KUALA LUMPUR (Nov 24): United Plantations Bhd ranked second and Sime Darby Plantation Bhd has climbed to the seventh spot out of 100 assessed palm oil producers globally in November, according to 2022 SPOTT ranking of palm oil producers.
United Plantations scored a high 92.6% based on SPOTT’s November 2022 assessment, an increase of 6.4% from the 86.2% score in last year’s assessment.
A breakdown in the SPOTT assessment on United Plantations showed an above 80% score in three categories: organisation (96.1%), policy (98.7%) and practice (84.2%). United Plantations also scored 100% in its High Conservation Value, High Carbon Stocks and Impact Assessments category.
Similarly, Sime Darby Plantation scored 89.8% — a 6.4% increase from last year’s assessment of 83.4% — and clinched above 80% scores in the organisation (95%), policy (92.2%) and practice (84.6%) categories. The group scored high in Community, Land and Labour Rights with 95.7%.
Other Malaysian palm oil producers in the list include Hap Seng Plantations Holdings Bhd ranked 14th, IOI Corp Bhd (17th) and Kuala Lumpur Kepong Bhd (23rd).
Zoological Society of London (ZSL)’s SPOTT assesses 100 palm oil producers, processors, and traders on their public disclosure regarding their organisation, policies and practices related to environmental, social and governance (ESG) issues.
“While 39% [of] companies report a clear process to assess suppliers, the remaining 61% have limited or no public commitment for evaluating the risk of their suppliers associated with habitat destruction or biodiversity loss,” said ZSL in a statement.
Additionally, it said, only 58% of companies have a public zero-deforestation commitment that applies to suppliers, and 12% have disclosed a time-bound action plan for suppliers to become compliant with sustainable palm oil sourcing commitments.
Meanwhile, PublicInvest Research analyst Chong Hoe Leong in a recent note said that Sime Darby Plantation’s 5% year-on-year drop in core earnings to RM1.6 billion was due to weaker plantation earnings from Malaysia and Indonesia, and the results were below the research firm's expectation at 62% of full-year forecast and consensus at 63%.
“In view of this, we cut our FY2022 earnings forecast by 16%, factoring in the decline in Malaysian fresh fruit bunches (FFB) production.
“No changes were made for our FY2023-2024 earnings forecasts,” said Chong, who maintained a "neutral" call with an unchanged target price of RM4.60 based on 18 times FY2023 earnings per share.
Nevertheless, Maybank Investment Bank’s analyst Ong Chee Ting said in a note that despite the research house placing a "hold" call on Sime Darby Plantation, the palm oil producer scored above average at 52 with its reformed ESG policies, practices and disclosures under Maybank Investment Bank’s ESG 2.0 review.
“In FY2022, the board approved a new ESG Scorecard outlining KPIs that reflect the initiatives Sime Darby has undertaken to meet the requirements of the International Labour Organisation (ILO) and to fully address the Forced Labour Indicators (FLI),” said Ong.
“The new ESG Scorecard now carries as much weight as the operational scorecard.”
At noon on Wednesday (Nov 24), United Plantations’ share price remained unchanged at RM14.58, for market capitalisation of RM6.07 billion.
Sime Darby Plantation’s share price fell 10 sen or 2.26% to RM4.33, while its market capitalisation was RM29.95 billion.