related parties 2,559 - 4,228 - Derivatives 57,226 - 27,968 - Bank balances, deposits and cash 363,238 - 68,284 - Guarantees in respect of credit facilities granted to: - a joint venture 6,655 - 6,655 - - subsidiaries - - 694,992 - - plasma stakeholders 49,832 - - - 2,441,686 454,203 1,720,620 5,520
Annual Report // 6-Month Financial Period Ended 31 December 2018 279 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(iii) Credit risk (continued)
(C) Impairment of financial assets and financial guarantee contracts
The Group and the Company assess on a forward looking basis the expected credit loss (“ECL”) associated with its debt instruments carried at amortised cost and financial guarantee contracts issued. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The Group and the Company have six types of financial instruments that are subject to the ECL model:
Measurement of ECL - simplified approach
• Trade receivables • Intercompany receivables (trade) - inclusive of amounts due from associates, joint ventures, subsidiaries and related parties
Measurement of ECL - general 3-stage approach
• Intercompany receivables (non-trade) - inclusive of amounts due from subsidiaries • Advances for plasma plantation projects • Financial guarantee contracts issued • Other receivables
While cash and cash equivalents are also subject to the impairment requirements of MFRS 9, the identified impairment loss was immaterial.
280 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 97 (698) 9,208 9,208 1,423 1,423 (7,813) 63,989 63,989 11,159 11,159 75,148 75,148 77,365 TOTAL RM’000 RM’000 - 4 (698) 1,134 1,134 1,687 1,687 2,821 2,821 2,926 2,926 3,459 3,459 Other (1,594) RM’000 RM’000 receivables receivables ------issued issued RM’000 RM’000 Financial Financial contracts guarantee guarantee - - - for 26 (315) 3,440 3,440 20,315 20,315 20,315 20,315 23,466 23,466 plasma plasma RM’000 RM’000 projects projects Advances Advances plantation ------GROUP related parties parties RM’000 RM’000 Amounts Amounts due from - - - - 906 906 joint joint 3,317 3,317 12,500 12,500 15,817 15,817 16,723 16,723 RM’000 RM’000 ventures ventures Amounts Amounts due from due from ------618 618 618 618 618 618 RM’000 Amounts Amounts due from due from associates associates - 97 487 487 6,155 6,155 2,842 2,842 Trade Trade (5,904) 29,422 29,422 35,577 35,577 33,099 33,099 RM’000 RM’000 receivables receivables 7 6(e) 6(e) Note
calculated under calculated under 139 MFRS opening retained opening retained earnings as at 1 July 2018 - 2018 - as at 1 July calculated under 9 MFRS period period Impairment of financial assets and financial guarantee contracts (continued) contracts and financial guarantee Impairment of financial assets advances from (non-trade), receivables intercompany (trade), receivables intercompany receivables, and other trade for allowance of loss Reconciliation issued. contracts and financial guarantee plasma plantation projects 2018 as at 1 July allowance the opening loss to 139 as at 30 June 2018 with MFRS in accordance the ending impairment allowance of The reconciliation 2018 1 July the restated 2018 from as at 31 December contracts and financial guarantee financial assets for allowance the loss of the reconciliation and loss allowance. loss At 30 June 2018 - 30 June 2018 - At Amounts restated through through Amounts restated Opening loss allowance allowance Opening loss Charge for the financial the financial for Charge Write offs Write Write backs Write Reversal for the financial the financial for Reversal Exchange differences Exchange At 31 December 2018 31 December At Credit risk (continued) Credit (C) Financial risk management objectives and policies (continued) Financial risk management objectives (iii) FINANCIAL INSTRUMENTS (CONTINUED) FINANCIAL INSTRUMENTS (c) 50.
Annual Report // 6-Month Financial Period Ended 31 December 2018 281 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018 5,434 5,434 14,519 14,519 TOTAL 307,356 307,356 312,790 312,790 RM’000 RM’000 327,309 327,309 10 349 349 4,058 4,058 4,407 4,407 4,417 4,417 Other RM’000 RM’000 receivables receivables - - - - - issued issued RM’000 RM’000 Financial Financial contracts guarantee guarantee 1,376 1,376 11,795 11,795 290,344 290,344 291,720 291,720 RM’000 RM’000 303,515 303,515 Amounts Amounts due from (non-trade) (non-trade) subsidiaries - - - - - COMPANY (trade) (trade) RM’000 RM’000 Amounts Amounts due from subsidiaries - joint joint 2,413 2,413 12,500 12,500 12,500 12,500 14,913 14,913 RM’000 RM’000 ventures ventures Amounts Amounts due from due from - - 618 618 618 618 618 618 RM’000 Amounts Amounts due from due from associates associates - 301 301 3,545 3,545 3,545 3,545 3,846 3,846 Trade Trade RM’000 RM’000 receivables receivables 6(e) 6(e) Note
calculated under calculated under 139 MFRS opening retained opening retained earnings as at 1 July 2018 - 2018 - as at 1 July calculated under 9 MFRS period Impairment of financial assets and financial guarantee contracts (continued) contracts and financial guarantee Impairment of financial assets 2018 as at 1 July allowance the opening loss to 139 as at 30 June 2018 with MFRS in accordance the ending impairment allowance of The reconciliation 2018 1 July the restated 2018 from as at 31 December contracts and financial guarantee financial assets for allowance the loss of the reconciliation and loss allowance. (continued) allowance. loss At 30 June 2018 - 30 June 2018 - At Amounts restated through through Amounts restated Opening loss allowance allowance Opening loss Charge for the financial the financial for Charge At 31 December 2018 31 December At Credit risk (continued) Credit (C) Financial risk management objectives and policies (continued) Financial risk management objectives (iii) FINANCIAL INSTRUMENTS (CONTINUED) FINANCIAL INSTRUMENTS (c) 50.
282 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(iii) Credit risk (continued)
(C) Impairment of financial assets and financial guarantee contracts (continued)
A summary of the assumptions underpinning the Group’s and the Company’s ECL are as follows:
• Trade receivables using simplified approach
The ECL rates are based on 5-year historical credit losses experienced by the Group and the Company. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. However, based on the Group’s and the Company’s assessment, the ability to collect has minimal correlation with macroeconomic factors as these are consumers products. No significant changes to estimation techniques or assumptions were made during the reporting period.
The following table contains an analysis of the credit risk exposure of trade receivables for which a loss allowance is recognised using simplified approach. The gross carrying amount of trade receivables below also represents the Group’s and the Company’s maximum exposure to credit risk on these assets:
GROUP Carrying Expected amount Gross credit loss Loss (net of loss receivables rate allowances allowance) RM’000 % RM’000 RM’000
31 December 2018 Upstream Local customers: Current 165,676 0.0% - 165,676 Past due by: - 1 to 30 days 57,362 0.0% (4) 57,358 - 31 to 60 days 5,511 2.2% (123) 5,388 - 61 to 90 days 826 2.4% (20) 806 - 91 to 180 days 37 0.0% - 37 - 181 to 360 days 23 0.0% - 23 - more than 360 days 3,935 100.0% (3,935) - 233,370 (4,082) 229,288
Export customers: Current 161,320 0.0% - 161,320 Past due by: - 1 to 30 days 870 0.0% - 870 162,190 - 162,190
Annual Report // 6-Month Financial Period Ended 31 December 2018 283 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(iii) Credit risk (continued)
(C) Impairment of financial assets and financial guarantee contracts (continued)
• Trade receivables using simplified approach (continued)
The following table contains an analysis of the credit risk exposure of trade receivables for which a loss allowance is recognised using simplified approach. The gross carrying amount of trade receivables below also represents the Group’s and the Company’s maximum exposure to credit risk on these assets: (continued)
GROUP Carrying Expected amount Gross credit loss Loss (net of loss receivables rate allowances allowance) RM’000 % RM’000 RM’000
31 December 2018 (continued) Downstream Local customers: Current 289,531 0.0% - 289,531 Past due by: - 1 to 30 days 194,029 0.1% (164) 193,865 - 31 to 60 days 52,227 0.0% - 52,227 - 61 to 90 days 11,272 1.3% (148) 11,124 - 91 to 180 days 8,256 9.2% (758) 7,498 - 181 to 360 days 1,561 69.0% (1,077) 484 - more than 360 days 8,782 97.7% (8,580) 202 565,658 (10,727) 554,931
Export customers: Current 323,647 0.0% - 323,647 Past due by: - 1 to 30 days 51,560 0.0% - 51,560 - 31 to 60 days 12,979 0.0% - 12,979 - 61 to 90 days 5,300 0.0% - 5,300 - 91 to 180 days 2,197 0.0% - 2,197 - 181 to 360 days 2,602 0.0% - 2,602 - more than 360 days 66,422 100.0% (18,211) 48,211* 464,707 (18,211) 446,496
* The RM48.2 million relates to amounts due from Golden Hope-Nha Be Edible Oils Ltd. which was secured by a corporate guarantee as described in Note 34(b)(ii).
284 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(iii) Credit risk (continued)
(C) Impairment of financial assets and financial guarantee contracts (continued)
• Trade receivables using simplified approach (continued)
The following table contains an analysis of the credit risk exposure of trade receivables for which a loss allowance is recognised using simplified approach. The gross carrying amount of trade receivables below also represents the Group’s and the Company’s maximum exposure to credit risk on these assets: (continued)
GROUP Carrying Expected amount Gross credit loss Loss (net of loss receivables rate allowances allowance) RM’000 % RM’000 RM’000
31 December 2018 (continued) Other Operations Local customers: Current - 0.0% - - Past due by: - 1 to 30 days 1,737 0.0% - 1,737 - 31 to 60 days 1,398 0.0% - 1,398 - 61 to 90 days 1,341 0.0% - 1,341 - 91 to 180 days 644 0.2% (1) 643 - 181 to 360 days 135 0.7% (1) 134 - more than 360 days 226 33.6% (76) 150 5,481 (78) 5,403
Export customers: Current - 0.0% - - Past due by: - 1 to 30 days 457 0.0% - 457 - 31 to 60 days 28 0.0% - 28 485 - 485
Annual Report // 6-Month Financial Period Ended 31 December 2018 285 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(iii) Credit risk (continued)
(C) Impairment of financial assets and financial guarantee contracts (continued)
• Trade receivables using simplified approach (continued)
The following table contains an analysis of the credit risk exposure of trade receivables for which a loss allowance is recognised using simplified approach. The gross carrying amount of trade receivables below also represents the Group’s and the Company’s maximum exposure to credit risk on these assets: (continued)
COMPANY Carrying Expected amount Gross credit loss Loss (net of loss receivables rate allowances allowance) RM’000 % RM’000 RM’000
31 December 2018 Upstream Local customers: Current 763 0.0% - 763 Past due by: - 1 to 30 days 8,354 0.0% - 8,354 - 31 to 60 days 176 0.0% - 176 - 61 to 90 days 31 0.0% - 31 - 91 to 180 days 37 0.0% - 37 - 181 to 360 days 15 0.0% - 15 - more than 360 days 793 100.0% (793) - 10,169 (793) 9,376
Export customers: Current - 0.0% - - Past due by: - 1 to 30 days 860 0.0% - 860 860 - 860
286 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(iii) Credit risk (continued)
(C) Impairment of financial assets and financial guarantee contracts (continued)
• Trade receivables using simplified approach (continued)
The following table contains an analysis of the credit risk exposure of trade receivables for which a loss allowance is recognised using simplified approach. The gross carrying amount of trade receivables below also represents the Group’s and the Company’s maximum exposure to credit risk on these assets: (continued)
COMPANY Carrying Expected amount Gross credit loss Loss (net of loss receivables rate allowances allowance) RM’000 % RM’000 RM’000
31 December 2018 (continued) Downstream Local customers: Current 65,266 0.0% - 65,266 Past due by: - 1 to 30 days 45,204 0.0% - 45,204 - 31 to 60 days 2,883 0.0% - 2,883 - 61 to 90 days 408 0.0% - 408 - 91 to 180 days 62 0.0% - 62 - 181 to 360 days 96 0.0% - 96 - more than 360 days 367 100.0% (367) - 114,286 (367) 113,919
Export customers: Current 11,854 0.0% - 11,854 Past due by: - 1 to 30 days 3,544 0.0% - 3,544 - 31 to 60 days 222 0.0% - 222 - more than 360 days 2,686 100.0% (2,686) - 18,306 (2,686) 15,620
Annual Report // 6-Month Financial Period Ended 31 December 2018 287 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(iii) Credit risk (continued)
(C) Impairment of financial assets and financial guarantee contracts (continued)
• Intercompany receivables (trade) - inclusive of amounts due from associates, joint ventures, subsidiaries and related parties using simplified approach
Intercompany receivables (trade) represent amounts outstanding arising from sales of goods.
In arriving at loss allowance, the same assumptions as trade receivables have been applied. As a result, management was of the view that adequate loss allowance has been recognised as at the date of reporting.
• Intercompany receivables (non-trade) - inclusive of amounts due from subsidiaries using general 3-stage approach
The Company provides unsecured advances to subsidiaries and where necessary makes payments for expenses on behalf of its subsidiaries. The Company monitors the performance of the subsidiaries regularly.
Management has assessed the loss allowance for amount due from subsidiaries individually taking into consideration of the financial position and the plans in place for the respective subsidiaries. As at this reporting date, management is of the view that adequate loss allowance has been recognised.
• Advances for plasma plantation projects using general 3-stage approach
In Indonesia, oil palm plantation owners/operators are required to participate in selected programs to develop plantations for smallholders (herein referred to as “plasma farmers”). The Group is involved in “Perusahaan Inti Rakyat Transmigrasi” and “Kredit Koperasi Primer untuk Anggotanya” which require the Group to serve as a contractor for developing the plantations, train and develop the skills of the plasma farmers, and purchase the fresh fruit bunches harvested by plasma farmers at prevailing prices determined by the Indonesian Government.
The advances made by the Group in the form of plasma plantation development costs are recoverable from the plasma farmers upon the completion of the plasma plantation projects, either from the plasma farmers directly, through the assignment to plasma farmers of the loans obtained for the projects or netted-off with the FFB purchased from the plasma farmers. Impairment losses are made when the estimated recoverable amounts are less than the outstanding advances.
• Financial guarantee contracts using general 3-stage approach
The Group is exposed to credit risk arising from financial guarantee contracts given to banks for joint ventures’ and plasma stakeholders’ borrowings where the maximum credit risk exposure is the amount of borrowings utilised by the joint ventures or plasma stakeholders. Management has reviewed the financial position of the joint ventures and plasma stakeholders as at the reporting date and was of the view that the financial guarantee contracts are unlikely to be called by the lenders.
The Company is exposed to credit risk arising from financial guarantee contracts given to banks for joint ventures’ and subsidiaries’ borrowings where the maximum credit risk exposure is the amount of borrowings utilised by the joint ventures and subsidiaries. Historically, the Group has not defaulted in any borrowings and with the stringent monitoring over the treasury process, management is of the view that the financial guarantee contracts are unlikely to be called by the joint ventures’ and subsidiaries’ lenders.
288 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(iii) Credit risk (continued)
(C) Impairment of financial assets and financial guarantee contracts (continued)
• Other receivables using general 3-stage approach
The Group’s and the Company’s other receivables are amounting to RM251.8 million and RM15.6 million respectively. Management has assessed the other receivables individually and determined that the majority of the other receivables were fully recoverable and adequate loss allowance has been recognised.
Previous accounting policy for financial assets
As permitted under MFRS 9, comparatives are presented in accordance with MFRS 139.
• Advances for plasma plantation projects (non-current)
GROUP 30.06.2018 Note RM’000
Gross At 1 July 2017 106,451 Additions 40,160 Write off (22) Recovered (142) Transfers to property, plant and equipment 16 (956) Transfers to non-current assets held for sale (2,108) Exchange differences (13,728) At 30 June 2018 29 129,655
Accumulated impairment losses At 1 July 2017 (23,649) Charge for the financial year 6(e) (1,248) Reversals for the financial year 7 1,928 Transfers to non-current assets held for sale 376 Exchange differences 2,278 At 30 June 2018 29 (20,315) Net book value at 30 June 2018 29 109,340
Annual Report // 6-Month Financial Period Ended 31 December 2018 289 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(iii) Credit risk (continued)
(C) Impairment of financial assets and financial guarantee contracts (continued)
Previous accounting policy for financial assets (continued)
• Redeemable loan stocks (unsecured)
GROUP 30.06.2018 Note RM’000
Nominal value 500,000 Discount on inception (334,000) Sale and transfer during the financial year (166,000) -
Accretion of discount: At 1 July 2017 159,645 Accretion during the financial year 9 7,599 Sale and transfer during the financial year (167,244) At 30 June 2018 - Net book value at 30 June 2018 -
• Trade and other receivables (current)
Individual gross current receivables (excluding prepayments and goods and services tax/value added tax receivables) are categorised into impaired and not impaired as follows:
GROUP COMPANY 30.06.2018 30.06.2018 RM’000 RM’000
Not impaired Not past due 779,754 120,192 Past due by: - 1 to 30 days 780,622 123,057 - 31 to 60 days 57,702 2,140 - 61 to 90 days 40,708 1,106 - 91 to 180 days 118,616 27,710 - more than 181 days 75,434 4,378 Impaired 43,674 17,012 1,896,510 295,595
The trade and other receivables that are neither past due nor individually impaired are credit worthy debtors with good payment records with the Group or the Company.
Receivables that are past due but not individually impaired relate to a number of independent customers for whom there is no recent history of default.
290 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(iii) Credit risk (continued)
(C) Impairment of financial assets and financial guarantee contracts (continued)
Previous accounting policy for receivables (continued)
• Trade and other receivables (current) (continued)
The ageing analysis of individually impaired receivables are as follows:
GROUP COMPANY 30.06.2018 30.06.2018 RM’000 RM’000
Past due by: - 1 to 30 days 278 - - 31 to 60 days 43 - - 61 to 90 days 30 - - 91 to 180 days 656 177 - more than 181 days 42,667 16,835 43,674 17,012
The individually impaired trade and other receivable balances past due by more than 30 days are mainly related to customers in financial difficulties and had defaulted on payments. These receivables are not secured by any collateral.
Movements of impairment losses trade and other receivables (excluding advances for plasma plantation projects) are as follows:
GROUP COMPANY 30.06.2018 30.06.2018 Note RM’000 RM’000
At 1 July 2017 45,337 3,906 Charge for the financial year 6(e) 14,504 13,106 Write offs (292) - Reversal for the financial year 7 (3,404) - Exchange differences (12,471) - At 30 June 2018 43,674 17,012
Impairment arising from: - individual assessment 43,674 17,012
Annual Report // 6-Month Financial Period Ended 31 December 2018 291 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(iii) Credit risk (continued)
(C) Impairment of financial assets and financial guarantee contracts (continued)
Previous accounting policy for receivables (continued)
• Amounts due from subsidiaries (current)
Breakdown of intercompany balances and accumulated impairment losses is as follows:
COMPANY 30.06.2018 RM’000
Amounts due from subsidiaries (Gross) 873,575 Accumulated impairment losses (290,344) Amounts due from subsidiaries (Net) 583,231
Movements of impairment losses of amounts due from subsidiaries are as follows:
COMPANY 30.06.2018 Note RM’000
At 1 July 2017 231,217 Charge for the financial year 6(e) 61,658 Reversal for the financial year 7 (2,531) At 30 June 2018 290,344
During financial year ended 30 June 2018, the impairment charge of RM61.7 million recorded in the Company’s profit or loss was mainly attributed to RM23.8 million impairment charged on amounts due from Sime Darby Oils Netherlands B.V. (fka Sime Darby Netherlands) on the back of full impairment of its associate, Verdezyne, Inc. (see Note 23) and its investment in Biosynthetic (see Note 25(b)(ii)).
292 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(iv) Liquidity and cash flow risks
Liquidity and cash flow risks are the risks that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to these risks arise primarily from the mismatch of maturities of financial assets and liabilities. To mitigate these risks to an acceptable level, the Group maintains sufficient cash and marketable securities, and the availability of funding through an adequate amount of committed credit facilities.
The Group maintains centralised treasury functions where all strategic funding requirements are managed.
The undiscounted contractual cash flows of the Group’s and the Company’s financial liabilities are as follows:
GROUP On demand Between Between Total Total or within 1 and 2 2 and 5 Above 5 contractual carrying 1 year years years years cash flows amount RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2018 Trade and other payables 1,413,162 - - 62,664 1,475,826 1,475,826 Borrowings - principal 1,804,339 3,664,114 1,307,517 520,944 7,296,914 7,296,914 - interest - 16,589 45,085 97,457 159,131 45,470 Dividend payable 748,092 - - - 748,092 748,092 Amounts due to related parties 61,020 - - - 61,020 61,020 Lease liabilities 34,939 38,539 52,476 172,352 298,306 192,555 Derivatives - gross settled 1,133,733 - - - 1,133,733 21,198 5,195,285 3,719,242 1,405,078 853,417 11,173,022 9,841,075
30 June 2018 Trade and other payables 1,529,351 14 136 59,622 1,589,123 1,589,123 Borrowings - principal 1,094,194 3,506,698 1,409,722 478,784 6,489,398 6,489,398 - interest 183,241 162,644 86,904 132,956 565,745 48,597 Amounts due to related parties 54,104 - - - 54,104 54,104 Finance lease obligations 1,405 1,405 4,215 10,537 17,562 13,425 Derivatives - gross settled 1,607,225 - - - 1,607,225 24,502 4,469,520 3,670,761 1,500,977 681,899 10,323,157 8,219,149
Annual Report // 6-Month Financial Period Ended 31 December 2018 293 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(iv) Liquidity and cash flow risks (continued)
The undiscounted contractual cash flows of the Group’s and the Company’s financial liabilities are as follows: (continued)
COMPANY On demand Between Between Total Total or within 1 and 2 2 and 5 Above 5 contractual carrying 1 year years years years cash flows amount RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
31 December 2018 Trade and other payables 313,656 - - - 313,656 313,656 Borrowings - principal 974,443 3,610,588 681,938 - 5,266,969 5,266,969 - interest 168,483 86,993 15,516 - 270,992 22,594 Intra-group payables 1,000,313 - - 504,707 1,505,020 1,505,020 Lease liabilities 2,491 1,247 2,565 7,553 13,856 9,397 Dividend payable 748,092 - - - 748,092 748,092 Derivatives - gross settled 8,883 - - - 8,883 8,883 3,216,361 3,698,828 700,019 512,260 8,127,468 7,874,611
30 June 2018 Trade and other payables 353,007 - - - 353,007 353,007 Borrowings - principal 519,728 3,513,444 884,323 - 4,917,495 4,917,495 - interest 151,982 131,577 25,362 - 308,921 21,787 Intra-group payables 1,124,691 - - 490,463 1,615,154 1,615,154 Derivatives - gross settled 305,869 - - - 305,869 8,149 2,455,277 3,645,021 909,685 490,463 7,500,446 6,915,592
As at 31 December 2018, the Group’s and the Company’s maximum potential liabilities under financial guarantee contracts amounted to RM51.6 million and RM1,173.7 million respectively (30 June 2018: RM56.5 million and RM701.6 million respectively). Financial guarantee contracts are assumed to be immediately payable on demand.
294 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(c) Financial risk management objectives and policies (continued)
(v) Price risk
The Group and the Company are largely exposed to commodity price risk due to fluctuations in crude palm oil and other palm products futures prices.
The Group and the Company enter into commodity futures contracts to minimise exposure to adverse movements in crude palm oil and other palm products prices. Certain contracts are entered into and continue to be held for the purpose of the receipt or delivery of the physical commodity in accordance with the Group’s and the Company’s expected purchase, sale or usage requirements. Contracts that are not held for the purpose of physical delivery are accounted for as derivatives and are disclosed in Note 32(b).
Average contract Maturity price per period Tonnage tonne Months Tonnes RM
GROUP - 31 December 2018 Sale contracts Less than 12 129,516 2,992 Purchase contracts Less than 12 103,834 2,466
GROUP - 30 June 2018 Sale contracts Less than 12 96,749 3,108 Purchase contracts Less than 12 116,737 2,431
COMPANY - 31 December 2018 Sale contracts Less than 12 750 1,862 Purchase contracts Less than 12 64,100 2,232
COMPANY - 30 June 2018 Sale contracts Less than 12 22,600 2,436 Purchase contracts Less than 12 90,375 2,394
(d) Financial instruments measured at fair value
In estimating the financial instruments carried at fair value, there are, in general, three different levels which can be defined as follows:
(i) Level 1 - Quoted prices in active markets for identical assets or liabilities; (ii) Level 2 - Valuation inputs (other than level 1 input) that are observable for the asset or liability, either directly or indirectly; and (iii) Level 3 - Valuation inputs that are not based on observable market data.
Annual Report // 6-Month Financial Period Ended 31 December 2018 295 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(d) Financial instruments measured at fair value (continued)
The following table presents the Group’s and the Company’s financial assets and liabilities that are measured at fair value at the end of the reporting date based on the three different levels as defined above:
GROUP Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000
31 December 2018 Financial assets Investments at FVOCI - 3,545 25,749 29,294 Derivatives - commodities futures contracts 574 31,277 - 31,851 - forward foreign exchange contracts - 8,277 - 8,277 - interest rate swap contracts - 18,536 - 18,536 574 61,635 25,749 87,958
Financial liabilities Derivatives - commodities futures contracts (8,882) (8,214) - (17,096) - forward foreign exchange contracts - (4,102) - (4,102) (8,882) (12,316) - (21,198)
30 June 2018 Financial assets Available-for-sale investments - 1,502 26,588 28,090 Derivatives - commodities futures contracts - 19,993 - 19,993 - forward foreign exchange contracts - 12,510 - 12,510 - interest rate swap contracts - 24,723 - 24,723 - 58,728 26,588 85,316
Financial liabilities Derivatives - commodities futures contracts - (8,506) - (8,506) - forward foreign exchange contracts - (15,996) - (15,996) - (24,502) - (24,502)
296 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(d) Financial instruments measured at fair value (continued)
The following table presents the Group’s and the Company’s financial assets and liabilities that are measured at fair value at the end of the reporting date based on the three different levels as defined above: (continued)
COMPANY Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000
31 December 2018 Financial assets Investments at FVOCI - - 25,749 25,749 Derivatives - commodities futures contracts 574 1,750 - 2,324 - interest rate swap contracts - 18,536 - 18,536 574 20,286 25,749 46,610
Financial liabilities Derivatives - commodities futures contracts (8,882) - - (8,882) - forward foreign exchange contracts - (1) - (1) (8,882) (1) - (8,883)
30 June 2018 Financial assets Available-for-sale investments - - 26,588 26,588 Derivatives - commodities futures contracts - 3,049 - 3,049 - forward foreign exchange contracts - 196 - 196 - interest rate swap contracts - 24,723 - 24,723 - 27,968 26,588 54,556
Financial liabilities Derivatives - commodities futures contracts - (5,888) - (5,888) - forward foreign exchange contracts - (2,261) - (2,261) - (8,149) - (8,149)
Annual Report // 6-Month Financial Period Ended 31 December 2018 297 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
50. FINANCIAL INSTRUMENTS (CONTINUED)
(d) Financial instruments measured at fair value (continued)
If quoted market prices in active markets are available, these are considered Level 1. If such quoted market prices are not available, fair value is determined using market prices for similar assets or present value techniques, applying an appropriate risk-free interest rate adjusted for non-performance risk. The inputs used in present value techniques are observable and fall into the Level 2 category. It is classified into the Level 3 category if significant unobservable inputs are used.
The fair values of derivatives are determined using quoted price of identical instruments from an active market, if available (Level 1). If quoted prices are not available, price quoted for similar instruments, appropriately adjusted or present value techniques, based on available market data, or option pricing models are used. The fair values obtained using price quotes for similar instruments or valuation techniques represent a Level 2 input unless significant unobservable inputs are used.
(e) Financial instruments measured at amortised costs
The carrying amounts and fair values of non-current financial assets and liabilities are measured at amortised cost.
The following methods and assumptions are used to estimate the fair value of each class of financial instruments:
(i) Short-term financial instruments The carrying amounts of financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair values.
(ii) Long-term financial instruments The fair value of the Group’s long-term financial instruments is estimated by discounting the future contractual cash flows at the current market rate available to the Group for similar instruments.
51. CAPITAL MANAGEMENT
(a) Capital management objectives
The Group’s capital management objectives are to ensure the Group’s ability to continue as a going concern and maximise shareholder value. This is achieved through reviewing and managing its equity, debt (including funds received from the immediate holding company) and cash. Equity attributable to equity holders of the Company includes share capital, reserves and retained earnings.
The Group seeks to achieve optimal capital structure taking into account returns expected by shareholders, cost of debts, capital expenditure, investment opportunities, projected cash flows and externally imposed financial covenants. The Group has consistently paid out around 50% to 70% of its annual profit attributable to equity holders of the Company as dividends and reinvests the rest. Whilst the current practice provides a reasonable balance between expansion and cash dividends, the Group may adjust the dividend payout, equity levels and debt levels to achieve the optimal capital structure.
298 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
51. CAPITAL MANAGEMENT (CONTINUED)
(a) Capital management objectives (continued)
(i) Rating by External Rating Agencies
The Company and its capital market programmes are rated by both local and international rating agencies:
Rating Agency Company/Programme Rating as at Rating
Fitch Ratings Company and the USD1.5 billion 15.11.2018 BBB+ Multi-currency Sukuk Programme Moody’s Investors Service Company and the USD1.5 billion 18.10.2018 Baa1 Multi-currency Sukuk Programme
Malaysian Rating Corporation Berhad RM3.0 billion Perpetual Subordinated 14.09.2018 AAIS Sukuk Programme (Perpetual Sukuk)
(ii) Gearing ratio and interest cover
Gearing ratio and interest cover are some of the ratios used in capital management. Gearing ratio is calculated as gross debt divided by total equity. Gross debt is calculated as the total of borrowings and amount due to a subsidiary (including “current and non-current” as shown in the Company’s statements of financial position). Interest cover is calculated as profit/(loss) before interest and tax excluding impairment on investments in subsiadiaries and associates divided by finance costs.
The ratios are as follows:
GROUP COMPANY 31.12.2018 30.06.2018 31.12.2018 30.06.2018
Gearing ratio (%) 46.3 39.8 51.0 43.0 Interest cover (times) 4.4 13.1 0.4 13.8
(b) Externally imposed financial covenants and capital structure
In addition to optimising capital structure and complying with externally imposed financial covenants, the Group is also required to comply with statutory requirements in certain countries where the Group operates. This includes minimum capital requirement and the requirement to maintain legal reserves which are non-distributable.
The Group was in compliance with externally imposed financial covenants and capital requirements for the financial period ended 31 December 2018 and the financial year ended 30 June 2018.
Annual Report // 6-Month Financial Period Ended 31 December 2018 299 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
52. EFFECT ON ADOPTION OF MFRS 9 AND MFRS 16
The adoption of MFRS 9 “Financial Instruments” and the early adoption of MFRS 16 “Leases” have resulted in changes in the Group’s accounting policies. The effect arising from these changes on the statements of financial position of the Group and of the Company are as follow:
GROUP As at Effects on adoption of As at 30.06.2018 MFRS 9 MFRS 16 01.07.2018 Note RM’000 RM’000 RM’000 RM’000
NON-CURRENT ASSETS Property, plant and equipment 16 17,742,040 - (1,462,354) 16,279,686 Prepaid lease rentals 19 528,890 - (528,890) - Right-of-use assets 20 - - 2,177,612 2,177,612 Available-for-sale investments 25 28,090 (28,090) - - Investments at fair value through other comprehensive income (“FVOCI”) 26 - 28,090 - 28,090 Deferred tax assets 27 518,896 1,417 - 520,313
CURRENT ASSETS Trade and other receivables 2,301,441 (11,159) (255) 2,290,027 Non-current assets held for sale 218,964 - 1,544 220,508
NON-CURRENT LIABILITIES Deferred tax liabilities 27 2,497,457 (1,467) - 2,495,990 Finance lease obligations 12,602 - (12,602) - Lease liabilities - - 187,328 187,328
CURRENT LIABILITIES Finance lease obligations 823 - (823) - Lease liabilities - - 12,210 12,210 Liabilities associated with non-current assets held for sale 45,993 - 1,544 47,537
EQUITY Available for sale reserve 36 25,569 (25,569) - - Investments at FVOCI reserve 36 - 25,569 - 25,569 Retained earnings 36 12,058,846 (8,275) - 12,050,571
300 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
52. EFFECT ON ADOPTION OF MFRS 9 AND MFRS 16 (CONTINUED)
The adoption of MFRS 9 “Financial Instruments” and the early adoption of MFRS 16 “Leases” have resulted in changes in the Group’s accounting policies. The effect arising from these changes on the statements of financial position of the Group and of the Company are as follow: (continued)
COMPANY As at Effects on adoption of As at 30.06.2018 MFRS 9 MFRS 16 01.07.2018 Note RM’000 RM’000 RM’000 RM’000
NON-CURRENT ASSETS Property, plant and equipment 16 8,032,186 - (279,965) 7,752,221 Right-of-use assets 20 - - 290,371 290,371 Available-for-sale investments 25 26,588 (26,588) - - Investments at fair value through other comprehensive income (“FVOCI”) 26 - 26,588 - 26,588
CURRENT ASSETS Trade and other receivables 306,864 (4,058) - 302,806 Amounts due from subsidiaries 583,231 (1,376) - 581,855
NON-CURRENT LIABILITIES Deferred tax liabilities 27 704,379 (975) - 703,404 Lease liabilities - - 8,388 8,388
CURRENT LIABILITIES Lease liabilities - - 2,018 2,018
EQUITY Available for sale reserve 36 25,483 (25,483) - - Investments at FVOCI reserve 36 - 25,483 - 25,483 Retained earnings 36 9,080,993 (4,459) - 9,076,534
MFRS 9 “Financial Instruments”
As disclosed in Note 2(a)(i), the Group and the Company have adopted MFRS 9, which resulted in changes in accounting policies and adjustments to the financial position. The main changes are as follows:
(a) Classification and measurement
The classification and measurement requirements of MFRS 9 did not have a significant impact on the Group and the Company. The following are the changes in the classification of the Group’s and of the Company’s financial assets:
• Trade and other receivables, amounts due from subsidiaries, amounts due from related parties, bank balances, deposits and cash previously classified as loans and receivables at amortised cost are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. These are now classified and measured as financial assets at amortised cost - debt instruments.
Annual Report // 6-Month Financial Period Ended 31 December 2018 301 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
52. EFFECT ON ADOPTION OF MFRS 9 AND MFRS 16 (CONTINUED)
MFRS 9 “Financial Instruments” (continued)
As disclosed in Note 2(a)(i), the Group and the Company have adopted MFRS 9, which resulted in changes in accounting policies and adjustments to the financial position. The main changes are as follows: (continued)
(a) Classification and measurement (continued)
• Equity investments in unquoted shares previously classified as available-for-sale financial assets are now classified and measured as investments at FVOCI - equity instruments. The Group and the Company elected to classify irrevocably its equity investments under this category as it intends to hold these investments for the foreseeable future. There were no impairment losses recognised in profit or loss for these investments in prior periods.
As a result of the change in classification for equity investments in unquoted shares, the carrying amounts of RM28.1 million and RM26.6 million respectively of the Group and of the Company as at 30 June 2018 were redesignated as investments at FVOCI as at 1 July 2018.
There are no changes in classification and measurement for the Group’s and for the Company’s financial liabilities.
The measurement category and the carrying amount of financial assets and liabilities in accordance with MFRS 139 and MFRS 9 at 1 July 2018 are compared as follows:
Measurement category Carrying amount Original New Original New MFRS 139 Reclassification Remeasurement MFRS 9 MFRS 139 MFRS 9 RM’000 RM’000 RM’000 RM’000
GROUP Loans and receivables at amortised cost: Non-current Trade and other receivables 109,340 - - 109,340 Borrowings (5,395,204) - - (5,395,204) Other payables (59,772) - - (59,772)
Current Trade and other receivables Loan and Amortised 1,852,836 - (11,159) 1,841,677 Amount due from receivables cost related parties 2,559 - - 2,559 Bank balances, deposits and cash 363,238 - - 363,238 Borrowings (1,094,194) - - (1,094,194) Trade and other payables (1,577,948) - - (1,577,948) Amount due to related parties (54,104) - - (54,104)
302 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
52. EFFECT ON ADOPTION OF MFRS 9 AND MFRS 16 (CONTINUED)
MFRS 9 “Financial Instruments” (continued)
As disclosed in Note 2(a)(i), the Group and the Company have adopted MFRS 9, which resulted in changes in accounting policies and adjustments to the financial position. The main changes are as follows: (continued)
(a) Classification and measurement (continued)
The measurement category and the carrying amount of financial assets and liabilities in accordance with MFRS 139 and MFRS 9 at 1 July 2018 are compared as follows: (continued)
Measurement category Carrying amount Original New Original New MFRS 139 Reclassification Remeasurement MFRS 9 MFRS 139 MFRS 9 RM’000 RM’000 RM’000 RM’000
GROUP (continued)
Financial guarantee contract Financial Financial guarantee guarantee Non-current (1,041) - - (1,041) contract contract Current (721) - - (721)
Available-for-sale financial assets Available-for-sale investments Available-for- 28,090 (28,090) - - FVOCI Investments at sale FVOCI - 28,090 - 28,090
Fair value through profit or loss - non hedging derivative Derivatives assets 27,611 - - 27,611 FVTPL FVTPL Derivatives liabilities (13,075) - - (13,075)
Derivatives used for hedging Derivatives assets - current 29,615 - - 29,615 FVTPL FVTPL Derivatives liabilities - current (11,427) - - (11,427)
Annual Report // 6-Month Financial Period Ended 31 December 2018 303 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
52. EFFECT ON ADOPTION OF MFRS 9 AND MFRS 16 (CONTINUED)
MFRS 9 “Financial Instruments” (continued)
As disclosed in Note 2(a)(i), the Group and the Company have adopted MFRS 9, which resulted in changes in accounting policies and adjustments to the financial position. The main changes are as follows: (continued)
(a) Classification and measurement (continued)
The measurement category and the carrying amount of financial assets and liabilities in accordance with MFRS 139 and MFRS 9 at 1 July 2018 are compared as follows: (continued)
Measurement category Carrying amount Original New Original New MFRS 139 Reclassification Remeasurement MFRS 9 MFRS 139 MFRS 9 RM’000 RM’000 RM’000 RM’000
COMPANY
Loans and receivables at amortised cost: Non-current Amounts due from subsidiaries 56,679 - - 56,679 Borrowings (4,397,767) - - (4,397,767) Amount due to a subsidiary (490,463) - - (490,463)
Current Trade and other receivables 278,583 - (4,058) 274,525 Amounts due from Loans and Amortised related parties receivables cost 4,228 - - 4,228 Amounts due from subsidiaries 583,231 - (1,375) 581,856 Bank balances, deposits and cash 68,284 - - 68,284 Borrowings (519,728) - - (519,728) Trade and other payables (374,794) - - (374,794) Amount due to subsidiaries (1,093,237) - - (1,093,237) Amount due to related parties (31,454) - - (31,454)
304 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
52. EFFECT ON ADOPTION OF MFRS 9 AND MFRS 16 (CONTINUED)
MFRS 9 “Financial Instruments” (continued)
As disclosed in Note 2(a)(i), the Group and the Company have adopted MFRS 9, which resulted in changes in accounting policies and adjustments to the financial position. The main changes are as follows: (continued)
(a) Classification and measurement (continued)
The measurement category and the carrying amount of financial assets and liabilities in accordance with MFRS 139 and MFRS 9 at 1 July 2018 are compared as follows: (continued)
Measurement category Carrying amount Original New Original New MFRS 139 Reclassification Remeasurement MFRS 9 MFRS 139 MFRS 9 RM’000 RM’000 RM’000 RM’000
COMPANY (continued)
Financial guarantee contract Financial Financial guarantee guarantee Non-current (61,969) - - (61,969) contract contract Current (5,983) - - (5,983)
Available-for-sale financial assets Available-for-sale Available-for- investments FVOCI 26,588 (26,588) - - sale Investment at FVOCI - 26,588 - 26,588
Fair value through profit or loss - held for trading Derivatives asset 3,049 - - 3,049 FVTPL FVTPL Derivatives liability (7,163) - - (7,163)
Derivatives used for hedging Derivatives asset 24,919 - - 24,919 FVTPL FVTPL Derivatives liability (986) - - (986)
Annual Report // 6-Month Financial Period Ended 31 December 2018 305 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
52. EFFECT ON ADOPTION OF MFRS 9 AND MFRS 16 (CONTINUED)
(b) Impairment
The adoption of MFRS 9 has fundamentally changed the Group’s and the Company’s accounting for impairment losses for financial assets by replacing the incurred loss approach under MFRS 139 with a forward-looking expected credit loss (“ECL”) approach. MFRS 9 requires the Group and the Company to recognise an allowance for ECLs for all debt instruments not held at fair value through profit or loss.
Upon the adoption of MFRS 9, the Group and the Company recognised additional impairment of RM11.2 million and RM5.4 million respectively on the receivables, which resulted in a decrease in retained earnings of RM8.3 million and RM4.5 million respectively as at 1 July 2018.
The reconciliation of the ending impairment allowances in accordance with MFRS 139 to the opening loss allowances determined in accordance with MFRS 9 is shown in Note 50(c)(iii).
MFRS 16 “Leases”
Upon adoption of MFRS 16, the Group and the Company recognised lease liabilities in relation to leases which had been previously been recognised as “operating leases” under the principles of MFRS 117 “Leases”.
Reconciliation for the differences between operating lease commitments disclosed as at 30 June 2018 and lease liabilities recognised at the date of initial application of 1 July 2018 are as follow:
Total RM’000
GROUP Operating lease commitments as disclosed at 30 June 2018 256,463 Effects from discounting at the incremental borrowing rate between 1.60% to 8.51% (66,556) Add: Lease liabilities additionally recognised based on the initial application of MFRS 16 43,030 Transfer from finance lease obligations upon initial application of MFRS 16 13,425 Less: Short-term leases recognised on a straight-line basis as expense (33,057) Leases of low value assets recognised on a straight-line basis as expense (57) Contracts reassessed as service agreements (12,166) Transfer to liabilities directly associated with non-current assets held for sale (1,544) Lease liabilities recognised as at 1 July 2018 199,538
COMPANY Operating lease commitments as disclosed at 30 June 2018 45,188 Effects from discontinuing at the incremental borrowing rate between 4.40% to 6.48% (614) Add: Liabilities additionally recognised based on the initial application of MFRS 16 7,655 Less: Short-term leases recognised on a straight-line basis as expense (32,990) Contracts reassessed as service agreements (8,833) Lease liabilities recognised as at 1 July 2018 10,406
306 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
53. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
(i) Subsidiaries which are active as at 31 December 2018 are as follows:
Country of Group’s incorporation/ effective interest (%) Principal place of Name of company business 31.12.2018 30.06.2018 Auditors Principal activities
Chartquest Sdn Bhd Malaysia 61.1 61.1 1 Cultivation of oil palm Chermang Development Malaysia 83.9 83.9 1 Investment holding (Malaya) Sdn Bhd Consolidated Plantations Malaysia 100.0 100.0 1 Investment holding Berhad Golden Hope Overseas Malaysia 100.0 100.0 1 Investment holding Sdn Bhd Guthrie Industries Malaysia Malaysia 100.0 100.0 1 Cultivation of oil palm and Sdn Bhd processing of palm oil and palm kernel Guthrie International Labuan, Malaysia 100.0 100.0 1 Investment holding Investments (L) Ltd Kumpulan Jelei Sdn Bhd Malaysia 100.0 100.0 1 Investment holding Mostyn Palm Processing Malaysia 100.0 100.0 1 Investment holding Sdn Bhd Sanguine (Malaysia) Sdn Bhd Malaysia 100.0 100.0 1 Cultivation of oil palm Sime Darby Agri-Bio Sdn Bhd Malaysia 100.0 100.0 1 Manufacturing and marketing of rat baits and trading of agricultural related products Sime Darby Austral Holdings Malaysia 100.0 100.0 1 Investment holding Berhad Sime Darby Oils Bintulu Malaysia 60.0 60.0 1 Processing of palm oil and Sdn Bhd (formerly known as palm kernel oil Sime Darby Austral Sdn Bhd) Sime Darby Oils Biodiesel Malaysia 100.0 100.0 1 Production and sale of Sdn Bhd (formerly known as biodiesel and related Sime Darby Biodiesel products Sdn Bhd) Sime Darby Biotech Malaysia 100.0 100.0 1 Provision of oil palm tissue Laboratories Sdn Bhd culture services
Annual Report // 6-Month Financial Period Ended 31 December 2018 307 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
53. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
(i) Subsidiaries which are active as at 31 December 2018 are as follows: (continued)
Country of Group’s incorporation/ effective interest (%) Principal place of Name of company business 31.12.2018 30.06.2018 Auditors Principal activities
Sime Darby Consulting Malaysia 100.0 100.0 1 Investment holding Sdn Bhd Sime Darby Foods & Malaysia 100.0 100.0 1 Distribution and marketing Beverages Marketing of cooking oil, tocotrienols, Sdn Bhd coconut oil and palm related products Sime Darby Oils Trading Malaysia 100.0 100.0 1 Trading of crude palm oil Sdn Bhd (formerly known as and palm oil products and Sime Darby Futures Trading as marketing agent of Sdn Bhd) commodities for its related companies Sime Darby Global Berhad Malaysia 100.0 100.0 1 Special purpose vehicle for the issue of securities programme Sime Darby Oils Trading Labuan, Malaysia 100.0 100.0 1 Trading of commodities (Labuan) Limited (formerly known as Sime Darby Global Trading (Labuan) Limited) Sime Darby Oils Pasir Gudang Malaysia 100.0 100.0 1 Processing of edible oil and Sdn Bhd (formerly known as related products Sime Darby Kempas Sdn Bhd) Sime Darby Latex Sdn Bhd Malaysia 100.0 100.0 1 Investment property activity Sime Darby Plantation (Sabah) Malaysia 100.0 100.0 1 Cultivation of oil palm and Sdn Bhd processing of palm oil and palm kernel Sime Darby Plantation Malaysia 100.0 100.0 1 Cultivation of oil palm and (Sarawak) Sdn Bhd processing of palm oil and palm kernel Sime Darby Plantation Malaysia 100.0 100.0 1 Operating childcare services Childcare Centre Sdn Bhd to employees Sime Darby Plantation Malaysia 100.0 100.0 1 Acquiring, developing and Intellectual Property investing in trademarks, Sdn Bhd patents and intellectual property rights Sime Darby Plantation Thailand Malaysia 100.0 100.0 1 Investment holding Sdn Bhd
308 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
53. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
(i) Subsidiaries which are active as at 31 December 2018 are as follows: (continued)
Country of Group’s incorporation/ effective interest (%) Principal place of Name of company business 31.12.2018 30.06.2018 Auditors Principal activities
Sime Darby Research Sdn Bhd Malaysia 100.0 100.0 1 Research and development services to group companies in relation to tropical agriculture Sime Darby Seeds & Malaysia 100.0 100.0 1 Agricultural research Agricultural Services and advisory services, Sdn Bhd production and sale of oil palm seeds and seedlings Sime Darby Technology Centre Malaysia 100.0 100.0 1 Research and development Sdn Bhd services in biotechnology and agriculture The China Engineers (Malaysia) Malaysia 100.0 100.0 1 Cultivation of oil palm and Sdn Bhd processing of palm oil and palm kernel Wangsa Mujur Sdn Bhd Malaysia 72.5 72.5 1 Cultivation of oil palm and processing of palm oil and palm kernel PT Aneka Intipersada Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Aneka Sawit Lestari Indonesia 100.0 100.0 2 Production and sale of oil palm planting materials PT Anugerah Sumbermakmur Indonesia 100.0 100.0 2 Investment holding PT Asricipta Indah Indonesia 90.0 90.0 2 Investment holding PT Bahari Gembira Ria Indonesia 99.97 99.3 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Bersama Sejahtera Sakti Indonesia 91.1 91.1 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Bhumireksa Nusasejati Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel
Annual Report // 6-Month Financial Period Ended 31 December 2018 309 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
53. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
(i) Subsidiaries which are active as at 31 December 2018 are as follows: (continued)
Country of Group’s incorporation/ effective interest (%) Principal place of Name of company business 31.12.2018 30.06.2018 Auditors Principal activities
PT Bina Sains Cemerlang Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Budidaya Agro Lestari Indonesia 100.0 100.0 2 Cultivation of oil palm PT Sime Darby Oils Pulau Laut Indonesia 100.0 100.0 2 Processing of palm oil Refinery (formerly known as products PT Golden Hope Nusantara) PT Guthrie Pecconina Indonesia 100.0 100.0 2 Cultivation of oil palm and Indonesia processing of palm oil and palm kernel PT Indo Sukses Lestari Indonesia 95.0 95.0 2 Development of rubber Makmur plantation PT Indotruba Tengah Indonesia 50.0 50.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Kartika Inti Perkasa Indonesia 60.0 60.0 2 Investment holding PT Kridatama Lancar Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Ladangrumpun Suburabadi Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Laguna Mandiri Indonesia 88.6 88.6 2 Cultivation of oil palm and processing of palm oil, palm kernel and palm kernel oil PT Lahan Tani Sakti Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Langgeng Muaramakmur Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel
310 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
53. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
(i) Subsidiaries which are active as at 31 December 2018 are as follows: (continued)
Country of Group’s incorporation/ effective interest (%) Principal place of Name of company business 31.12.2018 30.06.2018 Auditors Principal activities
PT Minamas Gemilang Indonesia 100.0 100.0 2 Investment holding PT Mitra Austral Sejahtera Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Muda Perkasa Sakti Indonesia 100.0 100.0 2 Investment holding PT Padang Palma Permai Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Paripurna Swakarsa Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Perkasa Subur Sakti Indonesia 100.0 100.0 2 Processing of palm oil and palm kernel PT Perusahaan Perkebunan Indonesia 100.0 100.0 2 Cultivation of oil palm Industri dan Niaga Sri Kuala PT Sajang Heulang Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Sandika Natapalma Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Sime Agri Bio Indonesia 100.0 100.0 2 Trading of agricultural related products PT Sime Indo Agro Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Sritijaya Abaditama Indonesia 60.0 60.0 2 Investment holding PT Swadaya Andika Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Tamaco Graha Krida Indonesia 90.0 90.0 2 Cultivation of oil palm and processing of palm oil and palm kernel
Annual Report // 6-Month Financial Period Ended 31 December 2018 311 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
53. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
(i) Subsidiaries which are active as at 31 December 2018 are as follows: (continued)
Country of Group’s incorporation/ effective interest (%) Principal place of Name of company business 31.12.2018 30.06.2018 Auditors Principal activities
PT Tamiyang Sumber Rezeki Indonesia 90.0 90.0 3 Cultivation of oil palm PT Teguh Sempurna Indonesia 100.0 100.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Tunggal Mitra Plantations Indonesia 60.0 60.0 2 Cultivation of oil palm and processing of palm oil and palm kernel PT Timbang Deli Indonesia Indonesia 49.0 49.0 2 Oil palm seed production and cultivation of rubber Kula Palm Oil Limited Papua New 100.0 100.0 2 Cultivation of oil palm and Guinea processing of palm oil, palm kernel and palm kernel oil New Britain Palm Oil Limited Papua New 100.0 100.0 2 Investment holding, Guinea cultivation of oil palm and processing of palm oil, palm kernel and palm kernel oil Poliamba Limited Papua New 100.0 100.0 2 Cultivation of oil palm and Guinea processing of palm oil, palm kernel and palm kernel oil Ramu Agri-Industries Limited Papua New 100.0 100.0 2 Cultivation of oil palm and Guinea growing canes, cattle rearing, processing and sale of palm oil, palm kernel oil, sugar, ethanol and beef Markham Farming Company Papua New 100.0 - 2 Cultivation of oil palm and Limited Guinea processing of palm oil, palm kernel, palm kernel oil and coconut Guadalcanal Plains Palm Oil Solomon Islands 80.0 80.0 3 Cultivation of oil palm and Limited processing of palm oil, palm kernel and palm kernel oil
312 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
53. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
(i) Subsidiaries which are active as at 31 December 2018 are as follows: (continued)
Country of Group’s incorporation/ effective interest (%) Principal place of Name of company business 31.12.2018 30.06.2018 Auditors Principal activities
New Britain Plantation Singapore 100.0 100.0 2 Investment holding and Services Pte. Ltd. management of oil palm plantations and seed production Ultra Oleum Pte. Ltd. Singapore 100.0 100.0 2 Investment holding Verdant Bioscience Pte. Ltd. Singapore 52.0 52.0 2 Agriculture science and research Sime Darby Oils Liverpool United Kingdom 100.0 100.0 2 Processing of edible oil and Refinery Limited (formerly related products known as New Britain Oils Limited) Sime Darby Oils International Singapore 100.0 100.0 2 Marketing of edible oils and Limited (formerly known as palm oil related products Sime Darby Edible Products Limited) Sime Darby Plantation Europe Singapore 100.0 100.0 2 Investment holding Ltd. Sime Darby Plantation Singapore 100.0 100.0 2 Investment holding Investment (Liberia) Private Limited Sime Darby China Oils And Hong Kong SAR 100.0 100.0 2 Investment holding Fats Company Limited Sime Darby Hong Kong Hong Kong SAR 100.0 100.0 2 Investment holding Nominees Limited Industrial Enterprises Co., Ltd. Thailand 99.9 99.9 2 Processing of soya bean oil and related products Morakot Industries Public Thailand 99.9 99.9 2 Processing and marketing Company Limited of edible oil and related products Sime-Morakot Holdings Thailand 100.0 100.0 2 Investment holding (Thailand) Limited The China Engineers Thailand 99.9 99.9 2 Investment holding (Thailand) Limited Sime Darby International Cayman Islands 100.0 100.0 4 Investment holding Investments Limited Sime Darby Plantation Holdings Cayman Islands 100.0 100.0 4 Investment holding (Asia Pacific)
Annual Report // 6-Month Financial Period Ended 31 December 2018 313 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
53. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
(i) Subsidiaries which are active as at 31 December 2018 are as follows: (continued)
Country of Group’s incorporation/ effective interest (%) Principal place of Name of company business 31.12.2018 30.06.2018 Auditors Principal activities
Sime Darby Plantation Holdings Cayman Islands 100.0 100.0 4 Investment holding (Cayman Islands) Golden Hope-Nha Be Edible Vietnam - 51.0 2 Processing and marketing Oils Co Ltd of edible oil and related products Sime Darby Plantation (Liberia) Liberia 100.0 100.0 2 Cultivation of oil palm and Inc. rubber and processing of palm oil and palm kernel Golden Hope Overseas Capital Mauritius 100.0 100.0 2 Investment holding Mulligan International B.V. Netherlands 100.0 100.0 2 Investment holding Sime Darby Oils Netherlands Netherlands 100.0 100.0 2 Investment holding B.V. (formerly known as Sime Darby Netherlands B.V.) Sime Darby Oils Zwijndrecht Netherlands 100.0 100.0 2 Processing and marketing Refinery B.V. (formerly of edible oil and related known as Sime Darby products Unimills B.V.) Sime Darby Oils South Africa South Africa 100.0 100.0 3 Processing and marketing (Pty) Ltd. (formerly known of edible oils and related as Sime Darby Hudson And edible oils products Knight (Pty) Limited)
314 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
53. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
(ii) Joint venture which are active as at 31 December 2018 are as follows:
Country of Group’s incorporation/ effective interest (%) Principal place of Name of company business 31.12.2018 30.06.2018 Auditors Principal activities
Emery Oleochemicals (M) Malaysia 50.0 50.0 3 Investment holding, Sdn Bhd production and sale of fatty acids, fatty alcohols, refined glycerine, oilfield chemicals, ozone acids, plastic additives, methyl esters and other oleochemical derivatives Emery Specialty Chemicals Malaysia 50.0 50.0 3 Investment holding Sdn Bhd Mybiomass Sdn Bhd Malaysia 30.0 30.0 3 Develop and pioneer high value green chemicals biorefinery Sime Darby TNBES Renewable Malaysia 51.0+ 51.0+ 1 Production and sale of Energy Sdn Bhd renewable energy using palm oil effluents Guangzhou Keylink Chemicals China 49.0 49.0 3 Manufacturing of surface Co., Ltd. active agents Rizhao Sime Darby Oils & Fats China 45.0 45.0 2 Storage and marketing of Co. Ltd. palm oil related products
Annual Report // 6-Month Financial Period Ended 31 December 2018 315 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
53. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
(iii) Associates which are active as at 31 December 2018 are as follows:
Country of Group’s incorporation/ effective interest (%) Principal place of Name of company business 31.12.2018 30.06.2018 Auditors Principal activities
Barlow Bulking Sdn Bhd Malaysia 32.0 32.0 3 Provision of bulking and marketing facilities for edible oil producers and millers Nescaya Maluri Sdn Bhd Malaysia 40.0 40.0 3 Investment holding and licensing Muang Mai Guthrie Public Thailand 49.0 49.0 3 Processing of rubber Company Limited Thai Eastern Trat Co., Ltd. Thailand 40.0 40.0 2 Processing of palm oil and palm kernel Yayasan Sime Darby Malaysia @ @ 1 Administration of scholarship awards and educational loans, undertake sports, environmental conservation and sustainability projects
316 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
53. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
(iv) Subsidiaries which are dormant/inactive as at 31 December 2018 are as follows:
Country of Group’s incorporation/ effective interest (%) Principal place of Name of company business 31.12.2018 30.06.2018 Auditors Principal activities
Kwang Joo Seng (Malaysia) Singapore 100.0 100.0 2 Dormant Private Limited Derawan Sdn Bhd Malaysia 100.0 100.0 1 Dormant Kumpulan Jerai Sendirian Bhd Malaysia 100.0 100.0 1 Dormant Kumpulan Linggi Sendirian Bhd Malaysia 100.0 100.0 1 Dormant Kumpulan Sua Betong Malaysia 100.0 100.0 1 Dormant Sendirian Bhd Kumpulan Tebong Sendirian Malaysia 100.0 100.0 1 Dormant Bhd Kumpulan Temiang Sendirian Malaysia 100.0 100.0 1 Dormant Bhd Sahua Enterprise Sdn Bhd Malaysia 100.0 100.0 1 Dormant Sime Darby Beverages Malaysia 100.0 100.0 1 Dormant Sdn Bhd Sime Darby Bukit Talang Malaysia 100.0 100.0 1 Dormant Sdn Bhd Sime Darby Edible Products India 100.0 100.0 2 Dormant India Private Limited Sime Darby Oils & Fats Malaysia 100.0 100.0 1 Dormant Sdn Bhd Sime Darby Plantation IT Malaysia 100.0 100.0 1 Dormant Sdn Bhd Sime Darby Plantation Malaysia 100.0 100.0 1 Dormant (Peninsular) Sdn Bhd PT Guthrie Abdinusa Industri Indonesia 70.0 70.0 2 Dormant
Annual Report // 6-Month Financial Period Ended 31 December 2018 317 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
53. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
(iv) Subsidiaries which are dormant/inactive as at 31 December 2018 are as follows: (continued)
Country of Group’s incorporation/ effective interest (%) Principal place of Name of company business 31.12.2018 30.06.2018 Auditors Principal activities
PT Sime Darby Commodities Indonesia 100.0 100.0 2 Dormant Trading Golden Hope-Nhabe Cambodia - 51.0 4 Dormant (Cambodia) Import & Export Co Ltd Sime Darby CleanerG B.V. Netherlands 100.0 100.0 4 Dormant Sime Darby Oils Europe B.V. Netherlands 100.0 100.0 4 Dormant Sime Darby Edible Products Tanzania 100.0 100.0 4 Dormant Tanzania Limited Trolak Estates Limited Scotland 100.0 100.0 3 Dormant
Dusun Durian Plantations United Kingdom 100.0 100.0 3 Dormant Limited Kinta Kellas Rubber Estate Plc. United Kingdom 100.0 100.0 3 Dormant Malaysian Estates Plc. United Kingdom 100.0 100.0 3 Dormant The Kuala Selangor Rubber Plc. United Kingdom 100.0 100.0 3 Dormant The London Asiatic Rubber and United Kingdom 100.0 100.0 3 Dormant Produce Company Limited The Pataling Rubber Estates United Kingdom 100.0 100.0 3 Dormant Limited The Straits Plantations Limited United Kingdom 100.0 100.0 3 Dormant The Sungei Bahru Rubber United Kingdom 100.0 100.0 3 Dormant Estates Plc.
318 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
53. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
(v) Subsidiaries placed under members’ voluntary liquidation/deregistered during the financial period are as follows:
Country of Group’s incorporation/ effective interest (%) Principal place of Name of company business 31.12.2018 30.06.2018 Auditors Principal activities
Eminent Platform Sdn Bhd Malaysia 100.0 100.0 4 In members’ voluntary liquidation Golden Hope Agrotech Malaysia 100.0 100.0 4 In members’ voluntary Consultancy Sdn Bhd liquidation Golden Hope Fruit Industries Malaysia 100.0 100.0 4 In members’ voluntary Sdn Bhd liquidation Nature Ambience Sdn Bhd Malaysia 100.0 100.0 4 In members’ voluntary liquidation Sime Darby Bioganic Sdn Bhd Malaysia 100.0 100.0 4 In members’ voluntary liquidation Sime Darby Julau Plantation Malaysia 100.0 100.0 4 In members’ voluntary Sdn Bhd liquidation Vertical Drive Sdn Bhd Malaysia 100.0 100.0 4 In members’ voluntary liquidation Sime Darby Plantation Cameroon 100.0 100.0 4 In members’ voluntary Cameroon Ltd. liquidation
Annual Report // 6-Month Financial Period Ended 31 December 2018 319 Financial Statements Sime Darby Plantation
NOTES TO THE FINANCIAL STATEMENTS For the financial period ended 31 December 2018
53. LIST OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (CONTINUED)
(vi) Associates placed under members’ voluntary liquidation/deregistered during the financial period are as follows:
Country of Group’s incorporation/ effective interest (%) Principal place of Name of company business 31.12.2018 30.06.2018 Auditors Principal activities
Verdezyne, Inc. United States of 43.5 43.5 3 In members’ voluntary America liquidation
Notes:
1. Subsidiaries and associates which are audited by PricewaterhouseCoopers PLT, Malaysia.
2. Subsidiaries and associates which are audited by member firms of PricewaterhouseCoopers International Limited, which are separate and independent legal entities from PricewaterhouseCoopers PLT, Malaysia.
3. Subsidiaries, joint ventures and associates which are audited by firms other than member firms of PricewaterhouseCoopers International Limited.
4. No legal requirement to appoint statutory auditors.
+ Notwithstanding that the Group holds more than 50% equity interest in Sime Darby TNBES Renewable Energy Sdn Bhd, the investment is classified as a joint venture (and not a subsidiary) as significant decisions require unanimous consent from all its shareholders.
@ Yayasan Sime Darby is a company without share capital, limited by guarantee.
54. APPROVAL OF FINANCIAL STATEMENTS
The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 5 April 2019.
320 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
STATEMENT BY DIRECTORS Pursuant to Section 251(2) of the Companies Act 2016
We, Tan Sri Dato’ A. Ghani Othman and Tan Sri Dato’ Seri Mohd Bakke Salleh, two of the Directors of Sime Darby Plantation Berhad, do hereby state that, in the opinion of the Directors, the financial statements set out on pages 112 to 320 are drawn up so as to give a true and fair view of the financial position of the Group and the Company as at 31 December 2018 and of the financial performance of the Group and the Company for the financial period ended on that date in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.
Signed in accordance with a resolution of the Board of Directors dated 5 April 2019.
TAN SRI DATO’ A. GHANI OTHMAN TAN SRI DATO’ SERI MOHD BAKKE SALLEH DIRECTOR DIRECTOR
Selangor 5 April 2019
STATUTORY DECLARATION Pursuant to Section 251(1) of the Companies Act 2016
I, Renaka Ramachandran, the Officer primarily responsible for the financial management of Sime Darby Plantation Berhad, do solemnly and sincerely declare that the financial statements set out on pages 112 to 320 are, to the best of my knowledge and belief, 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.
RENAKA RAMACHANDRAN OFFICER
Subscribed and solemnly declared by the abovenamed Renaka Ramachandran at Selangor, Malaysia on 5 April 2019.
Before me,
COMMISSIONER FOR OATHS
Annual Report // 6-Month Financial Period Ended 31 December 2018 321 Financial Statements Sime Darby Plantation
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SIME DARBY PLANTATION BERHAD (Incorporated in Malaysia) (Company No. 647766 V)
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Our opinion
In our opinion, the financial statements of Sime Darby Plantation Berhad (“the Company”) and its subsidiaries (“the Group”) give a true and fair view of the financial position of the Group and of the Company as at 31 December 2018, and of their financial performance and their cash flows for the period then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.
What we have audited
We have audited the financial statements of the Group and of the Company, which comprise the statements of financial position as at 31 December 2018 of the Group and of the Company, and the statements of profit or loss, statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the period then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 112 to 320.
Basis for opinion
We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the “Auditors’ responsibilities for the audit of the financial statements” section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence and other ethical responsibilities
We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.
Our audit approach
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements of the Group and of the Company. In particular, we considered where the Directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the Group and of the Company, the accounting processes and controls, and the industries in which the Group and the Company operate.
PricewaterhouseCoopers PLT (LLP0014401-LCA & AF 1146), Chartered Accountants, Level 10, 1 Sentral, Jalan Rakyat, Kuala Lumpur Sentral, P.O. Box 10192, 50706 Kuala Lumpur, Malaysia T: +60 (3) 2173 1188, F: +60 (3) 2173 1288, www.pwc.com/my
PricewaterhouseCoopers PLT (LLP0014401-LCA & AF 1146) was registered on 02.01.2018 and with effect from that date, PricewaterhouseCoopers (AF 1146), a conventional partnership was converted to a limited liability partnership.
322 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SIME DARBY PLANTATION BERHAD (Incorporated in Malaysia) (Company No. 647766 V)
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED)
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current period. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matters How our audit addressed the key audit matters Impairment of the Group’s property, plant and equipment (“PPE”) in Sime Darby Plantation (Liberia) Inc (“SDP Liberia”) and the Company’s cost of investment in SDP Liberia
Refer to Notes 4, 6(e), 16(d)(i) and 21 to the financial statements.
As at 31 December 2018, the carrying amount (net of impairment) We have assessed the objectivity, capability and competency of of the Group’s PPE which consist of oil palm estates and a palm the external valuer appointed by the Group by considering the oil mill in Liberia amounted to RM242.8 million and the carrying valuer’s professional background, reputation, experience in similar amount (net of impairment) of the Company’s cost of investment industries and held discussions with the valuer. We confirmed in SDP Liberia amounted to RM242.8 million. that the external valuer is independent and neither affiliated nor a related party of the Group. The Group had injected additional funds into SDP Liberia as deemed equity for the purposes of supporting the Liberia We have assessed the recoverable amount of the oil palm mill and operations as SDP Liberia did not meet its operating targets due oil palm estates (collectively known as “plantation assets”) based to lower Crude Palm Oil (“CPO”) and Palm Kernel Oil prices and on the fair value less costs to sell (FVLCTS). The key assumptions incurred higher operating cost which lead to higher losses as of the previous financial year was updated by management with compared to the forecast. These were identified as indicators for external valuer’s assistance to determine the FVLCTS of the an impairment test to be performed for the Group’s PPE and the plantation assets as at 31 December 2018. Company’s cost of investment in relation to its Liberia operations. We evaluated the reasonableness of the key assumptions used Management’s assessment on the recoverable amounts of the in the cash flow projections by comparing CPO selling price, Group’s PPE and the Company’s cost of investment in SDP FFB yields and operating costs to historical results, forecasted Liberia was determined using the fair value less costs of disposal commodity prices and industry data where appropriate. (“FVLCTS”) based on an income approach performed by external valuers, CBRE CH Williams Sdn Bhd. As at 31 December 2018, We involved our valuation experts to assess the discount rate the key assumptions applied during the 30 June 2018 impairment used in determining the recoverable amounts of the Group’s assessment were re-evaluated and updated by management PPE and the Company’s cost of investment in SDP Liberia. The with the assistance of the external valuer and approved by the valuation methodology, evaluated in the previous financial year by Directors. our valuation experts remains appropriate and had been used by the external valuers in determining the FVLCTS. We focused on the recoverability of the carrying amount of the Group’s PPE and the Company’s cost of investment in SDP Liberia We assessed the appropriateness of sensitivity analysis performed due to the significant estimates involved in determining the key by management, including the disclosures, on a reasonable assumptions used in deriving the recoverable amounts principally possible change in the key assumptions and the corresponding CPO selling prices, Fresh Fruit Bunch (“FFB”) yields, operating effect on the respective recoverable amounts by observing the costs and the discount rates. re-performance of the sensitivity analysis by the external valuer.
Based on management’s assessment, impairment losses of Based on the above procedures, we did not note any material RM14.5 million and RM49.6 million were recorded on the Group’s exception to management’s impairment assessment on the PPE in SDP Liberia and the Company’s cost of investment in SDP Group’s PPE in SDP Liberia and the Company’s cost of investment Liberia as at 31 December 2018 respectively, as stated in Notes in SDP Liberia as at 31 December 2018. 16(d)(i) and 21 to the financial statements.
Annual Report // 6-Month Financial Period Ended 31 December 2018 323 Financial Statements Sime Darby Plantation
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SIME DARBY PLANTATION BERHAD (Incorporated in Malaysia) (Company No. 647766 V)
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED)
Key audit matters (continued)
Key audit matters How our audit addressed the key audit matters Recoverability of the Group’s carrying amount of goodwill in New Britain Palm Oil Limited (“NBPOL”)
Refer to Notes 4 and 24(i) to the financial statements.
The intangible assets of the Group’s consolidated financial We evaluated the reasonableness of the key assumptions used by statements include goodwill of RM2,147.6 million which arose from management in the approved cash flow projections by comparing the acquisition of NBPOL group during the financial year ended the FFB yields and CPO selling prices to historical results, 30 June 2015. The goodwill was partly allocated to PT Minamas forecasted commodity prices and industry data where appropriate. Gemilang and its subsidiaries (“Minamas Group”) cash generating We had also agreed the projection period to the lease terms for units (“CGUs”) as Minamas Group operations are expected to the respective CGUs. benefit from the synergies of the acquisition of NBPOL. We assessed the reliability of management’s cash flow projections In accordance with the Group’s policy, the Group determine by comparing their previous years' forecasted results against past whether goodwill is impaired on an annual basis. trends of actual results. We checked that management has also updated the cash flow projections with the updated historical Management performed impairment assessments of the two CGUs results. based on value-in-use (“VIU”) determined using the discounted cash flow models, which was approved by the Directors. A range We involved our valuation experts to assess the discount rates of sensitivity analysis was also performed by management. used in determining the recoverable amounts of the respective CGUs. We focused on the recoverability of the carrying amount of goodwill in NBPOL due to the significant amount and significant We assessed the appropriateness of sensitivity analysis performed estimates involved in determining the key assumptions used in by management, including the disclosures of a reasonable deriving the recoverable amounts of the CGUs, i.e. projection possible change in the key assumptions and the corresponding period, FFB yields, CPO selling prices and the discount rates as effect on the respective recoverable amounts by re-performing disclosed in Note 24(i). the sensitivity analysis.
Based on management’s assessments, no impairment was Based on the above procedures, we did not note any material required as the recoverable amounts exceeded the carrying exception to management’s assessment on the recoverability amount of goodwill in NBPOL as at 31 December 2018. of the Group’s carrying amount of goodwill in NBPOL as at 31 December 2018.
324 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Financial Statements
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SIME DARBY PLANTATION BERHAD (Incorporated in Malaysia) (Company No. 647766 V)
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED)
Information other than the financial statements and auditors’ report thereon
The Directors of the Company are responsible for the other information. The other information comprises Directors’ Report, which we obtained prior to the date of this auditors’ report, and the remaining 31 December 2018 Annual Report of Sime Darby Plantation Berhad, which is expected to be made available to us after that date. Other information does not include the financial statements of the Group and of the Company and our auditors’ report thereon.
Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the financial statements
The Directors of the Company are responsible for the preparation of the financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
(a) Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
(b) Obtain an understanding of internal control relevant to the audit 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 Group’s and the Company’s internal control.
(c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.
Annual Report // 6-Month Financial Period Ended 31 December 2018 325 Financial Statements Sime Darby Plantation
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SIME DARBY PLANTATION BERHAD (Incorporated in Malaysia) (Company No. 647766 V)
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED)
Auditors’ responsibilities for the audit of the financial statements (continued)
(d) Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern.
(e) Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation.
(f) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiaries of which we have not acted as auditors, are disclosed in Note 53 to the financial statements.
OTHER MATTERS
This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
PRICEWATERHOUSECOOPERS PLT LOH LAY CHOON LLP0014401-LCA & AF 1146 02497/03/2020 J Chartered Accountants Chartered Accountant
Kuala Lumpur 5 April 2019
326 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Sixteenth Annual General Meeting (AGM) of Sime Darby Plantation Berhad (SDP or Company) will be held at the Grand Ballroom, First Floor, Sime Darby Convention Centre, 1A, Jalan Bukit Kiara 1, 60000 Kuala Lumpur, Malaysia on Thursday, 23 May 2019 at 10.00 a.m. for the following businesses:
AS ORDINARY BUSINESS
1. To receive the Audited Financial Statements for the financial period ended 31 December 2018 together with the Reports of the Directors and the Auditors thereon. Refer to Explanatory Note 1
2. To approve the payment of Directors’ remuneration to the Non-Executive Directors as disclosed in the Audited Financial Statements for the financial period ended 31 December 2018. Refer to Explanatory Note 2 (Resolution 1)
3. To approve the payment of benefits payable to the Non-Executive Directors based on the remuneration structure as disclosed in Explanatory Note 2 from 24 May 2019 until the next AGM of the Company to be held in 2020. Refer to Explanatory Note 2 (Resolution 2)
4. To re-elect Dato’ Henry Sackville Barlow who was appointed during the year and retires pursuant to Rule 81.2 of the Constitution of the Company and who being eligible, offers himself for re-election. Refer to Explanatory Note 3 (Resolution 3)
5. To re-elect the following Directors who retire pursuant to Rule 103 of the Constitution of the Company and who being eligible, offer themselves for re-election:
(i) Tan Sri Datuk Dr Yusof Basiran (Resolution 4) (ii) Datuk Zaiton Mohd Hassan (Resolution 5) (iii) Dato’ Mohd Nizam Zainordin (Resolution 6) (iv) Dato’ Mohamad Nasir Ab Latif (Resolution 7) Refer to Explanatory Note 3
6. To appoint Messrs PricewaterhouseCoopers PLT as Auditors of the Company for the financial year ending 31 December 2019 and to authorise the Directors to determine their remuneration. Refer to Explanatory Note 4 (Resolution 8)
Annual Report // 6-Month Financial Period Ended 31 December 2018 327 Other Information Sime Darby Plantation
NOTICE OF ANNUAL GENERAL MEETING
AS SPECIAL BUSINESS
7. To consider and, if thought fit, pass the following Ordinary Resolution:
Proposed Renewal of Shareholders’ Mandate for Existing Recurrent Related Party Transactions of a Revenue or Trading Nature
“THAT, in accordance with Paragraph 10.09 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, and subject to the Companies Act, 2016 (CA 2016), the Constitution of the Company, other applicable laws, guidelines, rules and regulations, and the approvals of the relevant government and/or regulatory authorities, approval be and is hereby given to the Company and/or its subsidiary companies to enter into recurrent related party transactions of a revenue or trading nature, as set out in Section 2.3 of the Circular to Shareholders dated 24 April 2019 uploaded together with the 2018 Annual Report, which are entered into in the ordinary course of business which are necessary for the day-to-day operations of the Company and/or its subsidiary companies on normal commercial terms which are not more favourable to the related parties than those generally available to the public, undertaken on arm’s length basis, and are not detrimental to the minority shareholders of the Company (Mandate);
THAT the Mandate is subject to annual renewal and shall continue to be in force until:
(i) the conclusion of the next Annual General Meeting (AGM) of the Company following this AGM at which such Mandate is passed, at which time it will lapse, unless by an ordinary resolution passed at the next AGM the Mandate is renewed; or
(ii) the expiration of the period within which the next AGM is required to be held pursuant to Section 340(2) of CA 2016, (but shall not extend to such extensions as may be allowed pursuant to Section 340(4) of CA 2016); or
(iii) the Mandate is revoked or varied by ordinary resolution passed by shareholders in a general meeting of the Company,
whichever is the earlier;
AND THAT the Directors of the Company and/or any of them be and are/is hereby 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 to give effect to the Mandate.” Refer to Explanatory Note 5 (Resolution 9)
328 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
NOTICE OF ANNUAL GENERAL MEETING
8. Allotment and Issuance of New Ordinary Shares in the Company (SDP Shares) in relation to the Dividend Reinvestment Plan that provides Shareholders of the Company with an Option to Elect to Reinvest their Cash Dividend in New SDP Shares (DRP)
“THAT pursuant to the DRP approved by the Shareholders at the Extraordinary General Meeting held on 21 November 2018, approval be and is hereby given to the Company to allot and issue such number of new SDP Shares from time to time as may be required to be allotted and issued pursuant to the DRP until the conclusion of the next Annual General Meeting (AGM), upon such terms and conditions and to such persons as the Directors of the Company may, in their sole and absolute discretion, deem fit and in the best interest of the Company PROVIDED THAT the issue price of the said new SDP Shares shall be fixed by the Directors at not more than ten percent (10%) discount to the adjusted five (5) market days volume weighted average market price (VWAMP) of SDP Shares immediately prior to the price-fixing date, of which the VWAMP shall be adjusted ex-dividend before applying the aforementioned discount in fixing the issue price of SDP Shares and that such authority to allot and issue SDP Shares shall continue to be in force until the conclusion of the next AGM of the Company.
AND THAT the Directors and the Secretary of the Company be and are hereby authorised to do all such acts and enter into all such transactions, arrangements and agreements and to execute, sign and deliver for and on behalf of the Company, all such documents and impose such terms and conditions or delegate all or any part of its powers as may be necessary or expedient in order to give full effect to the DRP, with full powers to assent to any conditions, modifications, variations and/or amendments (if any) including amendments, modifications, suspension and termination of the DRP as the Directors may, in their absolute discretion, deem fit and in the best interest of the Company and/or as may be imposed or agreed to by any relevant authorities.” Refer to Explanatory Note 6 (Resolution 10)
9. To transact any other business for which due notice shall have been given in accordance with the Companies Act, 2016 and the Constitution of the Company.
FURTHER NOTICE IS HEREBY GIVEN THAT for the purpose of determining a member who shall be entitled to attend this Sixteenth Annual General Meeting, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd in accordance with Rule 63 of the Constitution of the Company and Section 34(1) of the Securities Industry (Central Depositories) Act 1991, to issue a General Meeting Record of Depositors as at 10 May 2019. Only a depositor whose name appears on the Record of Depositors as at 10 May 2019 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.
By Order of the Board
Norzilah Megawati Abdul Rahman (LS0009247) Mazlina Mohd Zain (LS0008287) Company Secretary Company Secretary
Selangor Darul Ehsan, Malaysia 24 April 2019
Annual Report // 6-Month Financial Period Ended 31 December 2018 329 Other Information Sime Darby Plantation
NOTICE OF ANNUAL GENERAL MEETING
NOTES:
Proxy and/or Authorised Representative
1. A member of the Company entitled to attend and vote at the Sixteenth Annual General Meeting (AGM) is entitled to appoint not more than two (2) proxies to exercise all or any of his/her rights to attend, participate, speak and vote at the Sixteenth AGM on his/her behalf. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he/she specifies the proportion of his/her shareholdings to be represented by each proxy. A proxy may, but need not, be a member of the Company.
2. A member of the Company may appoint any person to be his/her proxy without any restriction as to the qualification of such person.
3. Pursuant to Paragraph 8.29A(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all resolutions set out in the Notice of the Sixteenth AGM of the Company shall be put to vote by way of a poll.
4. Where a member of the Company is an Authorised Nominee as defined under the Securities Industry (Central Depositories) Act 1991 (SICDA), he/she may appoint not more than two (2) proxies in respect of each Securities Account he/she holds with ordinary shares of the Company standing to the credit of the said Securities Account to attend and vote at a meeting of the Company instead of him/her.
5. Where a member of the Company is an Exempt Authorised Nominee as defined under SICDA which holds ordinary shares in the Company for multiple beneficial owners in one (1) Securities Account (Omnibus Account), there is no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each Omnibus Account it holds PROVIDED THAT each beneficial owner of ordinary shares, or where the ordinary shares are held on behalf of joint beneficial owners, such joint beneficial owners, shall only be entitled to instruct the Exempt Authorised Nominee to appoint not more than two (2) proxies to attend and vote at a general meeting of the Company instead of the beneficial owner or joint beneficial owners.
6. The instrument appointing a proxy shall be in writing signed by the appointor or his/her attorney duly authorised in writing or, if the appointor is a corporation, either under its common seal or signed by an officer or attorney so authorised, or in any other manner authorised by the Constitution of the Company. Any alteration to the instrument appointing a proxy must be initialled.
7. The appointment of proxy(ies) may be made in a hardcopy form or by electronic means as follows:
(i) In Hardcopy Form
The Form of Proxy or the Power of Attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority, must be deposited at the office of the Share Registrar of the Company, Tricor Investor & Issuing House Services Sdn Bhd, at Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia, no later than Wednesday, 22 May 2019 at 10.00 a.m.
(ii) By Tricor Online System (TIIH Online)
The Proxy Form can be electronically lodged with the Share Registrar of the Company via TIIH Online (applicable to individual shareholder only). The website to access TIIH Online is https://tiih.online (Kindly refer to the Annexure to the Proxy Form - Electronic Lodgement of Proxy Form for General Meeting).
330 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
NOTICE OF ANNUAL GENERAL MEETING
Explanatory Notes
1. Audited Financial Statements for the Financial Period Ended 31 December 2018
The Audited Financial Statements are laid in accordance with Section 340(1)(a) of Companies Act, 2016 (CA 2016) for discussion only. The Audited Financial Statements do not require shareholders’ approval and as such, will not be put forward for voting.
2. Directors’ Remuneration - Fees and Benefits Payable to the Non-Executive Directors
Rule 82.1 of the Constitution of the Company provides that the fees and benefits payable to Directors shall be subject to annual shareholders’ approval at a general meeting. Pursuant to Section 230 of CA 2016, fees of the Directors and any benefits payable to the Directors of a listed company and its subsidiaries shall be approved at a general meeting.
The fees and benefits payable to Directors shall not be increased except pursuant to a resolution passed at a general meeting. There was no increase in the quantum of fees and benefits payable to Directors in the financial period ended 31 December 2018. In this respect, the Board agreed that shareholders’ approval be sought on the Directors’ remuneration in two (2) separate resolutions as follows:
(i) Resolution 1 - Payment of Directors’ Remuneration to the Non-Executive Directors for the Financial Period Ended 31 December 2018
Please refer to page 162 of the Notes to the Financial Statements for the amount of Directors’ Remuneration at the Sime Darby Plantation Berhad (SDP) and the Group levels, to be approved at the Sixteenth Annual General Meeting (AGM) comprising fees and benefits amounting to RM2.261 million. The remuneration of each Director is set out in the Corporate Governance Overview Statement on page 81 of the Company’s 2018 Annual Report.
(ii) Resolution 2 - Payment of Directors’ Benefits Payable to the Non-Executive Directors from 24 May 2019 until the next AGM of the Company to be held in 2020
The benefits payable to the Non-Executive Directors (NED) comprise allowances and other emoluments payable to the Chairman and members of the Board.
The Company is seeking shareholders’ approval for benefits payable to the NEDs from 24 May 2019 until the next AGM to be held in 2020 in accordance with the benefits structure set out below, as and when incurred:
Description Company Amount Meeting Allowance • Sime Darby Oils Zwijndrecht Refinery B.V. €800 per meeting (formerly known as Sime Darby Unimills B.V.) • Sime Darby Oils South Africa (Pty) Ltd ZAR800 per meeting (formerly known as Sime Darby Hudson & Knight (Pty) Ltd) • Sime Darby Oils Liverpool Refinery Limited £200 per meeting (formerly known as New Britain Oils Limited) • PT Minamas Gemilang/PT Anugerah Sumbermakmur (i) Board of Commissioners (BOC) RM1,000 per day (ii) BOC Committee RM1,000 per day Other Benefits • Company car, petrol and driver for Non-Executive Chairman • Telecommunication devices/facilities, medical and insurance coverage
Annual Report // 6-Month Financial Period Ended 31 December 2018 331 Other Information Sime Darby Plantation
NOTICE OF ANNUAL GENERAL MEETING
3. Resolutions 3 to 7 - Re-election of Directors Pursuant to Rule 81.2 and Rule 103 of the Constitution
(i) Rule 81.2 of the Constitution stipulates that a Director appointed by the Board either to fill a casual vacancy or as an addition to the existing Board, shall hold office until the conclusion of the next AGM of the Company and shall be eligible for re-election at such meeting.
Dato’ Henry Sackville Barlow who was appointed during the financial year ending 31 December 2019, being eligible, has offered himself for re-election at the Sixteenth AGM pursuant to Rule 81.2 of the Constitution of the Company.
(ii) Rule 103 of the Constitution expressly states that at least one-third (1/3) of the Directors for the time being shall retire from office at each AGM. A Director retiring at a general meeting shall retain office until the conclusion of the meeting. In addition, Rule 104 of the Constitution states that all Directors shall retire from office once at least in each three (3) years. A retiring Director shall be eligible for re-election.
Tan Sri Datuk Dr Yusof Basiran, Datuk Zaiton Mohd Hassan, Dato’ Mohd Nizam Zainordin and Dato’ Mohamad Nasir Ab Latif being eligible, have offered themselves for re-election at the Sixteenth AGM pursuant to Rule 104 of the Constitution.
The Board recommends the re-election of the above Directors standing for re-election. Justifications on the appointment of Dato’ Henry Sackville Barlow pursuant to Rule 81.2 of the Constitution and the key contributions of the Directors seeking re-election pursuant to Rule 103 of the Constitution are set out in the Nomination & Remuneration Committee (NRC) Report on pages 92 to 94 of the Company’s 2018 Annual Report. All Directors standing for re-election have abstained from deliberation and decision on their own eligibility to stand for re-election at the relevant NRC and Board meetings and will continue to abstain from deliberations and decisions on their own eligibility to stand for re-election at this AGM.
4. Resolution 8 - Re-appointment of Auditors
The Governance & Audit Committee (GAC), at its meeting held on 23 May 2018, approved the adoption of an assessment methodology to appraise the performance, suitability, objectivity and independence of the external auditors, PricewaterhouseCoopers PLT (PwC). The GAC, at its meeting held on 2 April 2019, undertook an annual assessment of the suitability and independence of the external auditors, PwC, in accordance with the policy on External Auditor Appointment & Selection. The GAC considered the following factors in its assessment:
(i) Governance and independency; (ii) Communication of audit planning/audit strategy, and communication of audit findings/audit finalisation and completion with the GAC; and (iii) Quality of services and resources of the firm, processes and the audit team, and fees.
The GAC was satisfied with the suitability of PwC based on the quality of audit, performance, competency and sufficiency of resources provided by PwC to the SDP Group as prescribed under Paragraph 15.21 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. The GAC was also satisfied in its review that the provision of non-audit services by PwC to the Group and the Company for the financial period ended 31 December 2018 did not in any way impair their objectivity and independence as the external auditors of the Company.
The Board had, at its meeting held on 5 April 2019, approved the GAC’s recommendation that shareholders’ approval be sought at the Sixteenth AGM on the appointment of PwC as the external auditors of the Company for the financial year ending 31 December 2019, as set out under Resolution 8. The present external auditors, PwC, have indicated their willingness to continue their services for the financial year ending 31 December 2019.
332 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
NOTICE OF ANNUAL GENERAL MEETING
Explanatory Notes on Special Business
5. Resolution 9 - Proposed Renewal of Shareholders’ Mandate for Existing Recurrent Related Party Transactions of a Revenue or Trading Nature
The proposed Resolution 9, if passed, will enable the Company and/or its subsidiary companies to enter into recurrent transactions involving the interests of the Related Parties, which are of a revenue or trading nature and necessary for the Group's day-to-day operations, subject to the transactions being carried out in the ordinary course of business on terms not more favourable than those generally available to the public and are not detrimental to the minority shareholders of the Company.
Detailed information on the Proposed Renewal of Shareholders’ Mandate is set out in Section 2.3 of the Circular to Shareholders dated 24 April 2019 published on the Company’s website together with the Notice of Annual General Meeting and the 2018 Annual Report of the Company.
6. Resolution 10 - Allotment and Issuance of New Ordinary Shares in the Company (SDP Shares) in relation to the Dividend Reinvestment Plan that provides Shareholders of the Company with an Option to Elect to Reinvest their Cash Dividend in New SDP Shares (DRP)
The proposed Resolution 10, if passed, will give authority to the Directors of the Company to allot and issue new SDP Shares pursuant to the DRP, and such authority shall expire at the conclusion of the next AGM of the Company.
STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING (Pursuant to Paragraph 8.27(2) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad)
The profile of the Directors who are standing for re-election as enumerated in Resolutions 3 to 7 above at the Sixteenth AGM of Sime Darby Plantation Berhad are set out in the “Our Board of Directors” section on pages 64 to 69 of the Company’s 2018 Annual Report.
The details of any interest in securities held by the said Directors are set out in the “Directors’ Report” section on page 114 of the Company’s 2018 Annual Report.
Annual Report // 6-Month Financial Period Ended 31 December 2018 333 Other Information Sime Darby Plantation
ANALYSIS OF SHAREHOLDINGS As at 2 April 2019
Total Number of Issued Shares : 6,884,575,283 ordinary shares
Class of Shares : Ordinary shares
Voting Rights : One vote per ordinary share in the case of a poll and one vote per person on a show of hand
Size of Shareholdings No. of Shareholders % of Shareholders No. of Shares Held % of Issued Shares Less than 100 2,639 10.30 68,144 0.00 100 to 1,000 6,130 23.93 3,692,099 0.06 1,001 to 10,000 12,414 48.47 40,949,554 0.59 10,001 to 100,000 3,466 13.53 96,597,000 1.40 100,001 to less than 5% of issued 962 3.76 2,869,327,240 41.68 shares 5% and above of issued shares 2 0.01 3,873,941,246 56.27 Total 25,613 100.00 6,884,575,283 100.00
Classification of Shareholders No. of Shareholders % of Shareholders No. of Shares Held % of Issued Shares Individuals 20,884 81.54 131,927,714 1.92 Banks/Finance Companies 84 0.33 4,419,831,339 64.19 Investment Trusts/Foundations/ 16 0.06 517,622 0.01 Charities Industrial and Commercial Companies 570 2.22 134,990,344 1.96 Government Agencies/Institutions 3 0.01 1,185,890 0.02 Nominees 4,054 15.83 2,196,017,099 31.90 Others 2 0.01 105,275 0.00 Total 25,613 100.00 6,884,575,283 100.00
Directors’ Direct and Indirect Interests in the Company and its Related Corporations
As disclosed in the Directors’ Report of the Financial Statements as set out on page 114, none of the Directors of the Company has any interest, direct or indirect, in shares, or debentures of, the Company or its related corporations.
334 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
ANALYSIS OF SHAREHOLDINGS As at 2 April 2019
TOP 30 SECURITIES ACCOUNT HOLDERS ACCORDING TO THE RECORD OF DEPOSITORS
No. Name of Shareholder No. of Shares Held % of Issued Shares Amanahraya Trustees Berhad 1. 3,005,678,436 43.66 Amanah Saham Bumiputera Citigroup Nominees (Tempatan) Sdn Bhd 2. 868,262,810 12.61 Employees Provident Fund Board 3. Kumpulan Wang Persaraan (Diperbadankan) 314,207,878 4.56 4. Permodalan Nasional Berhad 297,657,611 4.32 Amanahraya Trustees Berhad 5. 167,373,103 2.43 Amanah Saham Malaysia 2 - Wawasan Amanahraya Trustees Berhad 6. 162,621,454 2.36 Amanah Saham Malaysia Amanahraya Trustees Berhad 7. 102,041,237 1.48 Amanah Saham Bumiputera 2 Amanahraya Trustees Berhad 8. 66,650,437 0.97 Amanah Saham Malaysia 3 Citigroup Nominees (Tempatan) Sdn Bhd 9. 62,682,549 0.91 Great Eastern Life Assurance (Malaysia) Berhad (PAR 1) 10. Urusharta Jamaah Sdn Bhd 59,363,900 0.86 HSBC Nominees (Asing) Sdn Bhd 11. 56,804,679 0.83 JPMCB NA for Vanguard Emerging Markets Stock Index Fund Cartaban Nominees (Asing) Sdn Bhd 12. 56,688,428 0.83 Exempt AN for State Street Bank & Trust Company (West CLT OD67) HSBC Nominees (Asing) Sdn Bhd 13. 55,367,044 0.81 JPMCB NA for Vanguard Total International Stock Index Fund Amanahraya Trustees Berhad 14. 53,609,700 0.78 Amanah Saham Bumiputera 3 - Didik 15. Valuecap Sdn Bhd 50,941,900 0.74 Cartaban Nominees (Tempatan) Sdn Bhd 16. 46,574,227 0.68 PAMB for Prulink Equity Fund Maybank Nominees (Tempatan) Sdn Bhd 17. 45,000,000 0.65 Maybank Trustees Berhad for Public Ittikal Fund (N14011970240) Citigroup Nominees (Tempatan) Sdn Bhd 18. 40,462,700 0.59 Employees Provident Fund Board (Nomura)
Annual Report // 6-Month Financial Period Ended 31 December 2018 335 Other Information Sime Darby Plantation
ANALYSIS OF SHAREHOLDINGS As at 2 April 2019
No. Name of Shareholder No. of Shares Held % of Issued Shares Maybank Nominees (Tempatan) Sdn Bhd 19. Maybank Trustees Berhad for Public Regular Savings Fund 33,346,216 0.48 (N14011940100) Citigroup Nominees (Tempatan) Sdn Bhd 20. 32,590,376 0.47 Exempt AN for AIA Bhd Amanahraya Trustees Berhad 21. 26,380,004 0.38 Public Islamic Select Enterprises Fund Amanahraya Trustees Berhad 22. 25,917,863 0.38 Public Islamic Dividend Fund Cartaban Nominees (Asing) Sdn Bhd 23. 24,537,661 0.36 GIC Private Limited for Government of Singapore (C) HSBC Nominees (Asing) Sdn Bhd 24. JPMCB NA for Flexshares Morningstar Global Upstream Natural 21,646,800 0.31 Resources Index Fund Maybank Nominees (Tempatan) Sdn Bhd 25. MTrustee Berhad for CIMB Islamic Dali Equity Growth Fund 21,608,303 0.31 (UT-CIMB-DALI) (419455) Amanahraya Trustees Berhad 26. 18,844,187 0.27 Public Ittikal Sequel Fund Citigroup Nominees (Tempatan) Sdn Bhd 27. 18,620,800 0.27 Employees Provident Fund Board (CIMB PRIN) Citigroup Nominees (Asing) Sdn Bhd 28. 16,147,700 0.23 CBHK for Kuwait Investment Authority (FUND 208) Citigroup Nominees (Tempatan) Sendirian Berhad 29. 15,537,602 0.23 Great Eastern Life Assurance (Malaysia) Berhad (PAR 3) 30. Pertubuhan Keselamatan Sosial 14,395,465 0.21 TOTAL 5,781,561,070 83.97
SUBSTANTIAL SHAREHOLDERS ACCORDING TO THE REGISTER OF SUBSTANTIAL SHAREHOLDERS
Name of Substantial No. of Shares Held % of No. of Shares Held % of No. Shareholder (Direct Interest) Issued Shares (Indirect/Deemed Interest) Issued Shares AmanahRaya Trustees Berhad 1. 3,005,678,436 43.66 - - Amanah Saham Bumiputera 2. Employees Provident Fund Board 873,287,610 12.69 89,446,421 1.30
336 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
ADDITIONAL COMPLIANCE INFORMATION
Information pertaining to Sime Darby Plantation Berhad (SDP or Company) and Group for the financial period under review is as follows:
UTILISATION OF PROCEEDS RAISED FROM CORPORATE PROPOSAL
There was no proceed raised from corporate proposals during the financial period ended 31 December 2018.
AUDIT AND NON-AUDIT FEES
(i) The amount of audit fees paid or payable to the external auditors, Messrs PricewaterhouseCoopers PLT (PwC), for services rendered to the Group and the Company for the financial period ended 31 December 2018 amounted to RM8.97 million and RM1.56 million, respectively.
(ii) The amount of non-audit fees paid or payable to the external auditors, PwC, and their affiliated companies for services rendered to the Group and the Company for the financial period ended 31 December 2018 amounted to RM1.59 million and RM0.15 million, respectively.
MATERIAL CONTRACTS INVOLVING INTERESTS OF DIRECTORS AND MAJOR SHAREHOLDERS
There were no material contracts entered into by the Company and its subsidiaries involving interests of Directors and Major Shareholders since the end of the previous financial year of 30 June 2018.
CONTRACTS RELATING TO LOANS
There were no contracts relating to loans by the Company involving interests of Directors and Major Shareholders during the financial period ended 31 December 2018.
RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE
At the Fifteenth Annual General Meeting (AGM) held on 21 November 2018, the Company obtained a general mandate from its shareholders for recurrent related party transactions of a revenue or trading nature, to be entered into by the Company and/or its subsidiaries (RRPT Mandate).
The RRPT Mandate is valid until the conclusion of the forthcoming Sixteenth AGM of the Company to be held on 23 May 2019.
The Company proposes to seek a renewal of the existing RRPT Mandate at its forthcoming Sixteenth AGM. The renewal of the existing RRPT Mandate, if approved by the shareholders, will be valid until the conclusion of the Company’s next AGM. Details of the RRPT Mandate being sought are provided in the Circular to Shareholders dated 24 April 2019 uploaded together with the Annual Report.
Pursuant to Paragraph 10.09(2)(b) and Paragraph 3.1.5 of Practice Note 12 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, details of the recurrent related party transactions of a revenue or trading nature entered into during the financial period ended 31 December 2018 by the Company and/or its subsidiaries were as follows:
Annual Report // 6-Month Financial Period Ended 31 December 2018 337 Other Information Sime Darby Plantation
ADDITIONAL COMPLIANCE INFORMATION
Company Transacting Party Nature of Transaction Value of Transaction RM’ million Transactions with Subsidiaries of Sime Darby Berhad (SDB) SDP Kumpulan Sime Darby Leaseback of the Malaysia Vision Valley (MVV) Land 3.4 Berhad (KSDB) 1 from KSDB to SDP for the SDP Group to carry out planting/replanting, maintenance of oil palm, harvesting and selling of fresh fruit bunches (FFB) for 3,560 hectares of Labu and New Labu Estates located at Mukim Labu, Seremban, Negeri Sembilan for a term of three (3) years from 30 June 2017
The rental expenses are payable on a monthly basis SDP Sime Darby Malaysia Grant of a non-exclusive, non-assignable and 2.0 Berhad (SDMB) non-transferable licence to use the “SIME DARBY” mark, Sime Darby Shield Device Logo, Shield Device Logo, Sime Darby in Chinese Characters, the “DEVELOPING SUSTAINABLE FUTURES” tagline and the “DELIVERING SUSTAINABLE FUTURES” tagline worldwide, solely in the course of or in connection with SDP’s business via the Trademark and Brand License Agreement by SDMB to SDP SDP and Group Sime Darby Global Receipt of centralised operational support, i.e. payroll, 32.6 Services Centre Sdn accounting and information technology processing, Bhd and other administration services SDP and its following • Sime Darby Auto Purchase of motor vehicles and charges for vehicle 1.6 subsidiaries: ConneXion Sdn Bhd maintenance services on an ad hoc basis • Sime Darby Auto • Sime Darby Plantation Hyundai Sdn Bhd (Sabah) Sdn Bhd (SDP Sabah) • Sime Darby Plantation (Sarawak) Sdn Bhd (SDP Sarawak) • Sime Darby Research Sdn Bhd (SD Research) • Sime Darby Seeds & Agricultural Services Sdn Bhd (SD SAS) • Sime Darby Agri-Bio Sdn Bhd • Sime Darby Technology Centre Sdn Bhd (SD TC) • The China Engineers (Malaysia) Sdn Bhd (TCEM) • Wangsa Mujur Sdn Bhd (WMSB)
338 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
ADDITIONAL COMPLIANCE INFORMATION
Company Transacting Party Nature of Transaction Value of Transaction RM’ million SDP and its following Sime Darby Car leasing charges payable on an ad hoc basis 1.4 subsidiaries: Rent-A-Car Sdn Bhd
• SDP Sabah • SDP Sarawak • SD TC • Sime Darby Biotech Laboratories Sdn Bhd SDP and its following • Sime Industrial Purchase of heavy equipment and spare parts, and 43.9 subsidiaries: Holdings Sdn Bhd receipt of maintenance services on an ad hoc basis • Sime Kubota Sdn • SDP Sabah Bhd • SDP Sarawak • Hastings Deering • SD Research (PNG) Limited • SD SAS • Hastings Deering • SD TC (Solomon Islands) • TCEM Limited • WMSB • Guthrie Industries Malaysia Sendirian Berhad • Chartquest Sdn Bhd SDP Sabah Sime Darby Energy Design, engineering, procurement, construction, 0.0 Solutions Sdn Bhd testing, commissioning and completion of palm oil (less than (formerly known as mill effluent biogas power plant for Sandakan Bay, RM100,000) Sime Darby Offshore Binuang and Giram. Engineering Sdn Bhd) Transactions with Sime Darby Property Berhad (SD Property) and its subsidiaries SDP Sime Darby Elmina Rental income from the tenancy of quarry land Nil Development Sdn Bhd of 80.14 hectares of Tanah Merah Estate located at Mukim Jimah, District of Port Dickson, Negeri Sembilan for a term of 30 years from 1 January 1995 until 31 December 2024
The rental income is receivable on an annual basis SDP and its following SD Property and its Rental expenses from leasing of the following 2.9 subsidiaries: following subsidiaries: agricultural lands:
• Sime Darby Latex Sdn Bhd • Sime Darby Ampar (i) Six (6) tenancy agreements for a term of two (2) • SDP Sabah Tenang Sdn Bhd years from 1 July 2017 with an option to renew • Sime Darby for a further term of one (1) year in respect of: Property (Bukit Selarong) Sdn Bhd (a) 95 hectares of Bukit Kerayong Estate • Sime Darby located at Mukim Kapar, Klang, Selangor Property (Nilai) Sdn (b) 120 hectares of Sua Betong Estate located Bhd at Mukim Si Rusa, Port Dickson, Negeri Sembilan (c) 61 hectares of Mostyn Estate located at Mukim Kunak, Tawau, Sabah
Annual Report // 6-Month Financial Period Ended 31 December 2018 339 Other Information Sime Darby Plantation
ADDITIONAL COMPLIANCE INFORMATION
Company Transacting Party Nature of Transaction Value of Transaction RM’ million • Sime Darby (d) 20 hectares of Bukit Selarong Estate Properties (Sabah) located at Mukim Naga Lilit, Kulim, Kedah Sdn Bhd (e) 371 hectares of Padang Buluh Estate • Sime Darby Lukut located at Mukim Bandar Gurun, Kuala Development Muda, Kedah Sdn Bhd (f) 138.76 hectares of Lanadron Estate located • Sime Darby at Mukim Jorak, Muar, Johor Properties Realty Sdn Bhd (ii) Three (3) tenancy agreements for a term of two • Sime Darby (2) years from 1 November 2017 with an option Property (Lembah to renew for a further term of one (1) year in Acob) Sdn Bhd respect of: • Sime Darby Property (Utara) (a) 121 hectares of Bukit Selarong Estate Sdn Bhd located at Mukim Padang Meha, Kulim, • Sime Darby Pagoh Kedah Development (b) 495 hectares of Bukit Lagong Estate Sdn Bhd located at Mukim Rawang, Gombak, Selangor (c) 206.59 hectares of New Labu Estate located at Mukim Labu, Nilai, Negeri Sembilan
(iii) A tenancy agreement for a term of two (2) years from 1 January 2018 with an option to renew for a further term of one (1) year for 269.5 hectares of Labu Estate located at Mukim Dengkil, Sepang, Selangor
(iv) A tenancy agreement for a term of two (2) years from 1 November 2017 with an option to renew for a further term of one (1) year for 563.05 hectares of Elmina Estate located at Mukim Rawang, Gombak, Selangor
(v) A tenancy agreement for a term of three (3) years from 29 September 2017 with an option to renew for a further three (3) years of the MVV Land 2 for 760.95 hectares of Labu and New Labu Estates located at Mukim Labu, Seremban, Negeri Sembilan
The rental expenses are payable on a monthly basis
340 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
ADDITIONAL COMPLIANCE INFORMATION
Company Transacting Party Nature of Transaction Value of Transaction RM’ million Transaction with Yayasan Sime Darby1 SDP Yayasan Sime Darby Rental income from office space located at Level 5, 0.1 Block C Plantation Tower for a period of 12 months commencing 1 July 2018 with an option to extend for a further three (3) years
The rental income is receivable on a monthly basis Transaction with UMW Holdings Berhad (UMWH) Group2 SDP Subsidiary of UMWH, Purchases of motor vehicles 1.3 namely UMW Toyota Motor Sdn Bhd
Notes:
1 SDP, SDB and SD Property are the registered corporate members of Yayasan Sime Darby, a company limited by guarantee.
2 AmanahRaya Trustees Berhad - Amanah Saham Bumiputera (ASB) is a major shareholder of SDP with 43.66% direct equity interest in SDP as at 5 April 2019 and is deemed interested in the Recurrent Related Party Transactions (Interested Major Shareholder). ASB is also a Major Shareholder of SDB and SD Property with 42.42% direct equity interest in SDB and 43.87% direct equity interest in SD Property, as at 5 April 2019. ASB is also a Major Shareholder of UMWH, holding 40.81% direct equity interest as at 5 April 2019.
Annual Report // 6-Month Financial Period Ended 31 December 2018 341 Other Information Sime Darby Plantation
SHARE PRICE MOVEMENT & FINANCIAL CALENDAR For the Financial Period Ended 31 December 2018
Volume Traded Closing Price of (Million shares) the month (RM) (RHS)
6.00 100.00
90.00
5.00 80.00
80.25 70.00 4.00 75.24
66.38 67.63 60.00
3.00 62.15 50.00
40.00 42.55 2.00 30.00
20.00 1.00
10.00
0.00 0.00
Highest (RM) 5.38 5.37 5.36 5.28 5.29 4.94 Lowest (RM) 5.16 5.16 5.21 5.12 4.70 4.09 Volume Traded 42.55 62.15 66.38 75.24 80.25 67.63 (Million shares) (RHS)
Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18
ANNOUNCEMENT OF UNAUDITED CONSOLIDATED RESULTS
1st Quarter ended 30 September 2018 2nd Quarter ended 31 December 2018 23 November 2018 28 February 2019
DIVIDEND
Notice Date Entitlement Date Payment Date Final Single Tier Dividend of 1.7 sen Per Ordinary Share 28 February 2019 10 May 2019 21 May 2019
SIXTEENTH ANNUAL GENERAL MEETING
Notice Date : 24 April 2019 Meeting Date : 23 May 2019
342 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
PROPERTIES OF THE GROUP As at 31 December 2018
Age of Land area Year of building Net book value Location Tenure (Hectares) acquisition (Years)+ Description (RM million)
UPSTREAM PROPERTIES
MALAYSIA
Kedah Darul Aman Anak Kulim, Bukit Hijau, Bukit Freehold 18,893 1978-2006 14 Oil palm and rubber 445 Selarong, Jentayu, Padang Buluh, estates and a palm oil Somme, Sungai Dingin mill Bukit Hijau Leasehold 9 2006 – Rubber estate ^ expiring 2068
Perak Darul Ridzuan Bagan Datoh, Bikam, Chersonese, Freehold 37,155 1978-2001 10-26 Oil palm and rubber 949 Cluny, Elphil, Flemington, estates and 5 palm oil Holyrood, Kalumpong, Kamuning, mills Kinta Kellas, Sabrang, Selaba, Seri Intan, Sogomana, Sungai Samak, Sungei Wangi, Tali Ayer Chersonese, Cluny, Kalumpong, Leasehold 5,446 1978-1987 – Oil palm estates 135 Kamuning, Kinta Kellas, Sogomana, expiring Sungai Samak, Sungei Wangi, 2035-2897 Tali Ayer
Pahang Darul Makmur Bukit Puteri, Chenor, Jabor, Freehold 9,336 1985-2006 23 Oil palm estates and 288 Jentar, Kerdau, Mentakab, 2 palm oil mills Sungai Mai Bukit Puteri, Chenor, Kerdau, Leasehold 10,621 1985-1992 13-23 Oil palm estates and 113 Sungai Mai expiring a palm oil mill 2057-2086
Selangor Darul Ehsan Banting, Bestari Jaya, Bukit Freehold 36,259 1978-2013 2-28 Oil palm estates, 1,289 Cheraka, Bukit Kerayong, Bukit 4 palm oil mills, biodiesel Lagong, Bukit Rajah, Bukit Rotan, and kernel crushing Bukit Talang, Dusun Durian, plants, rat bait factory, East Carey Island, Elmina, laboratories, research Sabak Bernam, Sepang, Sungai centres, warehouse and Buloh, Teluk Panglima Garang, a training centre Tennamaram, West Carey Island East Carey Island, Port Klang, Leasehold 171 1978-2010 43 Oil palm estates and 5 Sungai Buloh, Tennamaram expiring a bulking plant 2018-2109
Negeri Sembilan Darul Khusus Bradwall, Bukit Pelandok, Bukit Freehold 36,021 1978-2009 7-22 Oil palm and rubber 809 Pilah, Kok Foh, Labu, New Labu, estates, 4 palm oil Muar River, P.D. Lukut, Pertang, mills and a research Rantau, Salak, Sengkang, Siliau, laboratory Sungai Gemas, Sungai Sabaling, St Helier, Sua Betong, Sungai Bharu, Tampin Linggi, Tanah Merah Kok Foh, Sungai Bharu Leasehold 145 1982-1993 – Oil palm estates 2 expiring 2034-2072
Annual Report // 6-Month Financial Period Ended 31 December 2018 343 Other Information Sime Darby Plantation
PROPERTIES OF THE GROUP As at 31 December 2018 (continued)
Age of Land area Year of building Net book value Location Tenure (Hectares) acquisition (Years)+ Description (RM million)
UPSTREAM PROPERTIES (continued)
MALAYSIA (continued)
Melaka Bukit Asahan, Diamond Jubilee, Freehold 14,779 1978-2011 12-20 Oil palm estates and 239 Kempas, Kemuning, Serkam 2 palm oil mills Leasehold 470 1982-1992 – Oil palm estates 3 expiring 2025-2071
Johor Darul Takzim Batu Anam, Bukit Badak, Bukit Freehold 54,402 1978-2012 2-23 Oil palm and rubber 1,453 Benut, Bukit Paloh, Cenas, CEP estates, 4 palm oil mills, Nyior, CEP Renggam, Cha’ah, a research centre and Gunung Mas, Hadapan, Kempas 2 rubber factories Klebang, Kulai, Lambak, Lanadron, Layang, New Pagoh, Nordanal, North Labis, Pagoh, Pekan, Pengkalan Bukit, Sembrong, Seri Pulai, Sungai Senarut, Sungai Simpang Kiri, Tangkah, Tun Dr. Ismail, Ulu Remis, Welch, Yong Peng Cenas, CEP Nyior, Cha’ah, Leasehold 18,612 1978-2012 23-27 Oil palm estates and 238 Lanadron, Layang, Muar River, expiring 2 palm oil mills Pekan, Sembrong, Sungai Senarut, 2020-2918 Sungai Simpang Kiri, Ulu Remis
Sabah Binuang, Giram, Imam, Jeleta Leasehold 53,676 1978-1983 12-33 Oil palm estates, 5 palm 1,314 Bumi, Kunak, Melalap, Merotai, expiring oil mills, a bulking plant Mostyn, Sandakan Bay, Sapong, 2019-2940 and a research centre Segaliud, Sentosa, Sungang, Table, Tiger, Tigowis, Tingkayu, Tun Tan Siew Sin, Tunku
Sarawak Bayu, Belian, Chartquest, Damai, Leasehold 47,280 1990-2004 16-24 Oil palm estates and 709 Derawan, Dulang, Kelida, Lavang, expiring 4 palm oil mills Paroh, Pekaka, Rajawali, Rasan, 2048-2082 Ruai, Sahua, Samudera, Semarak, Takau
Upstream Malaysia Properties 343,275 7,991
344 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
PROPERTIES OF THE GROUP As at 31 December 2018 (continued)
Age of Land area Year of building Net book value Location Tenure (Hectares) acquisition (Years)+ Description (RM million)
UPSTREAM PROPERTIES (continued)
INDONESIA
Kalimantan - West Awatan, Beturus, East, Kelampai, Leasehold 48,656 2001-2013 8-17 Oil palm estates, 3 palm 248 Lembiru, Pelanjau, Mas 1 – 4, expiring 2030 oil mills and a bulking Sei Mawang, Sungai Putih, West plant
Kalimantan - Central Baras Danum, Batang Garing, Leasehold 59,116 2001-2018 11-22 Oil palm estates, 3 palm 366 Hatan Tiring, Kawan Batu, expiring oil mills, a bulking plant Kuala Kuayan, Pemantang, Sapiri, 2033-2034 and a kernel crushing Sekunyir, Seruyan, Sukamandang, plant Barito
Kalimantan - South Angsana, Bakau, Bebunga, Betung, Leasehold 86,924 2001-2012 2-23 Oil palm estates, 8 palm 1,031 Binturung, Gunung Aru, Gunung expiring oil mills, 2 bulking plants Kemasan, Gunung Sari, Lanting, 2032-2039 and a kernel crushing Laut Timur, Matalok, Mustika, plant Pantai Bonati, Pantai Timur, Pondok Labu, Rampa, Randi, Rantau, Sangkoh, Sekayu, Selabak, Sesulung, Sungai Cengal
Sulawesi - Central Ungkaya Leasehold 4,712 2001-2011 7-24 Oil palm estate, a palm 66 expiring 2024 oil mill and a bulking plant
Sumatera - Jambi Panjang Leasehold 4,000 2001-2007 11 Oil palm estate and 37 expiring 2038 a palm oil mill
Sumatera - South Bumi Ayu, Bukit Pinang, Karang Leasehold 21,175 2001-2002 16-18 Oil palm estates and 240 Ringin, Mangun Jaya, Napal, expiring 2 palm oil mills Rantau Panjang, Sungai Jernih, 2033-2034 Sungai Pinang Bangka Belitung Leasehold 10,045 2012 – Rubber estates 4 expiring 2072
Sumatera - East Aceh Batang Ara, Blang Simpo 1 & 2, Leasehold 8,820 2001-2008 21-36 Oil palm estates and 135 Tamiang expiring a palm oil mill 2022-2037
Sumatera - Riau Alur Damai, Aneka Persada, Leasehold 54,835 2001-2015 5-23 Oil palm estates, 5 palm 691 Mandah, Menggala 1 – 3, Nusa expiring oil mills and a research Lestari, Nusa Persada, Pinang 2031-2036 centre Sebatang, Rotan Semelur, Teluk Bakau, Teluk Siak
Annual Report // 6-Month Financial Period Ended 31 December 2018 345 Other Information Sime Darby Plantation
PROPERTIES OF THE GROUP As at 31 December 2018 (continued)
Age of Land area Year of building Net book value Location Tenure (Hectares) acquisition (Years)+ Description (RM million)
UPSTREAM PROPERTIES (continued)
INDONESIA (continued)
Sumatera – North Deli Serdang Leasehold 972 2015 – Rubber estate, oil palm 30 expiring 2023 nursery and office building
Upstream Indonesia Properties 299,255 2,848
LIBERIA
Bomi, Bong 1 & 2, Grand Cape Leasehold 220,000 2009 5-8 Oil palm and rubber 208 Mount, Gbarpolu, Lofa expiring 2072 estates
PAPUA NEW GUINEA
West New Britain, Morobe, Oro, Leasehold 138,148 2018 2-46 Oil palm estates, a sugar 4,091 Milne Bay, New Ireland,Markham expiring cane, plantation, grazing, Valley 2018-2107 pastures, a refinery, 2 biogas plants, a sugar factory, 11 palm oil mills, 5 kernel crushing plants, and 2 abattoirs
SOLOMON ISLANDS Guadalcanal Leasehold 8,315 2015 3-13 Oil palm estates, a palm 329 expiring oil mills and a kernel 2043-2065 crushing plant
Upstream Properties 1,008,969 15,467
DOWNSTREAM AND OTHERS PROPERTIES
MALAYSIA
Selangor Darul Ehsan Teluk Panglima Garang Freehold 2 2012 – Vacant land 11 North Port Edible Oil Refinery Leasehold 17 2006-2012 8-10 Refineries 137 Complex, Teluk Panglima Garang expiring 2076-2105
Johor Darul Takzim Pasir Gudang Leasehold 6 1974-1985 43 Refinery 10 expiring 2035-2043
Sarawak Kawasan Perindustrian Kidurong, Leasehold 14 2004 5-11 Refinery and a kernel 27 Bintulu expiring 2072 crushing plant
Downstream and Others 39 185 Properties - Malaysia
346 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
PROPERTIES OF THE GROUP As at 31 December 2018 (continued)
Age of Land area Year of building Net book value Location Tenure (Hectares) acquisition (Years)+ Description (RM million)
DOWNSTREAM AND OTHERS PROPERTIES (continued)
Overseas
INDONESIA
Desa Sei Taib, Kecamatan Pulau Leasehold 32 2014 4-5 Refinery 101 Laut, Kalimantan expiring 2044
THAILAND
Sukhumvit Road, Bangkok Freehold – 1986-2011 11-30 Office buildings 6 Poochaosamingprai Road, Samut Freehold 5 1986 11-30 Refinery 43 Prakan Yok Krabat-Laksi Road, Samut Freehold 6 1986 – Vacant land 8 Sakhon Tiwanon Road, Nonthaburi Freehold 13 2014 33-38 Crushing and refining 89 plant and office building
THE NETHERLANDS
Lindtsedijk, Zwijndrecht Freehold 11 2002 5-87 Refinery and a research 159 centre
SOUTH AFRICA
Boksburg Leasehold 1 2004 7 Refinery ^ expiring 2019
UNITED KINGDOM
Liverpool Leasehold 3 2015 4-9 Refinery and office 60 expiring 2034 building
PAPUA NEW GUINEA
Markham valley Leasehold 1 2018 10-3 2 copra mills 8 expiring 2033
Downstream and Others 72 474 Properties - Overseas Downstream and Others 111 659 Properties
Annual Report // 6-Month Financial Period Ended 31 December 2018 347 Other Information Sime Darby Plantation
PROPERTIES OF THE GROUP As at 31 December 2018 (continued)
Age of Land area Year of building Net book value Location Tenure (Hectares) acquisition (Years)+ Description (RM million)
GENERAL
MALAYSIA
Selangor Darul Ehsan Plantation Tower, Freehold 2 2012 5 Office complex 227 Oasis, Ara Damansara
Negeri Sembilan Darul Khusus Port Dickson Freehold 3 2018 24-60 Holiday bungalow 10
Pahang Darul Makmur Cameron Highlands Leasehold 2 2018 32-89 Holiday bungalow 2 expiring 2026-2082
Plantation Properties - 7 239 General Total Plantation Properties 1,009,087 16,365
+ The age of building is in respect of the building, mill and plant ^ NBV less than RM1 million
348 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
NOTICE TO SHAREHOLDERS Under The Personal Data Protection Act 2010
Sime Darby Plantation Berhad (“SDP” or “we” or “us” or “our”) strives to protect your personal data in accordance with the Personal Data Protection Act 2010 (“the Act”). The Act was enacted to regulate the processing of personal data. To comply with the Act, we are required to manage the personal data that we collect from you relating to your shareholding in SDP.
The purposes for which your personal data may be used are, but not limited to:
• Internal record keeping including but not limited to the registration and management of your shareholding in SDP • To provide services to you • To communicate with you as a shareholder of SDP • To better understand your needs as a shareholder of SDP • For security and fraud prevention purposes • For the purposes of statistical analysis of data • For marketing activities • For the purposes of our corporate governance • To send you event invitations based on selected events • To comply with any legal, statutory and/or regulatory requirements • For the purposes of inclusion in media engagements and/or any relevant or related events • For the purposes of us preparing guest invitations, registration and/or sign-ups for our events • For the purposes of printed and on-line publications
(collectively, “the Purposes”)
Your personal data is or will be collected from information provided by you, including but not limited to, postal, facsimile, telephone, e-mail and online communications with or from you, and information provided by third parties, including but not limited to, Bursa Malaysia Berhad and any other stock exchange, and your stockbrokers and remisiers.
You may be required to supply us with your name, identity card/passport number, correspondence address, telephone number, facsimile number and email address.
If you fail to supply us with such personal data, we may not be able to process and/or disclose your personal data for any of the Purposes.
Please be informed that your personal data may be disclosed, disseminated and/or transferred to companies within the SDP Group (including the holding company, subsidiaries, related and affiliated companies, both local and international), whether present or future (collectively, “the Group”) or to any third party organisations or persons for the purpose of fulfilling our obligations to you in respect of the Purposes and all such other purposes that are related to the Purposes and also in providing integrated services, maintaining and storing records including but not limited to the share registrar(s) appointed by us to manage the registration of shareholders.
The processing, disclosure, dissemination and/or transfer of your personal data by us and/or the Group and/or third party organisations or persons may result in your personal data being transferred outside of Malaysia.
To this end, we are committed to ensuring the confidentiality, protection, security and accuracy of your personal data made available to us. It is your obligation to ensure that all personal data submitted to us and retained by us are accurate, not misleading, updated and complete in all aspects. For the avoidance of doubt, we and/or the Group and/or our or their employees or authorised officers or agents will not be responsible for any personal data submitted by you to us that is inaccurate, misleading, not up to date and incomplete.
Annual Report // 6-Month Financial Period Ended 31 December 2018 349 Other Information Sime Darby Plantation
NOTICE TO SHAREHOLDERS Under The Personal Data Protection Act 2010
Further, we may request your assistance to procure the consent of third parties including, but not limited to your proxy(ies) whose personal data is made available by you to us and you hereby agree to use your best endeavours to do so.
You may at any time after the submission of your personal data to us, request for information relating to your personal data by contacting our share registrar Tricor Investor & Issuing House Services Sdn Bhd, if you wish to enquire about any aspect of share registration matters:
Tricor Investor & Issuing House Services Sdn Bhd Unit 32-01, Level 32, Tower A Vertical Business Suite Avenue 3, Bangsar South No. 8, Jalan Kerinchi 59200 Kuala Lumpur.
Attention : Ms Lim Lay Kiow, Senior Manager Tel : 03-2783 9299 e-mail : [email protected]
In addition, you may request for access to your personal data by contacting your broker or alternatively Tricor Investor & Issuing House Services Sdn Bhd as shown above if:
• you require access, limit access and/or make any correction and/or update to your personal data subject to compliance of such request for access limitation, corrections and/or updates not being refused under the provisions of the Act and/or existing laws; or • you wish to enquire about your personal data.
Any personal data retained by us shall be destroyed and/or deleted from our records and system in accordance with our retention policy in the event such data is no longer required for the said Purposes.
In the event of any inconsistency between the English version and the Bahasa Malaysia version of this Notice, the English version shall prevail over the Bahasa Malaysia version.
We shall proceed to continue to process your personal data for the Purposes as set out above, on the basis that you have consented to our processing of your personal data in accordance with this notice until we receive a notification from you concerning our processing of your personal data and you hereby declare that you have read, understood and accepted the statements and terms herein. SDP reserves the right to change and/or amend this notice from time to time.
350 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
NOTIS KEPADA PEMEGANG SAHAM Di Bawah Akta Perlindungan Data Peribadi 2010
Sime Darby Plantation Berhad (“SDP” atau “kami”) bermatlamat untuk melindungi data peribadi anda selaras dengan Akta Perlindungan Data Peribadi 2010 (“Akta”). Akta tersebut digubal untuk mengawal selia pemprosesan data peribadi. Bagi mematuhi Akta tersebut, kami perlu menguruskan data peribadi yang kami kumpulkan daripada anda berkenaan dengan pegangan saham anda di SDP.
Tujuan penggunaan data peribadi anda adalah untuk, tetapi tidak terhad kepada:
• Penyimpanan rekod dalaman termasuk, tetapi tidak terhad kepada, pendaftaran dan pengurusan pegangan saham anda di SDP • Untuk memberikan perkhidmatan kepada anda • Untuk berkomunikasi dengan anda sebagai pemegang saham SDP • Untuk lebih memahami keperluan anda sebagai pemegang saham SDP • Bagi maksud-maksud keselamatan dan pencegahan penipuan • Bagi maksud analisis statistik data • Untuk aktiviti-aktiviti pemasaran • Bagi maksud tadbir urus korporat kami • Untuk menghantar undangan-undangan ke acara-acara terpilih • Untuk mematuhi sebarang keperluan undang-undang, statutori, dan peraturan • Bagi maksud penyertaan dalam penglibatan media dan/atau apa-apa acara yang relevan atau yang berkaitan • Bagi maksud untuk kami menyediakan jemputan tetamu, pendaftaran dan/atau kemasukan untuk acara-acara kami • Bagi maksud penerbitan bercetak dan penerbitan dalam talian kami
(secara kolektif dirujuk sebagai, “Tujuan-Tujuan tersebut”).
Data peribadi anda adalah data yang sedang atau yang akan dikumpulkan daripada maklumat yang diberikan oleh anda, termasuk tetapi tidak terhad kepada, komunikasi-komunikasi dengan anda atau daripada anda melalui pos, faksimili, telefon, dan e-mel serta maklumat yang diberikan oleh pihak ketiga, termasuk tetapi tidak terhad kepada, Bursa Malaysia Berhad dan mana-mana bursa saham lain, broker saham dan remisier anda.
Anda mungkin diminta untuk memberikan kepada kami nama, nombor kad pengenalan/paspot, alamat surat-menyurat, nombor telefon, nombor faksimili dan alamat emel anda.
Jika anda gagal membekalkan kepada kami data peribadi tersebut, kami tidak akan dapat memproses dan/atau mendedahkan data peribadi anda untuk Tujuan-Tujuan tersebut.
Sila ambil maklum bahawa data peribadi anda boleh didedahkan, disebarkan dan/atau dipindahkan kepada syarikat-syarikat di dalam Kumpulan SDP (termasuk syarikat induk, anak-anak syarikat, syarikat-syarikat berkaitan dan bersekutu tempatan dan antarabangsa), samada pada masa kini atau masa hadapan (secara kolektif, “Kumpulan”), atau kepada mana-mana organisasi atau individu pihak ketiga bagi maksud memenuhi tanggungjawab kami kepada anda untuk melaksanakan Tujuan-Tujuan tersebut dan apa sahaja tujuan lain yang berkaitan dengan Tujuan-Tujuan tersebut, serta dalam menyediakan perkhidmatan-perkhidmatan bersepadu, menyelenggara dan menyimpan rekod-rekod oleh, termasuk tetapi tidak terhad kepada, pendaftar saham atau pendaftar-pendaftar saham yang dilantik oleh kami bagi menguruskan pendaftaran pemegang saham.
Pemprosesan, pendedahan, penyebaran dan/atau pemindahan data peribadi anda oleh kami dan/atau Kumpulan dan/atau organisasi atau individu pihak ketiga mungkin akan mengakibatkan data peribadi anda dipindahkan ke luar Malaysia.
Annual Report // 6-Month Financial Period Ended 31 December 2018 351 Other Information Sime Darby Plantation
NOTIS KEPADA PEMEGANG SAHAM Di Bawah Akta Perlindungan Data Peribadi 2010
Untuk tujuan ini, kami komited untuk memastikan kerahsiaan, perlindungan, keselamatan dan ketepatan data peribadi anda yang diberikan kepada kami. Anda bertanggungjawab untuk memastikan bahawa semua data peribadi yang anda berikan kepada kami dan yang disimpan oleh kami adalah tepat, tidak mengelirukan, terkini dan lengkap dalam semua aspek. Bagi mengelakkan keraguan, kami dan/atau Kumpulan dan/atau pekerja atau pegawai yang diberi kuasa atau ejen kami tidak akan bertanggungjawab untuk apa-apa data peribadi yang diberikan oleh anda kepada kami yang tidak tepat, mengelirukan, bukan terkini dan tidak lengkap.
Selanjutnya, kami juga boleh meminta bantuan anda untuk memperolehi persetujuan pihak ketiga, termasuk tetapi tidak terhad kepada proksi yang data peribadinya telah diberikan oleh anda kepada kami dan anda dengan ini bersetuju untuk menggunakan usaha terbaik anda untuk berbuat demikian.
Anda boleh pada bila-bila masa selepas penyerahan data peribadi anda kepada kami, mengemukakan permintaan untuk mengakses data peribadi anda dengan menghubungi pendaftar saham kami Tricor Investor & Issuing House Services Sdn Bhd, jika anda ingin membuat sebarang pertanyaan berkenaan dengan aspek-aspek pendaftaran saham:
Tricor Investor & Issuing House Services Sdn Bhd Unit 32-01, Level 32, Tower A Vertical Business Suite Avenue 3, Bangsar South No. 8, Jalan Kerinchi 59200 Kuala Lumpur.
Untuk perhatian : Puan Lim Lay Kiow, Pengurus Kanan No.Tel : 03-2783 9299 e-mel : [email protected]
Anda juga boleh membuat permintaan untuk mengakses data peribadi anda dengan menghubungi broker anda atau secara alternatif Tricor Investor & Issuing House Services Sdn Bhd seperti yang tersebut di atas jika:
• anda memerlukan akses, meminda, menyekat akses atau mengemaskini data peribadi anda, tertakluk kepada syarat bahawa pematuhan ke atas permintaan untuk akses, pindaan, sekatan atau kemaskini tersebut tidak ditolak di bawah peruntukan Akta dan/atau undang-undang yang sedia ada; atau • anda ingin membuat pertanyaan mengenai data peribadi anda.
Data peribadi anda yang disimpan oleh kami akan dimusnahkan dan/atau dipadamkan daripada rekod dan sistem kami mengikut polisi penyimpanan kami sekiranya data tersebut tidak lagi diperlukan bagi Tujuan-Tujuan tersebut.
Sekiranya terdapat sebarang percanggahan atau konflik antara versi Bahasa Inggeris and versi Bahasa Malaysia Notis ini, versi Bahasa Inggeris akan digunapakai.
Kami akan meneruskan pemprosesan data peribadi anda untuk Tujuan-Tujuan tersebut, atas dasar bahawa anda telah bersetuju untuk pemprosesan data peribadi anda mengikut notis ini sehingga kami menerima pemberitahuan daripada anda mengenai pemprosesan data peribadi anda dan anda telah membaca, memahami dan menerima pernyataan-pernyataan dan terma-terma di dalam notis ini. SDP berhak mengubah dan/atau meminda notis ini dari masa ke semasa.
352 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
GLOBAL REPORTING INITIATIVE (GRI)
The Global Reporting Initiative (GRI) is a multi-stakeholder standard for sustainability reporting, providing guidance on determining report content and indicators. Sime Darby Plantation Berhad Annual Report and the Supplementary Progress Report on Sustainability have been prepared in accordance with the GRI Standards: Core option. The following summary table details the location of specific disclosures throughout the report. It also includes additional supporting commentary and reasons for the omission of data, where relevant. Unless stated, the page numbers stated are from the Annual Report. For further details, please visit www.simedarbyplantation.com.
GRI 101: Foundation 2016 GRI 102: General Disclosures 2016 Disclosure Page or reason for omission Organisational Profile 102-1 Name of organisation About This Report (1) 102-2 Activities, brands, products, and services Who We Are (6) 102-3 Location of headquarters Our Corporate Information (11) 102-4 Location of operations Who We Are (6) Our Global Presence (8-9) 102-5 Ownership and legal form Our Corporate Information (11) 102-6 Markets served Our Global Presence (8-9) 102-7 Scale of the organisation Our Global Presence (8-9) Group Financial Performance (30) 102-8 Information on employees and other workers Human Capital Development (48) Our Social Impact – Annual Report (56) Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 102-9 Supply chain Our Value Creation Model (18) 102-11 Precautionary Principle or approach Letter from Our Chairman (24) Statement on Risk Management and Internal Control (104) 102-12 External initiatives Our Approach to Sustainability – Annual Report (12) Supplementary Progress Report (2) 102-13 Membership of associations Our Approach to Sustainability – Annual Report (12) Supplementary Progress Report (2) Our Environmental Impact – Annual Report (61) Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com Strategy 102-14 Statement from senior decision-maker Letter from Our Chairman (24) 102-15 Key impacts, risks, and opportunities Our Market Landscape (14) Our Value Creation Model (18) Managing Our Material Matters (20) Our Strategic Plan (22) Statement on Risk Management and Internal Control (104) Ethics and integrity 102-16 Values, principles, standards, and norms of Corporate Governance Overview Statement (75) behavior Statement on Risk Management and Internal Control (104) 102-17 Mechanisms for advice and concerns about ethics Corporate Governance Overview Statement (75) Statement on Risk Management and Internal Control (104)
Annual Report // 6-Month Financial Period Ended 31 December 2018 353 Other Information Sime Darby Plantation
GLOBAL REPORTING INITIATIVE (GRI)
Governance 102-18 Governance structure Corporate Governance Overview Statement (75) 102-19 Delegating authority Corporate Governance Overview Statement (75) 102-20 Executive-level responsibility for economic, Our Leadership Team (70) environmental, and social topics 102-21 Consulting stakeholders on economic, Our Approach to Sustainability – Annual Report (12) environmental, and social topics Supplementary Progress Report (2) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com Managing Our Material Matters (20) Our Strategic Plan (22) 102-22 Composition of the highest governance body and Our Board of Directors (64) its committees 102-23 Chair of the highest governance body Our Board of Directors (64) 102-26 Role of the highest governance body in setting Our Board of Directors (64) purpose, values, and strategy Stakeholder Engagement 102-40 List of stakeholder groups Managing Our Material Matters (20) 102-41 Collective bargaining agreements Our Social Performance – Annual Report (56) Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 102-42 Identifying and selecting stakeholders Managing Our Material Matters (20) 102-43 Approach to stakeholder engagement Our Approach to Sustainability – Annual Report (12) Supplementary Progress Report (2) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com Corporate Governance Overview Statement (75) 102-44 Key topics and concerns raised Our Market Landscape (14) Managing Our Material Matters (20) Reporting Practice 102-45 Entities included in the consolidated financial Notes to the Financial Statements (131) statements 102-46 Defining report content and topic Boundaries About This Report (1) 102-47 List of material topics About This Report (1) 102-48 Restatements of information Who We Are (6) 102-49 Changes in reporting About This Report (1) 102-50 Reporting period About This Report (1) 102-51 Date of most recent report About This Report (1) 102-52 Reporting cycle About This Report (1) 102-53 Contact point for questions regarding the report Our Corporate Information (11) 102-54 Claims of reporting in accordance with the GRI About This Report (1) Standards 102-55 GRI Content Index Global Reporting Index (GRI) Content Index (353)
354 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
GLOBAL REPORTING INITIATIVE (GRI)
Material Topics GRI Standard Disclosure Page or reason for omission Economic Economic Performance GRI 103: 103-1 Explanation of the material topic and its Letter from Our Chairman (24) Management Approach Boundary Group Financial Performance (30) 2016 103-2 The management approach and its Group Financial Performance (30) components 103-3 Evaluation of the management approach Group Financial Performance (30) GRI 201: 201-1 Direct economic value generated and Group Financial Performance (30) Economic Performance distributed Notes to the Financial Statements (131) 2016 Market Presence GRI 103: 103-1 Explanation of the material topic and its Our Global Presence (8-9) Management Approach Boundary 2016 103-2 The management approach and its Our Market Landscape (14) components 103-3 Evaluation of the management approach Our Market Landscape (14) GRI 202: 202-2 Proportion of senior management hired Our Leadership Team (70) Market Presence 2016 from the local community Procurement Practices GRI 103: 103-1 Explanation of the material topic and its Board Tender Committee Report (102) Management Approach Boundary 2016 103-2 The management approach and its Board Tender Committee Report (102) components Statement of Risk Management and Internal Control (104) 103-3 Evaluation of the management approach Statement of Risk Management and Internal Control (104) Anti-corruption GRI 103: 103-1 Explanation of the material topic and its Governance and Audit Committee Report (84) Management Approach Boundary 2016ment Approach 103-2 The management approach and its Governance and Audit Committee Report (84) 2016 components 103-3 Evaluation of the management approach Statement of Risk Management and Internal Control (104)
Annual Report // 6-Month Financial Period Ended 31 December 2018 355 Other Information Sime Darby Plantation
GLOBAL REPORTING INITIATIVE (GRI)
Environment Water and Effluents GRI 103: Management 103-1 Explanation of the material topic and its Our Environmental Impact Annual Report (61) Approach 2016 Boundary Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-2 The management approach and its Our Environmental Impact Annual Report (61) components Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-3 Evaluation of the management approach Our Environmental Impact Annual Report (61) Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com Biodiversity GRI 103: Management 103-1 Explanation of the material topic and its Our Environmental Impact Annual Report (61) Approach 2016 Boundary Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-2 The management approach and its Our Environmental Impact Annual Report (61) components Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-3 Evaluation of the management approach Our Environmental Impact Annual Report (61) Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com GRI 304: Biodiversity 304-1 Operational sites owned, leased, Our Environmental Impact Annual Report (61) 2016 managed in, or adjacent to, protected Supplementary Progress Report (17) areas and areas of high biodiversity Please refer to our “Supplementary Progress Report on Sustainability 2018” value outside protected areas which can be found on our website at www.simedarbyplantation.com 304-2 Significant impacts of activities, Our Environmental Impact Annual Report (61) products, and services on biodiversity Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 304-3 Habitats protected or restored Our Environmental Impact Annual Report (61) Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com Emissions GRI 103: Management 103-1 Explanation of the material topic and its Our Environmental Impact Annual Report (61) Approach 2016 Boundary Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-2 The management approach and its Our Environmental Impact Annual Report (61) components Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-3 Evaluation of the management approach Our Environmental Impact Annual Report (61) Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com
356 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
GLOBAL REPORTING INITIATIVE (GRI)
Emissions (Continued) GRI 305: 305-1 Direct (Scope 1) GHG emissions Our Environmental Impact Annual Report (61) Emissions 2016 Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 305-2 Energy indirect (Scope 2) GHG Our Environmental Impact Annual Report (61) emissions Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 305-4 GHG emissions intensity Our Environmental Impact Annual Report (61) Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 305-5 Reduction of GHG emissions Our Environmental Impact Annual Report (61) Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com Effluents and Waste GRI 103: Management 103-1 Explanation of the material topic and its Our Environmental Impact Annual Report (61) Approach 2016 Boundary Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-2 The management approach and its Our Environmental Impact Annual Report (61) components Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-3 Evaluation of the management approach Our Environmental Impact Annual Report (61) Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com Environmental Compliance GRI 103: Management 103-1 Explanation of the material topic and its Our Environmental Impact Annual Report (61) Approach 2016 Boundary Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-2 The management approach and its Our Environmental Impact Annual Report (61) components Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-3 Evaluation of the management approach Our Environmental Impact Annual Report (61) Supplementary Progress Report (17) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com
Annual Report // 6-Month Financial Period Ended 31 December 2018 357 Other Information Sime Darby Plantation
GLOBAL REPORTING INITIATIVE (GRI)
Social Employment GRI 103: Management 103-1 Explanation of the material topic and its Human Capital Development (48) Approach 2016 Boundary 103-2 The management approach and its Human Capital Development (48) components 103-3 Evaluation of the management approach Human Capital Development (48) Labour/Management Relations GRI 103: Management 103-1 Explanation of the material topic and its Human Capital Development (48) Approach 2016 Boundary 103-2 The management approach and its Human Capital Development (48) components 103-3 Evaluation of the management approach Human Capital Development (48) Occupational Health and Safety GRI 103: Management 103-1 Explanation of the material topic and its Our Social Performance – Annual Report (56) Approach 2016 Boundary Our Occupational Safety and Health – Supplementary Progress Report (15) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-2 The management approach and its Our Social Performance – Annual Report (56) components Our Occupational Safety and Health – Supplementary Progress Report (15) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-3 Evaluation of the management approach Our Social Performance – Annual Report (56) Our Occupational Safety and Health – Supplementary Progress Report (15) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com GRI 403: Occupational 403-1 Occupational health and safety Our Social Performance – Annual Report (56) Health and Safety 2018 management system Our Occupational Safety and Health – Supplementary Progress Report (15) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 403-2 Hazard identification, risk assessment, Our Social Performance – Annual Report (56) and incident investigation Our Occupational Safety and Health – Supplementary Progress Report (15) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 403-4 Worker participation, consultation, and Our Social Performance – Annual Report (56) communication on occupational health Our Occupational Safety and Health – Supplementary Progress and safety Report (15) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com
358 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
GLOBAL REPORTING INITIATIVE (GRI)
Social (Continued) Occupational Health and Safety (Continued) GRI 403: Occupational 403-5 Worker training on occupational health Our Social Performance – Annual Report (56) Health and Safety 2018 and safety Our Occupational Safety and Health – Supplementary Progress (Continued) Report (15) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 403-6 Promotion of worker health Our Social Performance – Annual Report (56) Our Occupational Safety and Health – Supplementary Progress Report (15) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 403-9 Work-related injuries Our Social Performance – Annual Report (56) Our Occupational Safety and Health – Supplementary Progress Report (15) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com Training and Education GRI 103: Management 103-1 Explanation of the material topic and its Human Capital Development (48) Approach 2016 Boundary 103-2 The management approach and its Human Capital Development (48) components 103-3 Evaluation of the management approach Human Capital Development (48) Diversity and Equal Opportunity GRI 103: Management 103-1 Explanation of the material topic and its Human Capital Development (48) Approach 2016 Boundary 103-2 The management approach and its Human Capital Development (48) components 103-3 Evaluation of the management approach Human Capital Development (48) GRI 405: 405-1 Diversity of governance bodies and Our Social Performance – Annual Report (56) Diversity and Equal employees Supplementary Progress Report (10) Opportunity 2016 Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com Our Board of Directors (64) Non-discrimination GRI 103: Management 103-1 Explanation of the material topic and its Human Capital Development (48) Approach 2016 Boundary 103-2 The management approach and its Human Capital Development (48) components 103-3 Evaluation of the management approach Human Capital Development (48) Freedom of Association and Collective Bargaining GRI 103: Management 103-1 Explanation of the material topic and its Our Social Performance Annual Report (56) Approach 2016 Boundary Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-2 The management approach and its Our Social Performance Annual Report (56) components Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-3 Evaluation of the management approach Our Social Performance Annual Report (56) Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com
Annual Report // 6-Month Financial Period Ended 31 December 2018 359 Other Information Sime Darby Plantation
GLOBAL REPORTING INITIATIVE (GRI)
Child Labour GRI 103: Management 103-1 Explanation of the material topic and its Our Social Performance Annual Report (56) Approach 2016 Boundary Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-2 The management approach and its Our Social Performance Annual Report (56) components Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-3 Evaluation of the management approach Our Social Performance Annual Report (56) Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com Forced or Compulsory Labour GRI 103: Management 103-1 Explanation of the material topic and its Our Social Performance Annual Report (56) Approach 2016 Boundary Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-2 The management approach and its Our Social Performance Annual Report (56) components Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-3 Evaluation of the management approach Our Social Performance Annual Report (56) Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com Human Rights Assessments GRI 103: 103-1 Explanation of the material topic and its Our Social Performance Annual Report (56) Management Approach Boundary Supplementary Progress Report (10) 2016 Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-2 The management approach and its Our Social Performance Annual Report (56) components Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-3 Evaluation of the management approach Our Social Performance Annual Report (56) Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com Local Communities GRI 103: 103-1 Explanation of the material topic and its Our Social Performance Annual Report (56) Management Approach Boundary Supplementary Progress Report (10) 2016 Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-2 The management approach and its Our Social Performance Annual Report (56) components Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 103-3 Evaluation of the management approach Our Social Performance Annual Report (56) Supplementary Progress Report (10) Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com GRI 413: 413-1 Operations with local community Our Social Performance Annual Report (56) Local Communities engagement, impact assessments, and Supplementary Progress Report (10) 2016 development programmes Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com 413-2 Operations with significant actual and Our Social Performance Annual Report (56) potential negative impacts on local Supplementary Progress Report (10) communities Please refer to our “Supplementary Progress Report on Sustainability 2018” which can be found on our website at www.simedarbyplantation.com
360 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
NOTICE TO PROXIES Under The Personal Data Protection Act 2010
Sime Darby Plantation Berhad (“SDP” or “we” or “us” or “our”) strives to protect your personal data in accordance with the Personal Data Protection Act 2010 (“the Act”). The Act was enacted to regulate the processing of personal data. To comply with the Act, we are required to manage the personal data that we collect from you relating to your acting as a proxy for a shareholder in SDP.
The purposes for which your personal data may be used are, but not limited to:
• Internal record keeping including but not limited to the registration of attendance at general meeting(s) • To communicate with you as a proxy for a shareholder of SDP • For security and fraud prevention purposes • For the purposes of statistical analysis of data • For the purposes of our corporate governance • To comply with any legal, statutory and/or regulatory requirements
(collectively, “the Purposes”).
Your personal data is or will be collected from information provided by you, including but not limited to, postal, facsimile, telephone, e-mail and online communications with or from you, and information provided by third parties, including but not limited to, Bursa Malaysia Berhad and any other stock exchange, and your stockbrokers and remisiers.
You may be required to supply us with your name, identity card/passport number and correspondence address.
If you fail to supply us with such personal data, we may not be able to process and/or disclose your personal data for any of the Purposes.
Please be informed that your personal data may be disclosed, disseminated and/or transferred to companies within the SDP Group (including the holding company, subsidiaries, related and affiliated companies, both local and international), whether present or future (collectively, “the Group”) or to any third party organisations or persons for the purpose of fulfilling our obligations to you in respect of the Purposes and all such other purposes that are related to the Purposes and also in providing integrated services, maintaining and storing records including but not limited to the share registrar(s) appointed by us to manage the registration of shareholders.
The processing, disclosure, dissemination and/or transfer of your personal data by us and/or the Group and/or third party organisations or persons may result in your personal data being transferred outside of Malaysia.
To this end, we are committed to ensuring the confidentiality, protection, security and accuracy of your personal data made available to us. It is your obligation to ensure that all personal data submitted to us and retained by us are accurate, not misleading, updated and complete in all aspects. For the avoidance of doubt, we and/or the Group and/or our or their employees or authorised officers or agents will not be responsible for any personal data submitted by you to us that is inaccurate, misleading, not up to date and incomplete.
Further, we may request your assistance to procure the consent of third parties whose personal data is made available by you to us and you hereby agree to use your best endeavours to do so.
Annual Report // 6-Month Financial Period Ended 31 December 2018 361 Other Information Sime Darby Plantation
NOTICE TO PROXIES Under The Personal Data Protection Act 2010
You may at any time after the submission of your personal data to us, request for access to your personal data from Tricor Investor & Issuing House Services Sdn Bhd if:
• you require access, limit access and/or make any correction and/or update to your personal data subject to compliance of such request for access, limitation, corrections and/or updates not being refused under the provisions of the Act and/or existing laws; or • you wish to enquire about your personal data.
Tricor Investor & Issuing House Services Sdn Bhd Unit 32-01, Level 32, Tower A Vertical Business Suite Avenue 3, Bangsar South No. 8, Jalan Kerinchi 59200 Kuala Lumpur.
Attention : Ms Lim Lay Kiow, Senior Manager Tel : 03-2783 9299 e-mail : [email protected]
Any personal data retained by us shall be destroyed and/or deleted from our records and system in accordance with our retention policy in the event such data is no longer required for the said Purposes.
In the event of any inconsistency between the English version and the Bahasa Malaysia version of this Notice, the English version shall prevail over the Bahasa Malaysia version.
We shall proceed to continue to process your personal data for the Purposes as set out above, on the basis that you have consented to our processing of your personal data in accordance with this notice until we receive a notification from you concerning our processing of your personal data and you hereby declare that you have read, understood and accepted the statements and terms herein. SDP reserves the right to change and/or amend this notice from time to time.
362 Annual Report // 6-Month Financial Period Ended 31 December 2018 Sime Darby Plantation Other Information
NOTIS KEPADA PROKSI Di Bawah Akta Perlindungan Data Peribadi 2010
Sime Darby Plantation Berhad (“SDP” atau “kami”) bermatlamat untuk melindungi data peribadi anda selaras dengan Akta Perlindungan Data Peribadi 2010 (“Akta”). Akta tersebut digubal untuk mengawal selia pemprosesan data peribadi. Bagi mematuhi Akta tersebut, kami perlu menguruskan data peribadi yang kami kumpulkan daripada anda yang berkait dengan perwakilan anda sebagai proksi untuk pemegang saham SDP.
Data peribadi anda adalah untuk, tetapi tidak terhad kepada tujuan-tujuan berikut:
• Penyimpanan rekod dalaman termasuk, tetapi tidak terhad kepada, pendaftaran kehadiran di mesyuarat atau mesyuarat-mesyuarat agung • Untuk berkomunikasi dengan anda sebagai proksi kepada pemegang saham SDP • Bagi maksud-maksud keselamatan dan pencegahan penipuan • Bagi maksud analisis statistik data • Bagi maksud tadbir urus korporat kami • Untuk mematuhi sebarang keperluan undang-undang, statutori, dan/atau peraturan
(secara kolektif dirujuk sebagai, “Tujuan-Tujuan tersebut”).
Data peribadi anda adalah data yang sedang atau yang akan dikumpulkan daripada maklumat yang diberikan oleh anda, termasuk tetapi tidak terhad kepada, komunikasi-komunikasi dengan anda atau daripada anda melaui pos, faksimili, telefon, dan e-mel serta maklumat yang diberikan oleh pihak ketiga, termasuk tetapi tidak terhad kepada, Bursa Malaysia Berhad dan mana-mana bursa saham lain, broker saham dan remisier anda.
Anda mungkin diminta untuk memberikan kepada kami nama, nombor kad pengenalan/paspot dan alamat surat-menyurat anda.
Jika anda gagal membekalkan kepda kami data peribadi tersebut, kami tidak akan dapat memproses dan/atau mendedahkan data peribadi anda untuk Tujuan-Tujuan tersebut.
Sila ambil maklum bahawa data peribadi anda boleh didedahkan, disebarkan dan/atau dipindahkan kepada syarikat-syarikat di dalam Kumpulan SDP (termasuk syarikat induk, anak-anak syarikat, syarikat-syarikat berkaitan dan bersekutu tempatan dan antarabangsa), samada pada masa kini atau masa hadapan (secara kolektif, “Kumpulan”), atau kepada mana-mana organisasi atau individu pihak ketiga bagi maksud memenuhi tanggungjawab kami kepada anda untuk melaksanakan Tujuan-Tujuan tersebut dan apa sahaja tujuan lain yang berkaitan dengan Tujuan-Tujuan tersebut, serta dalam menyediakan perkhidmatan-perkhidmatan bersepadu, menyelenggara dan menyimpan rekod-rekod oleh, termasuk tetapi tidak terhad kepada, pendaftar saham atau pendaftar-pendaftar saham yang dilantik oleh kami bagi menguruskan pendaftaran pemegang saham.
Pemprosesan, pendedahan, penyebaran dan/atau pemindahan data peribadi anda oleh kami dan/atau Kumpulan dan/atau organisasi atau individu pihak ketiga mungkin akan mengakibatkan data peribadi anda dipindahkan ke luar Malaysia.
Untuk tujuan ini, kami komited untuk memastikan kerahsiaan, perlindungan, keselamatan dan ketepatan data peribadi anda yang diberikan kepada kami. Anda bertanggungjawab untuk memastikan bahawa semua data peribadi yang anda berikan kepada kami dan yang disimpan oleh kami adalah tepat, tidak mengelirukan, terkini dan lengkap dalam semua aspek. Bagi mengelakkan keraguan, kami dan/atau Kumpulan dan/atau pekerja atau pegawai yang diberi kuasa atau ejen kami tidak akan bertanggungjawab untuk apa-apa data peribadi yang diberikan oleh anda kepada kami yang tidak tepat, mengelirukan, bukan terkini dan tidak lengkap.
Selanjutnya, kami juga boleh meminta bantuan anda untuk memperolehi persetujuan pihak ketiga yang data peribadinya telah diberikan oleh anda kepada kami dan anda dengan ini bersetuju untuk menggunakan usaha terbaik anda untuk berbuat demikian.
Annual Report // 6-Month Financial Period Ended 31 December 2018 363 Other Information Sime Darby Plantation
NOTIS KEPADA PROKSI Di Bawah Akta Perlindungan Data Peribadi 2010
Anda boleh pada bila-bila masa selepas penyerahan data peribadi ini mengemukakan permintaan untuk mengakses data peribadi anda daripada Tricor Investor & Issuing House Services Sdn Bhd jika:
• anda memerlukan akses, meminda, menyekat akses atau mengemaskini data peribadi anda, tertakluk kepada syarat bahawa pematuhan ke atas permintaan untuk akses, pindaan, sekatan atau kemaskini tersebut tidak ditolak di bawah peruntukan Akta dan/atau undang-undang yang sedia ada; atau • anda ingin membuat pertanyaan mengenai data peribadi anda.
Tricor Investor & Issuing House Services Sdn Bhd Unit 32-01, Level 32, Tower A Vertical Business Suite Avenue 3, Bangsar South No. 8, Jalan Kerinchi 59200 Kuala Lumpur.
Untuk perhatian : Puan Lim Lay Kiow, Pengurus Kanan No.Tel : 03-2783 9299 e-mel : [email protected]
Data peribadi anda yang disimpan oleh kami akan dimusnahkan dan/atau dipadamkan daripada rekod dan sistem kami mengikut polisi penyimpanan kami sekiranya data tersebut tidak lagi diperlukan bagi Tujuan-Tujuan tersebut.
Sekiranya terdapat sebarang percanggahan atau konflik antara versi Bahasa Inggeris and versi Bahasa Malaysia Notis ini, versi Bahasa Inggeris akan digunapakai.
Kami akan meneruskan pemprosesan data peribadi anda untuk Tujuan-Tujuan tersebut, atas dasar bahawa anda telah bersetuju dengan pemprosesan data peribadi anda mengikut notis ini sehingga kami menerima pemberitahuan daripada anda mengenai pemprosesan data peribadi anda dan anda telah membaca, memahami dan menerima pernyataan-pernyataan dan terma-terma di dalam notis ini. SDP berhak untuk mengubah dan/atau meminda notis ini dari masa ke semasa.
364 Annual Report // 6-Month Financial Period Ended 31 December 2018 SIME DARBY PLANTATION BERHAD (Company No. 647766-V) FORM OF (Incorporated in Malaysia)
PROXY Number of ordinary shares held CDS Account No. - -
I/We My/Our proxy is to vote on the resolutions as indicated by an “X” in the appropriate space above. If no indication is given, my/our (FULL NAME OF SHAREHOLDER AS PER NRIC/PASSPORT/CERTIFICATE OF INCORPORATION IN CAPITAL LETTERS) proxy shall vote or abstain from voting as he/she thinks fit.
(NRIC/Passport/Company No. ) of IMPORTANT: Disclosure of Shareholder’s and Proxy’s Personal Data (ADDRESS)
Please refer to the Notice to Shareholders under the Personal Data Protection Act 2010 (PDPA Notice) in the Annual Report (ADDRESS) concerning the Company’s collection of your personal data for the purpose of the Company’s General Meeting(s). Tel. No. being a member/members of SIME DARBY PLANTATION BERHAD hereby appoint:
You hereby declare that you have read, understood and accepted the statements and terms contained in the PDPA Notice. Full Name Proportion of Shareholdings (As per NRIC/Passport in Capital Letters) In disclosing the proxy’s personal data, you as a shareholder, agree to procure the consent of the proxy whose personal data is NRIC/Passport No. No. of Shares % made available by you to us and you hereby agree to use your best endeavour to do so. Address Dated this day of 2019 Signature/Common Seal of Member(s) * and/or (delete as applicable) ** If you do not wish to appoint the Chairman of the Meeting as your proxy/one of your proxies, please strike out the words “or failing Full Name Proportion of Shareholdings him/her, the Chairman of the Meeting” and insert the name(s) of the proxy(ies) you wish to appoint in the blank space(s) provided. (As per NRIC/Passport in Capital Letters) Notes: NRIC/Passport No. No. of Shares % Address 1. A member of the Company entitled to attend and vote at the Sixteenth Annual General Meeting (AGM) is entitled to appoint not more than two (2) proxies to exercise all or any of his/her rights to attend, participate, speak and vote at the Sixteenth AGM on his/her behalf. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he/she specifies the proportion of his/her shareholdings to be represented by each proxy. A proxy may, but need not, be a member of the Company. ** or failing him/her, the Chairman of the Meeting, as my/our proxy/proxies to attend and vote for me/us and on my/our behalf at the Sixteenth Annual General Meeting of Sime Darby Plantation Berhad (SDP or the Company) to be held at the Grand Ballroom, First Floor, 2. A member of the Company may appoint any person to be his/her proxy without any restriction as to the qualification of such person. Sime Darby Convention Centre, 1A, Jalan Bukit Kiara 1, 60000 Kuala Lumpur, Malaysia, on Thursday, 23 May 2019 at 10.00 a.m. and at any adjournment thereof. 3. Pursuant to Paragraph 8.29A(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all resolutions set out in the Notice of the Sixteenth AGM of the Company shall be put to vote by way of a poll.
No. Agenda 4. Where a member of the Company is an Authorised Nominee as defined under the Securities Industry (Central Depositories) Act 1991 Ordinary Business Resolution For Against (SICDA), he/she may appoint not more than two (2) proxies in respect of each Securities Account he/she holds with ordinary shares of 1. To receive the Audited Financial Statements for the financial period ended 31 December the Company standing to the credit of the said Securities Account to attend and vote at a meeting of the Company instead of him/her. 2018 together with the Reports of the Directors and the Auditors thereon 5. Where a member of the Company is an Exempt Authorised Nominee as defined under SICDA which holds ordinary shares in the 2. To approve the payment of Directors’ remuneration to the Non-Executive Directors for 1 Company for multiple beneficial owners in one (1) Securities Account (Omnibus Account), there is no limit to the number of proxies the financial period ended 31 December 2018 which the Exempt Authorised Nominee may appoint in respect of each Omnibus Account it holds PROVIDED THAT each beneficial 3. To approve the payment of benefits payable to the Non-Executive Directors from 24 May 2 owner of ordinary shares, or where the ordinary shares are held on behalf of joint beneficial owners, such joint beneficial owners, shall only be entitled to instruct the Exempt Authorised Nominee to appoint not more than two (2) proxies to attend and vote at a 2019 until the next Annual General Meeting of the Company to be held in 2020 general meeting of the Company instead of the beneficial owner or joint beneficial owners. 4. To re-elect Dato’ Henry Sackville Barlow who retires in accordance with Rule 81.2 of 3 the Constitution of the Company 6. The instrument appointing a proxy shall be in writing signed by the appointor or his/her attorney duly authorised in writing or, if the appointor is a corporation, either under its common seal or signed by an officer or attorney so authorised, or in any other manner 5.(i) To re-elect Tan Sri Datuk Dr Yusof Basiran who retires in accordance with Rule 103 of 4 authorised by the Constitution of the Company. Any alteration to the instrument appointing a proxy must be initialled. the Constitution of the Company 5.(ii) To re-elect Datuk Zaiton Mohd Hassan who retires in accordance with Rule 103 of the 5 7. The appointment of proxy(ies) may be made in a hardcopy form or by electronic means as follows: Constitution of the Company (i) In Hardcopy Form 5.(iii) To re-elect Dato’ Mohd Nizam Zainordin who retires in accordance with Rule 103 of the 6 The Form of Proxy or the Power of Attorney or other authority, if any, under which it is signed or a notarially certified copy of that Constitution of the Company power or authority, must be deposited at the office of the Share Registrar of the Company, Tricor Investor & Issuing House Services 5.(iv) To re-elect Dato’ Mohamad Nasir Ab Latif who retires in accordance with Rule 103 of 7 Sdn Bhd, at Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala the Constitution of the Company Lumpur, Malaysia, no later than Wednesday, 22 May 2019 at 10.00 a.m. 6. To appoint Messrs PricewaterhouseCoopers PLT as Auditors of the Company for the 8 (ii) By Tricor Online System (TIIH Online) financial year ending 31 December 2019 and to authorise the Directors to determine The Proxy Form can be electronically lodged with the Share Registrar of the Company via TIIH Online (applicable to individual their remuneration shareholder only). The website to access TIIH Online is https://tiih.online (Kindly refer to the Annexure to the Proxy Form – Special Business Electronic Lodgement of Proxy Form for General Meeting).
7. To approve the renewal of the Shareholders’ Mandate for existing recurrent related 9 8. Only Members registered in the Record of Depositors as at 10 May 2019 shall be eligible to attend, speak and vote at the AGM or party transactions of a revenue or trading nature appoint proxy(ies) to attend, speak and vote on his/her behalf. 8. To authorise the Directors to allot and issue new ordinary shares in the Company in 10 relation to the Dividend Reinvestment Plan Fold Here ------
Affix Postage Stamp
THE SHARE REGISTRAR
SIME DARBY PLANTATION BERHAD (647766-V) c/o Tricor Investor & Issuing House Services Sdn Bhd (11324-H) Unit 32-01, Level 32, Tower A Vertical Business Suite Avenue 3, Bangsar South No. 8, Jalan Kerinchi 59200 Kuala Lumpur Malaysia
------Fold Here ANNEXURE
Dear Security Holders
ELECTRONIC LODGEMENT OF PROXY FORM FOR GENERAL MEETING
We are pleased to inform that security holders can have the option to lodge their proxy forms by electronic means through our system, TIIH Online (“e-proxy form”).
TIIH Online is a web-based facility that provides an online platform for security holders (individuals only) to perform lodgement of document/form electronically which includes proxy form in paperless form (“e-lodgement”). Once you have successfully lodged your e-proxy form, you are no longer required to complete and lodge the physical proxy form to the company or Tricor’s office.
To assist you on how to engage with e-lodgement of proxy form, kindly read and follow the guidance notes which are detailed below:
1. Sign up as user of TIIH Online
Using your computer, access our website at https://tiih.online
Sign up as a user by completing the registration form. Registration is free.
Upload a softcopy of your MyKad (front and back) or your passport.
Administrator will approve your registration within one working day and notify you via email.
Activate your account by re-setting your password.
Notes: (i) If you are already a user of TIIH Online, you are not required to sign up again. (ii) An email address is allowed to be used once to register as a new user account, and the same email cannot be used to register another user account. (iii) At this juncture, only individual security holders are offered to register as user and participate in e-lodgement.
2. Proceed with e-lodgement of proxy form
Login with your username (i.e. e-mail address) and password.
Select the corporate event: “Lodgement of Proxy Form”.
Read and agree to the Terms & Conditions and confirm the Declaration.
Preview and select the CDS account number and indicate the number of securities for your proxy(s) to vote on your behalf.
Appoint your proxy(s) or chairman and insert the required details of your proxy(s).
Indicate your voting instructions – FOR or AGAINST, otherwise your proxy will decide your vote.
Review & confirm your proxy(s) appointment.
Proceed to pay handling fee of RM5 for each CDS account through the online FPX payment gateway.
Print payment receipt and e-proxy form for your record.
Our Contact
Should you need further clarification on the e-lodgement of proxy form, you can contact us at the following. Thank you.
Tricor Investor & Issuing House Services Sdn Bhd Unit 32-01, Level 32, Tower A, Vertical Business Suite, Telephone No: 03-27839299 Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, Fax No: 03-27839222 59200 Kuala Lumpur, Malaysia E-mail: [email protected] This page has been intentionally left blank. www.simedarbyplantation.com
SIME DARBY PLANTATION BERHAD (Company No.: 647766-V) Main Block, Level 10 Plantation Tower No. 2, Jalan PJU 1A/7, Ara Damansara 47301 Petaling Jaya, Selangor Malaysia Tel: (603) 7848 4000 Fax: (603) 7848 4172