This article first appeared in The Edge Malaysia Weekly on November 7, 2022 - November 13, 2022
United Plantations Bhd (UP) is no stranger to The Edge Billion Ringgit Club (BRC) awards, being among the winners in 2010 when the awards began and recognised for its efforts in corporate responsibility more than once.
For the second straight year, the niche oil palm planter is taking home the award for highest return on equity (ROE) over three years, which it also won in 2010.
UP, which has plantation estates and mills in Perak and Indonesia, posted a bumper profit of RM522 million for the financial year ended Dec 31, 2021 (FY2021) — a 30% improvement from the RM402 million achieved in FY2020.
Revenue increased 52% in FY2021 to RM2.03 billion compared with FY2020 mainly due to higher crude palm oil (CPO) and palm kernel (PK) production and sales prices.
Its palm oil production rose to 251,601 tonnes in FY2021, a 3.6% increase year on year, mainly attributable to the favourable weather conditions experienced in 2021 as well as the tremendous efforts undertaken to secure the crop despite severe labour shortages in 2020 and 2021.
Its plantation division in Indonesia generated a record group contribution of RM75.1 million in 2021 against RM42.5 million in 2020, representing an increase of 76.7%.
The good results were also primarily a function of the higher market prices for CPO and PK, and cost controls implemented during the year.
The record profit helped lift UP’s weighted return on equity (ROE) over three years to 16.6%, the best return among its peers in the plantation sector. ROE increased from 11.1% in 2019 to 15.5% in 2020, and 19.6% in 2021.
Earnings per share grew steadily from 68 sen in 2019 to 96 sen in 2020, and rocketed to 125 sen in 2021.
UP paid a dividend of 115 sen per share to its shareholders in FY2021 compared with 85 sen a share in FY2020.
In FY2021 its cash position stood at RM478 million compared with RM465 million in FY2020.
In its annual report, UP states that it will continue to maintain a conservative capital structure to have the flexibility to utilise internally generated funds for capital investments within the group, sustain a stable dividend to shareholders and have the capability to pursue new investments.
The group’s 2021 capital expenditure for property, plant and equipment (including bearer plants) and right-of-use assets was RM114.4 million compared with RM108.4 million in 2020.
During the year, RM29.8 million was spent on replanting activities on 1,733ha compared with 1,384ha in 2020.
UP’s largest shareholder is the Bek-Nielsen family, with a stake of 43.85% held via United International Enterprises Ltd and the family’s holding company, Maximum Vista Sdn Bhd, followed by the Employees Provident Fund (EPF) with an 8.8% stake and the Perak State Agriculture Development Corporation with a 5.79% stake.
On the group’s prospects and outlook, UP CEO Datuk Carl Bek-Nielsen says the UP management will continue to devise ways to manage the cost of raw materials such as energy, fertilisers, chemicals and building materials that has gone up due to global supply chain challenges.
He adds that special attention will continue to be given towards addressing the present acute labour shortages and increasing yields and productivity.
“We will pursue this relentlessly through continued mechanisation efforts and replanting of the older and less productive oil palm stands in order to take full advantage of our latest superior planting materials from our research department as a vital part of sustaining our positive development,” says Nielsen in the 2021 annual report.
He adds that UP’s positive liquidity and conservative capital resources position will enable the group to perform satisfactorily without the need for any asset impairments arising from the current global market developments.
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