KLK aims to meet yield target in FY24

PETALING JAYA: Kuala Lumpur Kepong Bhd (KLK) is committed to enhancing operational efficiency to drive performance, aiming to meet its yield target of 23 tonnes per hectare in its financial year ending Sept 30, 2024 (FY24).

Outgoing chairman Tun Raja Muhammad Alias Raja Muhammad Ali said that despite the improvement in yields to 20.5 tonnes per hectare in FY23, there is still work to be done to achieve its FY24 target.

“A tall order no doubt, but certainly not impossible for our dedicated and highly charged team,” he noted in the company’s recently released annual report.

He said the integrated plantation group has identified the factors that limit its yields in each region and had started implementing site-specific strategies to overcome them even during FY23.

Initiatives include filling worker vacancies, worker training programmes, optimal water management, pest control and the expansion of proven mechanisation systems.

“This improvement has to begin from training and providing attention to the substantial number of newly recruited inexperienced workers, and also focused on normalisation of agricultural conditions as well as work towards efficiency in crop recovery and quality,” Raja Muhammad Alias said.

The chairman, who assumed the role 15 years ago, specifically pointed out efforts to mitigate the impact of mealy bugs, a key pest causing sooty mould and affecting palm photosynthesis, particularly in Tawau, Sabah.

He emphasised the importance of learning from successful regions with over 30,000 ha capable of yielding six tonnes of per hectare.

Notably, KLK’s palm oil yield of 4.36 tonnes per hectare in FY23 saw a slight increase from 4.20 tonnes per hectare in FY22.

“In short, all ‘back to basics’ operations must be well planned, executed, checked and cross-checked by all levels of management,” he added.

Despite the challenges faced in 2023 due to global economic headwinds, KLK has persistently worked towards optimising all business operations.

Its plantation division demonstrated resilience by achieving a 5% increase in total fresh fruit bunch production, reaching 5.25 million tonnes in FY23 compared to 4.99 million tonnes in the previous financial year.

This achievement is attributed to improvements in estate operations management including pruning, harvesting and field work upkeep.

Meanwhile, for its manufacturing division, Raja Muhammad Alias expressed a positive outlook for FY24.

The optimism stems from the anticipation that most of the major projects will be completed and operational in stages within the specified period.

“This should provide a boost in its contribution to the group,” he said.

He expects a slow but steady recovery in customer demand as they are expected to remain cautious, no longer buying to stock up but buying only when needed.

Looking ahead, KLK chief executive officer Tan Sri Lee Oi Hian said the group does not expect to enjoy the exceptional profits due to high crude palm oil (CPO) prices as seen in the past two years.

Notably, CPO prices fell to about RM4,000 per tonne at the beginning of 2023, then steadied between RM3,300 to RM3,800 for most parts of the year.

He said the group is also trapped in a vicious cycle of high business costs and muted demand, resulting in lower profits.

For FY23, KLK reported a net profit of RM834.3mil, a 62% decrease from the RM2.17bil reported in FY22.

This decline was primarily attributed to substantially lower contributions from all business segments particularly the plantation and manufacturing segments, which traditionally constitute the majority of the group’s profit.

“The efforts of the major economies to quell inflation have sent long-term interest rates to the highest level, putting a lot of stress on the balance sheet,” Lee said.

As at Sept 30, 2023, the group’s net debt-to-equity ratio stood at 46%, against 41% in FY22, with approximately 70% of the borrowings being long-term with fixed interest rates.

On another note, Raja Muhammad Alias declared his retirement, noting that this is his final address to the shareholders.

“The time is right for me to step back from the group,” he, who joined the board in 1978, noted.

He concluded that he is confident the board will remain committed to further strengthening and expanding the group.