Throughout our long history, the overarching ambition of Kulim (Malaysia) Berhad (“Kulim”) has always been to deliver value to all its stakeholders. Moving forward from the Selective Capital Reduction and Repayment (“SCR”) exercise completed on 4 August 2016, we have taken steps to recalibrate and reinvigorate the businesses we are in.

As part of Johor Corporation Group (“JCorp”), our values are also synergistic with the ambition of our parent company in terms of sustainable growth, creating value through innovation, expansion into new income streams and forging entrepreneurship principles. It is notable that in an increasingly challenging and rapidly changing environment, Kulim has been resilient to weather all circumstances with sound business acumens and solid strategies, hence, the theme for this year’s Integrated Annual Report (“IAR”) is “Defining New Perspective”.

Forging ahead, our goal is to create enterprise value through a raft of strategies. These have been carefully crafted to produce near-term results and reinforce the foundation for future success by:

  • Remaining focused on our core business, while continually evaluating and reshaping our portfolio to unlock the value of our investments by selectively divesting and monetising of non-strategic assets.
  • Actively identifying and investing in new income streams, even venturing into uncharted territory to exploit opportunities within the entire chain of our plantation business that could offer long-term strategic value.
  • Driving capital discipline while maximizing productivity and cost management.
  • Encouraging our people to be more innovative in generating new products, patents and processes that will be a departure from tradition.
  • Pursuing our Sustainability Agenda driven by the Roundtable on Sustainable Palm Oil (“RSPO”) and Malaysian Sustainable Palm Oil (“MSPO”) Certification.

This year’s annual report also marks our fourth edition of the integrated format, which was adopted by Kulim in 2014 to enhance and consolidate traditional reporting practices. By integrating both material financial and non-financial information and incorporating info graphics we hope to capture elements of our business in an upbeat, forward-looking and interesting way.

Kulim’s maiden efforts at integrated reporting have earned recognition by professional bodies within Malaysian and regionally. However, like Kulim’s own unfolding story, integrated reporting is a journey. We hope to do better with each successive year in our quest to provide clarity on what Kulim is all about. Any comments and feedback will be welcome as they will help us shape our reporting for future years.

On behalf of the Board of Directors, it is my pleasure to present the fourth Integrated Annual Report and Audited Financial Statements of Kulim (Malaysia) Berhad for the financial year ended 31 December 2017 (“FY 2017”).


Globalisation is recasting the business landscape and throughout 2017, the Kulim Group continued to operate in a dynamic and evolving operating environment, characterised by currency fluctuations, volatility in commodity prices and a changing regulatory landscape.

To achieve our strategic agenda, we have a Balanced Scorecard where we use financial and non-financial metrics to measure the performance and efficiency of our business. We constantly assess our progress against this scorecard where Key Performance Indicators (“KPIs”) were identified for four (4) areas - Financial,Stakeholders, Internal Processes and Organisational Capacity. As at year-end 2017, we met 85% of our KPIs to keep the Group on a strong and stable trajectory.

Financial numbers aside, we were also focused on further improving our operating performance, streamlining and improving internal structures and processes to improve efficiency, productivity and cost savings. The importance of employee engagement cannot be overstated and in FY 2017, Kulim’s top management engaged with staff on no less than seven (7) occasions at various venues where we operate. As they are the key enablers, we want our people to share in our vision. By actively engaging them in a two-way dialogue, we ensure their buy-in of ongoing changes and developments in our transformation journey.

In the face of significant headwinds, revenue declined marginally to RM1.54 billion in 2017, compared to RM1.61 billion recorded the previous year. The Group’s core Plantation Segment remained the main contributor to Group revenue, accounting for 67% or RM1.03 billion. Profit Before Tax (“PBT”) decreased by 27.49% from RM59.92 million to RM43.44 million. Core operations from Plantation recorded a gain of RM209.94 million whilst our subsidiary involved in Oil and Gas (O&G”) support services suffered a one time loss of RM131.90 million driven by its Engineering,Procurement, Contracts, Installation and Constructions (“EPCIC”) project.


To maintain a balanced portfolio which meets our financial objectives, while earning recognition as a leader in responsible and sustainable business.

Disciplined and responsible inverstment

Operational Excellence

Sustainable Growth

Robust Corporate Governance and Risk Management Framework

Echancing the Kulim Brand’s strong reputation


Our Business Policy emphasises a Balance Growth Strategy focused on Plantation Intrapreneur Ventures and Oil & Gas

We adhere to the highest standard of ethics, integrity and governance

Our people are given utmost priority to ensure individual well-being and career success

Responsible and sustainable growth is the cornerstone of the way we conduct our businesses


Notwithstanding the ever rising challenge to balance investment with payables and cash flows, Kulim remains steadfast to its commitment of shareholders value creation. In living up to this promise, the Board has approved a total dividend payment of RM50 million for the financial year ended 31 December 2017.


In defining new perspectives, we are continually fine-tuning our portfolio of assets to provide an operational base that will continue to deliver optimum results. Our approach to portfolio optimisation takes into account various factors such as market dynamics, assets that are under-performing or are no longer in line with the Group’s strategic vision or when we can realise our investment at an attractive premium.

In line with our strategy to monetise certain non-strategic assets, we undertook a variety of corporate exercises during 2017. The operations of some companies were ceased, while we disposed our stake in another. We also sold a prime property asset in Johor Bahru and rationalized our investment in Central Kalimantan. This will be discussed at greater length in the Management Discussion and Analysis (“MD&A”).


Our quest for sustainability is a never-ending journey, with stretchable targets in an ever evolving space. Kulim was among the first companies in Malaysia to become a member of the RSPO, the global standard that is an assurance that palm oil is produced without causing harm to the environment or society.

As we continue to be standard bearer in this regard, almost all of our plantations in Malaysia have been fully RSPO-certified since January 2009. In addition, five (5) mills have earned RSPO certification, the latest being the Pasir Panjang Palm Oil Mill which was certified on 9 March 2017, including those of JCorp’s estate managed by Kulim.

Furthermore, two (2) mills have also earned RSPO Identity Preserved (“IP”) status. Four (4) of our mills have been accorded International Sustainability & Carbon Certification (“ISCC”) status. Being certified means that any Sustainable Palm Oil (“SPO”) produced at the mill can be traced throughout the supply chain, from estate to factory to retailer. We have set a target for our fully segregated mills, with the exception of the Sedenak Palm Oil Mill, to gain the benefits of SPO premium. Sustainability premium could become an important contributor to the Group’s margin in future, given on-going international scrutiny and pressures in this regard. We set our sights to establish biogas plant at all of our five (5) mills by 2025. As at end 2017, three (3) biogas plant have been installed with two (2) of them in operations. By generating biogas from Palm Oil Mill Effluent (“POME”), it can help reduce emissions while generating energy, thereby improving the Greenhouse Gas (“GHG”) impacts of palm oil production.

We have also set our sights to obtain the MSPO Certification by end- 2018. Covering seven (7) main principles, MSPO certification was first launched in 2015 on a voluntary basis and has become mandatory for all Malaysian palm oil producers by 2019.

The Group has taken steps to take its sustainability agenda to the next level by continually developing and deploying new technology, utilising environment-friendly fertilizers, improving field mechanisation, providing on-the-field training for operational optimisation, allocating more funds for Research & Development (“R&D”) to produce improved clones with higher yields, switching to alternative energy sources and imposing more stringent controls on operational costs. Our strategy of sustainability embraces the 3Ps of People, Planet and Profit, which will be further elaborated in the Sustainability Reporting Section.


Over the years, we have been the recipient of numerous industry-wide awards and accolades. The year under review was no exception and we are pleased that our efforts to be a responsible and sustainable entity have been recognised.

Each and every award or accolade that we receive means a lot to us as a measure of our performance. It was especially gratifying to be the winner in the Excellence Category for the Plantation Sector for the Global Responsible Business Leadership Award 2017. The Award builds on the United Nations Sustainable Development Goals and is among the most prestigious forms of recognition for companies from all over the world that have demonstrated leadership in Corporate Social Responsibility (“CSR”) and Corporate Sustainability.

At the 9th Annual Global CSR Summit Awards 2017, Kulim was the winner in three (3) categories. Kulim has always acknowledged the important role women play in our workforce. We work hard to empower women through various initiatives, notably our Women OnWards (“WOW”) was established in July 2008 as part of a larger women’s employee outreach programme. WOW also promotes gender equality and empowers women’s knowledge and skill. In recognition of our support of WOW, we won Gold in the Empowerment of Women Award.

Kulim was also honoured with the Bronze in two (2) other categories, for the Best Workplace Practices Award and the CSR Leadership Award. The Global CSR Summit Awards is Asia’s most prestigious programme for CSR, recognising companies for outstanding, innovative and world-class products, services, projects and programmes. Not be outdone, our subsidiaries also won their share of awards. Kulim Pineapple Farm (“KPF”) was awarded the Anugerah Pengeksport Nanas Segar at the 60th Anniversary of Lembaga Perindustrian Nanas Malaysia (“LPNM”). Danamin (M) Sdn Bhd was awarded a Certificate of Appreciation as an Improved Performance Contractor at the PETRONAS Contractor Forum 2017.


Having defined new perspectives and with the appropriate strategies in place, the coming Financial Year 2018 (“FY 2018”) will be a busy and eventful one. We have set ourselves targets that are both realistic and aggressive for each of our operating segments.


To compete successfully in today’s challenging environment, we can no longer operate with an old mindset and has identified various latent opportunities. We need to keep focused and continue exploring any opportunities to be more involved in the plantation business.

Kulim has therefore adopted the Blue Ocean Strategy to “Enhance Value through Innovation”, through a three-pronged approach:

1. Venturing into uncharted territory

Kulim has been looking into opportunities to expand its palm oil business in uncharted territory which expected to generate revenue and contribute significant earnings to the Group.

2. Enhancing Mechanisation

Kulim is developing new mechanisation in harvesting activity of oil palm, which is expected to increase efficiency and productivity of the Group  

3. Research and Development (“R&D”) Initiatives

Kulim’s R&D Division has successfully introduced new high yielding clones of oil palm to gearing a level up than peers


JCorp’s introduced Intra 2.0 programme on December 2016 and implementation across all IV companies was held in 2017. This to create a conducive ecosystem for intrapreneurs with the context of a 21st Century economic and business landscape. The programme identifies three (3) categories of intrapreneurs, with emphasis on their financial contribution as one of the key bottom lines as well as their business sustainability.

Kulim has been reassessing the performance of the companies it has taken under its wing. Consistent with the corporate direction we have taken, priority will be given to nurturing companies that are related to our core palm oil business.

Kulim stands at the crossroad of a pivotal stage of its development. These are exciting times as we continue to lay the foundations that will anchor new growth to future success. We have a viable plan and the strategies we have crafted will serve us well in a changing and challenging market environment. Time will show the validation of the Group’s vision and the actions taken today.


On 10 December 2014, our wholly-owned subsidiary, Kulim Energy Nusantara Sdn Bhd (“KENSB”) signed a Conditional Subscription and Shares Purchase Agreement (“CSSPA”) to acquire a 60% stake in PT Citra Sarana Energi (“PT CSE”) for USD133.55 million. Two subsidiaries of PT CSE, namely PT Rizki Bukit Barisan Energi (“PT RBBE”) and PC SKR International (“PC SKR”) have been awarded a Production Sharing Contract (“PSC”) for the South West Bukit Barisan (“SWBB”) Production Sharing Contract (PSC”), located in the West Sumatera Province. On 7 February 2016, a Supplemental Agreement (“SA CSSPA”) was signed with the vendors, revising the investment cost downward to USD80 million to take into account lower crude oil prices.

The completion date of the CSSPA and SA CSSPA has been further extended to 4 November 2018, pending approval of the Indonesian Government and Satuan Kerja Khusus Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi (“SKK MIGAS”). The Plan of Development (“POD”) approval is expected to be obtained by the first half of 2018. In the meantime, PT RBBE has fulfilled all its obligations to drill four (4) exploratory wells as required under the POD and the SKK MIGAS


Kulim is currently evaluating the viability of expanding its cattle and pineapple cultivation operations. Our cattle operations are contributing towards the nation’s food security programme, while Malaysian pineapples have a high marketability worldwide.


As a plantation-based company, Kulim has a vast landbank, with sizeable tracts suitable for development. The first phase, at Taman R.E.M. is being developed to provide staff housing and is expected to be completed by end-2018. Several of our estates in the vicinity of Pengerang also hold the potential of property development as a spill-over from Petronas’ Refinery and Petrochemical Integrated Development (“RAPID”) project.


My confidence in the future of Kulim is strong. This is because I know I can harness the knowledge, experience, professionalism and commitment of our employees, who will undoubtedly play a decisive role in shaping our corporate future. In a demanding year, it has been inspirational how everyone, both management and staff, have pulled together to achieve all we have set out to do. On behalf of the Board, I express my sincere appreciation for all your efforts.

In this time of revitalisation and preparing for the next thrust forward, we are grateful for the backing we receive from several quarters. Our parent company, JCorp, has always been there to provide guidance and support. We have also benefited from the support of our business partners and associates, consultants, financiers, media and the relevant government and regulatory authorities both in Malaysia and Indonesia. Your support has always made the difference.

The momentum has been established and we look forward to achieving many more milestones.

I thank all of you.


Non-Independent Non-Executive Director