United Plantations Bhd made its debut on The Edge Billion Ringgit Club (BRC) in 2016 when its sustainable initiatives saw it bagging the Best CR Initiatives: Below RM10 Billion Market Capitalisation award.
This year, United Plantations returned to the BRC by winning two awards in the plantation category: the highest return on equity (ROE) over three years and the highest growth in profit after tax (PAT) over three years.
The Perak-based plantation group achieved a three-year compound annual growth rate for PAT of 0.6%, beating its peers whose market capitalisation is above RM1 billion.
It also achieved a record-high net profit of RM399.5 million in the financial year ended Dec 31, 2020 (FY2020), up nearly 42% year on year from RM283.3 million. It posted a PAT of RM372.4 million in FY2018, down from RM393 million in FY2017, as crude palm oil (CPO) prices were on a decline.
The bumper profit in FY2020 was achieved partly because of higher CPO and palm kernel (PK) prices, along with the company’s focus on timely manuring, harvesting and fruit evacuation as well as increased mechanisation.
Its CPO production in FY2020 stood at 242,857 tonnes, up 7.7% y-o-y, whereas PK production rose 6.2% y-o-y to 48,911 tonnes. CPO yield also saw an uptick of 4% to 5.93 tonnes per hectare in FY2020.
The record profit helped lift United Plantation’s weighted ROE over three years to 14%, the best return among its big cap peers.
The group rewards shareholders with regular dividends. It raised its dividend to 85 sen per share in FY2020 — the highest payment since FY2015, when it declared RM1 per share — compared with 67.5 sen in FY2019 and 70 sen in FY2018. Its three-year average dividend payout ratio stood at 88.45%.
Besides higher dividends, the group also undertook a one-for-one bonus issue in May 2020 to reward its shareholders.
Because of its conservative cash policy, the group built up a warchest of RM465 million, which enabled it to acquire the 3,642ha Tanarata Estate near Teluk Intan, Perak, in 2019 for RM401 million, fully funded by internal funds.
United Plantations did not start with the oil palm and coconut plantations that it is known for today; it was a rubber planter when it was founded in 1906. The group started planting oil palm only 12 years later.
The plantation group has a storied past that begins in 1885, when Aage Westenholz, a young engineer from Denmark, found himself deeply involved in the development of electric trams in Thailand, which was known as the Kingdom of Siam at the time.
A decade later, he had found himself involved in the development of the Kingdom through his involvements in the Siam Land, Canals and Irrigation Co and the Siam Electricity Co in 1898.
While in Bangkok, Westenholz had made himself a wealthy man and was actively involved in ventures of his own, which led to the establishment of the precursor to the modern-day United Plantations Bhd, the Jendarata Rubber Company in Perak in 1906.
Today, United Plantations has a total cultivated land bank of about 51,000ha spread over Malaysia (80%) and Indonesia (20%) for its plantation activities while also operating two palm oil refineries — the Unitata Refinery, built in 1976; and the Optimill and UniFuji palm oil mill and refinery complex, set up in 2019.
Its largest shareholder is the Bek-Nielsen family, with a stake of 49.98% held via United International Enterprises Ltd and the family’s holding company, Maximum Vista Sdn Bhd; the Employees Provident Fund (EPF), with a 12.58% stake; and the Perak State Agriculture Development Corporation (6.30%).
On the group’s prospects and outlook, United Plantations chief executive director Datuk Carl Bek-Nielsen says in the group’s 2020 annual report that it will face its biggest risk in the labour shortage caused by Covid-19, a change in Indonesia’s biodiesel policy and the El Niño weather patterns.
“In 2021, special attention will continue to be given towards addressing the present acute labour shortages as well as improving cost efficiencies and increasing yields and productivity as a vital part of sustaining our positive development. To further improve on weaknesses identified in respect of our sustainability journey, much more attention must also be given to operationalise and mainstream the principles of our sustainability commitments, so these are ‘built in’ and not just ‘bolted on’,” Bek-Nielsen adds.