SIME DARBY PLANTATION POTENTIALLY EYES MORE BROWNFIELD ESTATES FOR GROWTH

KUALA LUMPUR, Oct 12 -- Sime Darby Plantation (SDPL) is potentially eyeing more brownfield estates for growth while focusing on boosting fresh fruit bunches (FFB) yields via research, development and innovation.

Maybank IB Research in its note today said that the company’s future earnings growth would also likely come from the expansion of its downstream capacity and capabilities.

“Its No Deforestation, No Peat, No Exploitation policy (NDPE) commitment means SDPL may likely preclude greenfield developments going forward, given the increased scarcity of strategically located greenfield lands,” it said, adding that the NDPE policy is also extended to all suppliers within SDPL’s supply chain.

The research house said SDPL is also working towards a fully traceable supply chain; having achieved 95 per cent traceability to the mill level, and 47 per cent traceability to plantations in 2019.

SDPL is the world’s largest producer of certified sustainable palm oil with a production of 2.49 million tonnes as of last year; having embarked on its sustainability journey 30 years ago with its zero-burning pledge.

On plantation workers, Maybank IB said the industry had been saddled with labour shortages for years, subsequently losing income due to uncollected FFB.

“Malaysian planters are heavily reliant on foreign workers, including SDPL which has 24,646 migrant workers in 2019.

“Rising minimum wage, calls for enhanced labour rights and rising costs associated with hiring foreign workers are adding to cost pressures,” it said.

Without higher crude palm oil price to match rising costs, Maybank IB said the industry needs to continuously innovate, mechanise and introduce higher yielding materials to keep unit costs low, otherwise inefficient planters would risk going out of business in the not too distant future.

-- BERNAMA