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INTEGRATED
REPORT
2020
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Dear Stakeholders,


" It is an honour for me to be appointed as the new Chairman of Kulim (Malaysia) Berhad, a position assumed on 1 March 2021. I am looking forward to work with my fellow Board members and the Senior Management Team to continue building on the Company’s strong operating and financial performance. "

As I write this message, most countries – Malaysia included – have entered a third wave of the COVID-19 pandemic. Although vaccinations have been approved and administered, it will take time before a sufficient number of people receive the required doses for immunity. Until then, the world will still have to observe social distancing, good hygiene and other Standard Operating Procedures (“SOPs”) as part of the “new normal”.

Yet, as the American poet Robert Frost wisely stated, “life goes on”. People and organisations alike just have to adapt to the sweeping changes around us as best as possible. In some ways, the call for change is positive for businesses as it forces a rethink of fundamental issues, such as our broader purpose within the context of society and how best we can create real value.

At Kulim, the process of change began prior to the pandemic, when we decided to streamline our operations and create a leaner organisation that is focused on an essential commodity: food. Amid the pandemic related uncertainties, however, we questioned our longer-term objectives; and realised that to attain the sustainable growth envisaged we would need to once again be listed on Bursa Malaysia. A five years’ Transformation Programme was therefore outlined to guide us to this end.

This programme is as comprehensive as it is detailed, entailing organisational and corporate restructuring, the integration of Environmental, Social and Governance (“ESG”) principles into our business model, and a strengthened governance framework to ensure integrity as our purpose to serving our stakeholders.




DIVIDEND

As a result of our ongoing transformation, we have incurred substantial impairment losses. However, this is a small price to pay in return for the expected long-term benefits. In 2020, these impairment costs resulted in Kulim recording a loss of RM398.95 million. Because the loss does not reflect any weakening of our fundamentals, I am pleased to share that the Board has approved a total dividend payment of RM52 million for the year 2020. This is in line with our commitment to creating sustainable shareholder value.



SOCIAL & ENVIRONMENTAL PERFORMANCE

As a state-owned entity, playing a socio-economic development role comes naturally to Kulim. While being profit-driven, we see our businesses as vehicles for the betterment of local communities. In addition to contributing in a significant manner to food security, we also pride ourselves on providing fair and equitable employment.

No less than 73% of our total workforce are foreign but we treat them the same as local hires, offering the same rights and benefits including housing and health coverage. As of January 2020, we have created greater inclusiveness by providing our foreign employees with the same SOCSO protection as local employees. Committed to keeping our workers safe during the pandemic, we have not just adhered to all SOPs as required by the Ministry of Health and the Malaysian Palm Oil Association (“MPOA”) but also made available additional medical staff at our operating units, and established an online counselling platform to help manage any mental stress.

Environmentally, we have always operated in a manner that respects and protects our natural surroundings. Kulim was among the first plantation companies in the world to obtain the RSPO certification, and we continue to strengthen our commitment to sustainability while incentivising our smallholders to do the same.

In light of the urgency to mitigate climate change, we are placing greater emphasis on reducing carbon emissions in our operations. Over the years, we have invested in biogas plants to capture methane, one of the most potent Greenhouse Gases (“GHGs”), from our effluent, and convert it into energy. Today, we are increasing our methane-capturing efficiency and capacity and looking at feeding the gas onto the national grid while also supplying a highly compressed form to third parties. This would serve the dual purpose of lowering our carbon footprint while creating a new and viable source of revenue.



STRENGTHENED GOVERNANCE

In last year’s Integrated Annual Report, we indicated plans to attain the MS ISO 37001:2016 Anti-Bribery Management System (“ABMS”) certification. Towards this end, our newly established Integrity Unit has developed an Anti-Bribery Plan, reviewed three existing policies related to integrity: our Conflict of Interest, Gift and Entertainment, and Whistle-Blowing policies; while developing three new policies: an Anti-Bribery and Corruption Policy, a Due Diligence Policy and a Referral Letter Policy. These came into effect as of 10 September 2020.

Our Integrity Unit also carried out various initiatives to create awareness of Section 17A of the Malaysian Anti-Corruption Commission (Amendment) Act 2018 within Kulim as well as among our contractors, suppliers and business associates. The objective is to ensure integrity in all our dealings and those of our partners.

We had hoped to be ABMS certified by the end of 2020, but SIRIM’s audit exercise was delayed due to the pandemic, and we now expect to obtain the certification in the second quarter of 2021.





ACKNOWLEDGEMENTS

Despite operating in very challenging times, Kulim is at an exciting juncture in our ongoing journey, poised on the cusp of a new transformation. To achieve the goals we have set requires the full commitment of our team, who proved their capabilities over the last few months. To each employee, I would like to express my heartfelt gratitude for your dedication to Kulim. I would also like to acknowledge our Senior Management for their sound leadership and extend a warm welcome to our newly appointed Managing Director, Mohd Faris Adli Shukery, who brings with him many years of plantation experience in the private sector. The Board has confidence in his ability to build a stronger, more focused Kulim, and will provide him with all the support he needs. I also take this opportunity to congratulate Fawzi Ahmad and Abdullah Abu Samah who were appointed to the Board as Independent Non-Executive Directors on 1 January 2021.

A special note of appreciation also goes to our former Chairman, Datuk Anuar Ahmad who resigned on 1 March 2021, and the outgoing Independent Non-Executive Director, Dr. Radzuan A. Rahman who resigned on 31 December 2020. Their leadership and contributions have helped bring the Group to greater heights.

The Board is also fully appreciative of all our other stakeholders – our parent company Johor Corporation (“JCorp”), our shareholders, business partners, associates, consultants, financiers and government authorities in Malaysia and Indonesia – who contribute in various ways to our sustainable operations. Many aspects of the immediate future carry a high degree of uncertainty. But one thing is for sure: all our plans and strategies going forward are geared towards creating increasing value for you.



Tan Sri Dr. Ali Hamsa
Chairman



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