Dear Shareholders,

"The year 2019 could best be described as the year where Kulim proved its resilience in weathering the challenges that have continued to eclipse the palm oil industry."

Q1 : How would you summarise the Group’s performance for the year under review?

ED : The year 2019 could best be described as the year where Kulim proved its resilience in weathering the challenges that have continued to eclipse the palm oil industry.
Overall, Malaysia’s palm oil industry saw CPO production increased marginally by 1.8% to 19.86 million tonnes recorded in 2018. The increase was due to higher FFB processed, up by 0.5% arising from higher FFB yield which increased by 0.2%. Better OER performance, which was recorded higher by 1.3% to 20.21% as compared to 19.95% achieved in 2018 also contributed to higher CPO production.
In 2019, the prices of all oil palm products were traded lower. CPO price traded lower by 6.9% to RM2,079.00 per tonne compared to RM2,232.50 per tonne in 2018.
Although CPO priced was traded lower in 2019, the price was on an upward trend, especially towards the last quarter. The lower CPO price during the year was mainly due to weaker prices of soybean oil and Brent crude oil in the world market. (Source: Overview of the Malaysian Oil Palm Industry, MPOB).
With regards to our Malaysian operations, our Agribusiness segment for Plantation Division managed to maintain our actual average selling price of CPO at above MPOB’s average prices, which stood at RM2,182 compared to RM2,327 per tonne in the previous year.
However, our O&G Division and IV Division have both recorded a satisfactory performance in terms of their contribution to the Group.

Q2 : Can you elaborate more on the challenges faced by the Group during the year?

ED : Indeed, the year 2019 was challenging for the Group but our fundamentals remained strong as we undertook various strategic initiatives to further unlock the potential of our business segments.
Our Plantation Division, for instance, had faced a challenging business environment in the form of lower commodity prices combined with the constraints associated with labour shortages. In addition, the numerous geopolitical risk affected the industry as restrictions of the European Union (“EU”) on the use of palm oil, unsolved trade disputes between US-China along with high inventory levels and lower CPO export volume to major countries.
On the financial side, the Group remained conscientious while managing the fluctuations in the exchange rate, higher gearing as well as the cost of capital.

Q3 : What is the rationale behind this year’s theme of “Strategic Initiatives. Unleashing Potential”?

ED : Amidst of challenging scenario in the global palm oil industry, it is imperative for Kulim to remain steadfast yet agile in adapting to the ever-volatile market. To ensure that our fundamentals remain strong, we decided to undertake various strategic initiatives across the Group to unleash the full potential of our assets in order to strengthen the financial position and delivering value to our shareholders.
These are the reason why we have chosen this theme, as we believe Kulim still has tremendous potential that is yet to be tapped and we are excited to explore these new opportunities and possibilities in the near future.

Q4 : Can you tell us more about the corporate exercises carried out by Kulim during the year?

ED : The year embarked the Group undertaking on several strategic initiatives to unleash the optimum the potential of our business divisions.
The disposal of 75% equity interest in Optimum Status Sdn Bhd (“OSSB”) held by EPA Management Sdn Bhd to our IV company, Kulim Safety Training and Services Sdn Bhd (“KSTS”) was completed on 13 February 2019.
This exercise was part of our business diversification strategy in a bid to position KSTS as a Health, Safety and Environment (“HSE”) management company. With the disposal, OSSB will now be focusing on environmental management, specifically waste, allocation and emission management. The combined business networking held by both KSTS and OSSB is expected to sustain their profit level in moving forward.
On 1 May 2019, EPASA Shipping Agency Sdn Bhd (“EPASA”) ceased the operations and become dormant.
Subsequently, on 7 May 2019, Kulim had acquired a 25% equity interest held by Intrapreneur in Renown Value Sdn Bhd (“RVSB”), which was aimed at improving Kulim’s earning through strengthening our MD2 pineapple cultivation by centralising and having full control over pineapple business activities. Through this move, Kulim Pineapple Farm (“KPF”) will be able to supply suckers at comparable standards and sufficient quantity in order to fulfill the contract with Malaysian Pineapple Industry Board (“MPIB”).
An Extraordinary General Meeting (“EGM”) was held on 25 September 2019 by our subsidiary, E A Tech, during which the following proposals were tabled and duly passed and approved:
The proposed private placement up to 106.35 million of new ordinary shares in E A Tech, representing approximately 21.1% of the company’s total number of issued shares (“Proposed Private Placement”);
The proposed settlement of debt Sindora Berhad (“Sindora”) via owing to the major shareholder, the issuance of 121.62 million new ordinary shares in E A Tech (“Proposed Debt capitalisation”); and
The proposed issuance of up to 365.99 million free warrants in EA Tech on the basis of one (1) warrant for every two (2) existing shares held on the entitlement date to be determined later (“Proposed Free Warrants Issue”).
The exercise was carried out after considering the financial position of EA Tech, whereby the proposed private placement was deemed as an appropriate fund-raising option to enable E A T ech to raise the necessary funds to support its operation. The proposed debt capitalisation will enable EA Tech to reduce its debt and interest costs whilst preserving cash reserves.
In addition, the proposed free warrants issue was an appropriate way for rewarding the shareholders for their continuous support by enabling them to participate in convertible securities without incurring any costs, while providing an opportunity to further increase their equity. However, the proposed free warrants issue is expected to be implemented after the completion of the private placement and the proposed debt capitalisation.
On 1 October 2019, Kulim and MTC OREC entered into Subscription and Shareholders Agreement (“SHA”) for the formation of KGEV, as a joint venture company for an investment to develop a biomethane plant for commercialisation. MTC OREC is a company established through the synergy between OREC Ind Sdn Bhd and MTC Engineering Sdn Bhd.
In particularly on 8 October 2019, Kulim via KGEV has signed the Gas Purchase Agreement (“GPA”) with GMVP, a wholly-owned subsidiary of Gas Malaysia Berhad (“GMB”). Resulting from this partnership, GMVP will procure biomethane from KGEV for injection into Gas Malaysia’s Natural Gas Distribution System (“NGDS ”) network.
Notwithstanding the results, we continue to deliver value to our shareholders through the payment of dividends amounting RM200 million for the FYE 2019.

Q6 : Which business segment was the biggest contributor to the Group revenue and profitability in 2019? How was the performance of each business division?

HOF : Our Plantation segment, remained the most significant revenue contributor by generating RM834.61 million or 69.04% of the Group’s revenue. However, the PBT was decreased from RM49.97 million in 2018 to RM44.95 million in 2019.
On the other hand, our IV segment generated revenue of RM37.63 million, declined 21.49% from RM47.93 million reported in 2018. This segment recorded a PBT of RM0.25 million in 2019 versus RM1.24 million in 2018.
Meanwhile, our O&G segment posted revenue of RM307.52 million decreased by 34.56% compared to RM469.92 million recorded in the previous year. The Division recorded LBT of RM92.51 million in 2019 compared to PBT of RM73.91 million in 2018.

Q7 : Tell us more about the strength of Kulim’s balance sheet.

HOF : Kulim’s financial position remained stable in 2019, with a positive cash balance of RM169.93 million and net gearing ratio of 0.64 times. The Group’s borrowings level rose slightly to RM2.38 billion as at end-2019, up RM0.50 billion from RM1.88 billion as at end-2018. The increase was mainly due to higher external borrowings in 2019 to strengthen the company’s financial position and capital base.
Our finance cost for FYE 2019 surged to RM101.51 million from RM92.13 million in the previous year due to higher interest rate charged for borrowing with floating rates, revolving credits, as well as Foreign currency-denominated borrowing that was affected by fluctuations in the exchange rate.

Q8 : Can you tell us the main achievements and highlights of Kulim for FYE 2019?

ED : Despite the various challenges faced by the Group, we continued to record a string of remarkable achievements during the review period. Firstly, the Group successfully achieved an Oil Extraction Rate (“OER”) of 21.66% and a Kernel Extraction Rate (“KER ”) of 5.39% in FYE 2019.
Kulim also managed to lower the cost per mature hectare to RM6,246.25 compared with our target of RM6,493.00, representing a total savings of 4%.
Our commitment to corporate excellence was proven again in 2019, with the Group winning no less than ten (10) awards during the year.
Kulim has also received the MSPO Certification in March 2019.
We are also proud to note that Kulim is currently towards obtaining MS ISO 37001:2016 certification for Anti-Bribery Management Systems (“ABMS”) which is expected to be certified in December 2020.
Kulim also continued to contribute to the well-being of the community, disbursing a total of RM17.26 million for our corporate responsibility initiatives.

Q9 : Please tell us more about Kulim’s initiative to obtain the MS ISO 37001:2016 Certification for ABMS.

ED : Kulim has set up an Integrity Unit in November 2019 as one of its initiatives to instill the culture of integrity. The establishment of the Integrity Unit is in accordance with the Prime Minister’s Directive No. 1/2018 (October 2018) on the establishment of Integrity and Governance U nit in Government-Linked Companies (“GLCs”), companies owned by the Ministry and Government Agencies including the State Government. The Integrity Unit is responsible for promoting good governance, strengthening integrity, monitoring compliance and dealing with improper conducts.
Kulim certification to ISO 37001:2016 ABMS is one of the tools for fighting corruption and as a defense in meeting the “adequate procedures”.
Our ABMS objectives are to achieve a CORRUPTION-FREE ENVIRONMENT within Kulim, and this can be achieved through the following initiatives:

  • Reviewing our Anti-Bribery related policies and procedures periodically;
  • Conducting integrity and ABMS awareness programmes annually;
  • Promoting ABMS amongst all business associates; and
  • Conducting ABMS performance evaluation annually.

Q10 : Please provide a brief “SWOT” (Strength, Weaknesses, Opportunities and Threats) of Kulim.

ED : Our corporate SWOT are as follows: STRENGTH

  • Sizeable and economic of scale for agribusiness operation;
  • Strong R&D, technology and mechanisation support;
  • Sustainability driven management culture;
  • Certified Sustainable Palm Oil – RSPO & MSPO;
  • Cost management initiatives;
  • Experienced and professional management team; and
  • Established with vast experience and knowledge in the agribusiness industry.


  • Dependence on foreign labour and higher labour costs;
  • Labour situation a high ratio;
  • Ageing mills and palms; and
  • Stagnant growth potential for Malaysian operations.


  • Premium for SPO-certified products;
  • Potential involvement in related products along the integrated agribusiness value chain;
  • Involve in the circular economy via waste-to-wealth activities;
  • Leveraging on agribusiness expertise; and
  • Venturing into agrotourism business.


  • The volatility of CPO and PK price;
  • Manpower shortage;
  • Unfavourable weather conditions;
  • Competition from substitutes;
  • Exchange rate fluctuations;
  • Discriminatory policies; and
  • Geopolitical risks.

Q11 : Human capital is Kulim’s most valuable asset. How do the Group nurture and develop its employees to help them unleash their full potential?

ED : Creating and nurturing a conducive corporate culture for our employees are one of Kulim’s top priorities, as we believe this will further motivate and facilitate our staff to perform their best and thrive. By motivating, upskilling and providing them with a positive and rewarding working environment, our staff are able to realise their full potential and remain motivated to contribute to the Group even during challenging times, thus ultimately benefitting Kulim and our shareholders in the long-term.
For these reasons, Kulim’s human capital strategies emphasize on the following aspects in order to bring out the best of in our staff :-
Leadership Enhancement Kulim focuses on building and growing “leaders” among our employees at every level through exclusive leadership programmes that will help enhance their skills, such as the Johor Corporation Leadership Programme (“JLP”) and Advance Johor Leadership Programme (“AJLP”) in a bid to create a sustainable talent pool within the organisation.
Through these programmes, participating employees are exposed to a range of business challenges in a variety of scenarios, where they are given with the opportunity to share their leadership experiences.
Capitalising on Growth Potential The Group also strive to groom and prepare our workforce by upskilling them to meet the needs and changes in their current job and other positions, which also help the staff in terms of their career promotion. Such upskilling programmes cover general skills and professional certifications, such as HR Certification, ACCA, CIMA, CIA, CAHRM, and CePSWAM, among others.
Continuous Training and Development Programmes Such programmes will assist Kulim in enhancing the skills of our workforce, reduce the gap between the requirements of the organisations and their capabilities, and enrich the skill sets and competencies of our employees.
Strengthening Performance Management System (“PMS”) This move is aimed at promoting a high-performance work culture and runs parallel with our human capital initiatives mentioned earlier. Kulim has also implemented a performance-based on reward system to improve our staff competencies, which involves annual target reviews and settings in a bid to motivate and challenge the Group and employees to raise our performance to the next level.
Employee Engagement Being a caring corporate entity is important to us, and this means having genuine care for our employees, as well as the society, environment and beyond. This philosophy is well-reflected in our C.A.R.E. programme which aimed at instilling Kulim’s corporate values, namely Competitive, Action, Responsible, Ethical amongst all employees, both in their working environment and day-today activities.
Hence, it is vital for us to build our Competitive capacity through the firm Action in generating profitable growth, while being firmly guided by our pledge to be Responsible and Ethical. Kulim pursue continuous initiatives to improve the C.A.R.E. programme that engages employees at all level including executives, staff and workers.

Q12 : Moving forward, what is the expected outlook for the palm oil industry in 2020?

ED:We believe that 2020 to be a better year for the palm oil industry. We expect plantation remains the largest contributor to the Agribusiness segment. The CPO production is expected to recover driven primarily by favourable weather conditions as well as the expansion in oil palm matured area. Apart from that, palm oil prices in the world market are expected to be firmer in 2020 with palm oil demand expected to regain its momentum to generate higher export revenue and supported with the higher demand from major markets like China and India.
CPO price expects to be at average of RM2,750 per tonne against last year’s average of slightly more than RM2,000. The export revenue from palm oil products was expected to increase by 21% to RM78 billion in 2020 from RM64.45 billion recorded last year in anticipation of firmer CPO price this year (Source: MPOB).
Furthermore, exports of CPO are expected to improve following the downward revision on import tariff by India. Following the ban on palm-based biodiesel by the EU , the Government will implement the B20 biodiesel programme which expected to boost domestic demand for palm oil and contribute to a cleaner environment.

Q13 :In view of the expected challenges as mentioned earlier, what would be the business outlook for Kulim in the coming year?

ED : We remain optimistic of the Group’s outlook for the coming year as our fundamentals remain strong despite the various challenges faced by us throughout the year 2019. Therefore, we are optimistic on the strategic initiatives already planned by Kulim to strengthen and further unlock our potential business divisions.
Agribusiness We aim to strengthen our competencies in Agribusiness segment through diversification of the existing upstream activities to integrated agribusiness value chain with involvement from upstream, midstream, downstream and circular economy via waste-to-wealth activities. The expansion of agribusiness activity are indeed crucial for us to reduce over-dependency on palm oil upstream activities and will able cushion the impact of volatility of CPO and PK prices to the Group.
In addition, as part of our strategic initiatives to leverage our internal expertise in oil palm by the expansion of plantation activities to Agribusiness segment which involved pineapple, cattle, coconut and other crops which will unleash our potential growth in the future.
Furthermore, the Group is focused to explore untapped opportunities in relation to environment friendly and value-adding applications such as palm oil by-product. T he conversion of biogas into biomethane is part of a circular economy and also viewed as a part of Kulim’s long term commitment to sustainable practices along the entire chain of oil palm plantation business. In line with this, we are targeting the commissioning of our first biomethane plant at Sedenak P OM by June 2021.
The Group will further enhance our R &D initiatives by using the latest technology and know-how in agronomy, chemistry, seed production, plant breeding, biotechnology and crop protection to optimise our production.
With the new R &D building, Kulim Agrotech Centre (“KAC”), we are optimistic that the findings will help the Group in the R&D field, and subsequently give benefits to the entire plantation industry, especially in terms of quality improvement and agro products innovation.
Meanwhile, the collaborations with MPOB and Malaysian Nuclear Agency offers great potential in enhancing the value-added in the agriculture sector and will have a significant impact on the country’s overall economic development.


Kulim plans to expand pineapple business and production through collaboration with the government agency and other interested parties. We also intend to explore the opportunity of expanding into downstream pineapple product.


Kulim aims to leverage on Selai Cattle operation which integrates cattle operation with oil palm plantation and to increase the calving rate and sales weight.

Oil & Gas

For our Indonesian O&G segment, we intend to focus on the completion of the CSSPA by 2020. Moving forward, we aim to recoup our investment in the O&G business, considering either through joint venture with a third party or cashing out via dilution of KENSB ’s equity in PT CSE for a huge potential return after development.

Intrapreneur Venture

Kulim aims to establish a stronger foundation for our IV business and further boost its growth, in our effort to bring this segment to greater heights. In this regard, various strategies have been undertaken to strengthen the Group’s I V business, comprising exit, harvest or divestment strategy; transforming our existing IV companies into core business; business diversification; and strengthening of the IV segment towards ensuring the Group’s business survival.


Kulim aims to increase the values of land owned by the Group which will involve the conversion of our plantation estates into the property development projects, especially in strategic locations with a high growth population and demand. T he first property project developed for staff housing at Taman R.E.M. was completed by end-2019 and is currently open for sale.

Q14 : What would be Kulim’s key message to its shareholders and stakeholders?

ED : We would like to assure all our shareholders and stakeholders that Kulim will continue to deliver sustainable long-term returns and long-term value to them. In 2020, Kulim shall remain committed to generate sustainable returns and superior performance to our shareholders. In this regard, we will continuously be looking at various strategic initiatives to deliver optimal value to our shareholders, as well as provide rewarding careers to our people, foster a mutually beneficial relationship with our business partners, and care for the society and the environment in which we operate while contributing towards the progress of our nation.