RIMBUNAN SAWIT BERHAD [Registration No: 200501014346(691393-U)] (Incorporated in Malaysia) ANNUAL REPORT 2019 Contents 2 VISION & MISSION 3 LOCATION OF OPERATIONS 4 CORPORATE STRUCTURE 5 CORPORATE INFORMATION 6 MANAGEMENT DISCUSSION AND ANALYSIS 12 PROFILE OF DIRECTORS 15 KEY SENIOR MANAGEMENT 16 SUSTAINABILITY STATEMENT 28 CORPORATE GOVERNANCE OVERVIEW STATEMENT 37 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL 40 REPORT OF THE AUDIT COMMITTEE 44 STATEMENT OF DIRECTORS’ RESPONSIBILITIES FOR PREPARING THE ANNUAL FINANCIAL STATEMENT 45 FINANCIAL STATEMENTS 147 ADDITIONAL COMPLIANCE INFORMATION 149 LIST OF PROPERTIES 150 ANALYSIS OF SHAREHOLDINGS 154 NOTICE OF ANNUAL GENERAL MEETING PROXY FORM 2 VISION & MISSION VISION MISSION To be progressive plantation and • To enhance stakeholders’ values. agri-business group. • To provide high quality products and services to our customers. • To provide job opportunities and lifelong learning opportunities at the workplace and local community. CORPORATE VALUES QUALITY INTEGRITY TEAMWORK FAMILY RESULT- (both our VALUES ORIENTED products and services) Southern Region Plantations Palm Oil Mills Selangau Zone: 18. R.H. Plantation Sdn. Bhd. (Bakong POM) 1. PJP Pelita Selangau Plantation Sdn. Bhd. 19. RSB Palm Oil Mill Sdn. Bhd. 2. Nescaya Palma Sdn. Bhd. 20. RSB Lundu Palm Oil Mill Sdn. Bhd. 3. Novelpac-Puncakdana Plantation Sdn. Bhd. Lundu Zone: 4. PJP Pelita Lundu Plantation Sdn. Bhd. 5. PJP Pelita Biawak Plantation Sdn. Bhd. Norhern Region Plantations Limbang 14 Miri Zone 1 Lawas 6. R.H. Plantation Sdn. Bhd. - Bakong Estate Miri 7. R.H. Plantation Sdn. Bhd. - Selangor Estate 15 8. Timrest Sdn. Bhd. Marudi 9. Jayamax Sdn. Bhd. 16 LOCATIONS OFOPERATIONS 17 6 Miri Zone 2: 18 10. PJP Pelita Ulu Teru Plantation Sdn. Bhd. 8 11. PJP Pelita Ekang-Banyok Plantation Sdn. Bhd. 19 13 12. Baram Trading Sdn. Bhd. 10 12 7 11 13. Pelita-Splendid Plantation Sdn. Bhd. Bintulu 9 Marudi Zone: 14. Lumiera Enterprise Sdn. Bhd. Mukah 15. Sastat Holdings Sdn. Bhd. 16. Woodijaya Sdn. Bhd. 17. Formasi Abadi Sdn. Bhd. Sibu Belaga 3 2 Sarikei 1 Kuching Kapit Lundu Samarahan 4 Betong Lubuk Antu 20 Serian 5 Sri Aman 3 4 CORPORATE STRUCTURE 100% | Jayamax Plantation Sdn Bhd 100% | Nescaya Palma Sdn Bhd 100% | Formasi Abadi Sdn Bhd P 100% | Novelpac-Puncakdana Plantation Sdn Bhd L 100% | Timrest Sdn Bhd A 100% | Woodijaya Sdn Bhd N 100% | Lumiera Enterprise Sdn Bhd T 100% | Sastat Holdings Sdn Bhd A 85% | Baram Trading Sdn Bhd 85% | PJP Pelita Biawak Plantation Sdn Bhd T 70% | Pelita-Splendid Plantation Sdn Bhd I 60% | PJP Pelita Ekang-Banyok Plantation Sdn Bhd O 60% | PJP Pelita Lundu Plantation Sdn Bhd N 60% | PJP Pelita Selangau Plantation Sdn Bhd 60% | PJP Pelita Ulu Teru Plantation Sdn Bhd RIMBUNAN SAWIT M 100% | R. H. Plantation Sdn Bhd I 100% | RSB Palm Oil Mill Sdn Bhd BERHAD PALM OIL SECTOR L L 100% | RSB Lundu Palm Oil Mill Sdn Bhd 85% | Burung Tiong Helicopter Sdn Bhd O 100% | Rajang Agrisupplies Sdn Bhd T H 100% | Rajang Builders Sdn Bhd E 100% | Rakantama Sdn Bhd R 100% | Topline Synergy Sdn Bhd S 100% | Rimbunan Sawit Management Services Sdn Bhd 5 CORPORATE INFORMATION BOARD OF DIRECTORS TIONG CHIONG IE BONG WEI LEONG (Chairman/Non-Independent Non-Executive Director) (Independent Director) TIONG KIONG KING TIONG ING MING (Vice Chairman/Executive Director) (Independent Director) TIONG CHIONG ONG (Executive Director) COMPANY SECRETARIES AUDITORS Toh Ka Soon (MAICSA 7031153) Crowe Malaysia PLT (AF: 1018) Chartered Accountants Voon Jan Moi (MAICSA 7021367) 1st Floor No.1 Lorong Pahlawan 7A2 Jalan Pahlawan REGISTERED OFFICE 96000 Sibu, Sarawak North Wing, Menara Rimbunan Hijau 101, Pusat Suria Permata, STOCK EXCHANGE LISTING Jalan Upper Lanang 96000 Sibu, Sarawak Listed on Main Market of Bursa Malaysia Tel: 084-218555 Securities Berhad Fax: 084-219555 Stock name : RSAWIT E-mail: [email protected] Stock code : 5113 Website: www.rsb.com.my PRINCIPAL BANKERS SHARE REGISTRAR Affin Bank Berhad Boardroom Share Registrars Sdn Bhd Alliance Bank Malaysia Berhad 11th Floor, Menara Symphony, Ambank (M) Berhad No. 5, Jalan Prof. Khoo Kay Kim, Bank of China (Malaysia) Berhad Seksyen 13, Bank Pertanian Malaysia Berhad 46200 Petaling Jaya, CIMB Bank Berhad Selangor Darul Ehsan Hong Leong Bank Berhad Tel: 03-78904700 Malayan Banking Berhad Fax: 03-78904670 Public Bank Berhad RHB Bank Berhad 6 MANAGEMENT DISCUSSION AND ANALYSIS DEAR SHAREHOLDERS, On behalf of the Board of Directors of Rimbunan Sawit Berhad, it is my privilege to put forward to you the Annual Report of our Company and Group for the financial year ended 31 December 2019. For 2019, the Crude Palm Oil (“CPO”) price was range bound between RM1,800 per metric tonne (“mt”) and RM2,100/mt before rallied above RM2,800/mt towards year end. Despite the subdued CPO price for the majority of 2019, our Earnings before Interest, Taxation, Depreciation, and Amortisation (“EBITDA”) has improved by 85% to RM50.1 million as compared to 2018 of RM27.1 million. Concurrently, our Loss Before Taxation has shrank by 63% to RM68.8 million as compared to 2018 of RM184.1 million, in spite of notching a 16% drop in revenue. Overview of Business and Operations, Objectives and Strategies Rimbunan Sawit Berhad was listed on the Main Board of Bursa Malaysia on 28 June 2006 with three main subsidiaries mainly R.H. Plantation Sdn. Bhd. (“RHP”), Timrest Sdn. Bhd., and Rimbunan Sawit Holdings Berhad (which was later renamed to Rimbunan Sawit Management Services Sdn. Bhd.). We started off with a palm oil mill in RHP and a land bank of 13,663 hectares before gradually expanded the planted areas and mill operation via various acquisitions between 2008 and 2012. We remain as a cultivator of oil palm and operator of palm oil mill producing CPO, Palm Kernel (“PK”), and Fresh Fruit Bunches (“FFB”). As a progressive player in this plantation industry, we are committed to espouse our stakeholders’ value as we continue to yield products and services of high quality underpinned by the conducive work environment and continuous engagement with the local community. Our Corporate and Organisation Structure Our Corporate Functions at Head Office level remain intact with continuous improvement and streamlining led by Executive Director Office with the unwavering camaraderie and backing of the five core functions mainly Plantation Operation – South & Selangau Region, Plantation Operation – North Region, Engineering and Mill Operation, Human Resource and Administration, and Corporate Finance. RIMBUNAN SAWIT’S ORGANISATION STRUCTURE EXECUTIVE DIRECTOR OFFICE 7 Management Discussion and Analysis (cont’d) The Progress of the Ongoing Corporate Proposals For the financial year under review, the Lundu Mill acquisition is still pending for the completion of its land transfer, which is still subject to the subdivision and issuance of the land title, which the Group is expected to complete by end of 2020. On 22 January 2020, our Group wholly-owned subsidiary, Lumiera Enterprise Sdn. Bhd. (Lumiera) had entered into a Sale and Purchase Agreement with Biogreen Success Sdn. Bhd. to dispose all that parcel of land situated at Along Batang Baram, Baram together with the oil palm plantation, its facilities, infrastructures, improvements, immovable assets but excluding the movable assets thereon for a total cash consideration of Ringgit Malaysia Eighty-Five Million. The disposal is condition upon obtaining Land and Survey Department’s consent to transfer the land to Biogreen Success Sdn. Bhd. and charged to its Financier and completion of due diligence review by Biogreen Success Sdn. Bhd Our Oil Palm Estates Our portfolio of estates remains at seventeen spanning across Kuching, Sibu, and Miri regions in Sarawak. Our total land bank remains at 77,427 hectares. Our total planted area stood at 48,765 hectares, comprising 63% of our land bank. The planted area by Age Cluster and are reflected in the following tables: Age Cluster 2019 (ha) Planted Ha by Region 2019 (ha) Immature (1 - 3 years) 5,341 Kuching region 6,926 Young mature (4 - 7 years) 7,315 Sibu region 9,405 Prime mature (8 - 19 years) 24,342 Miri region 32,434 Old mature (> 20 years) 11,767 Total planted area 48,765 Total planted area 48,765 Our Group placed top emphasis on best agricultural practices within its estates. All our estates have obtained the Malaysian Sustainable Palm Oil (“MSPO”) certification during the financial year under review. Our Palm Oil Mills The Group has three palm oil mills with two of the mills situated in Miri region, namely RHP Mill and RSB Mill, which is under RSB Palm Oil Mill Sdn. Bhd. RSB Mill was constructed in early 2013 and commenced production in the middle of 2017. Subsequently, the Mill began its CPO sales in July 2017. The remaining mill, Lundu Mill is located in Kuching region. The Mill was previously constructed and managed by RH Lundu Palm Oil Mill Sdn. Bhd. before it was bought over by RSB Lundu Palm Oil Mill Sdn. Bhd. except for the land via the supplemental agreement dated 21 December 2018. Lundu Mill began operation in March 2006. 8 Management Discussion and Analysis (cont’d) The brief profiles of the three mills are indicated in the following table: RHP Mill RSB Mill Lundu Mill • Commenced • Commenced • Commenced operation in 1998. operation in May operation in March Operation & • 80 metric ton per 2017. 2006. Capacity hour • 60 metric ton per • 45 metric ton per hour hour • Obtain MSPO • Obtain MSPO • Obtained MSPO certification on 18 certification on 18 certification on 20 February 2019. February 2019. June 2018. Certification & • ISO 9001:2008 • Crops’ grading • Crops’ grading Compliance standard in line with MPOB in line with MPOB guidelines guidelines • Equip with • Into the 2nd year of • Waste management composting plant to operation. Waste plan in compliance recycle mill’s waste management plan with DOE.