This article first appeared in The Edge Malaysia Weekly on November 13, 2023 - November 19, 2023

Yet another feather in United Plantations Bhd’s (UP) hat. The Perak-based planter has won The Edge Billion Ringgit Club (BRC) 2023 corporate award for the highest return on equity (ROE) over three years in the plantation sector. This is the fifth BRC award that the company has won over the years. It bagged two CR Awards as well in 2013 and 2016.

The record-breaking net profit in three financial years — FY2020, FY2021 and FY2022 ended Dec 31 — helped its risk-weighted three-year profit after tax (PAT) compound annual growth rate (CAGR) to come in at 28.5%, strong numbers that lifted its ROE.

UP posted its highest ever net profit of RM601.7 million in FY2022 — a 16% increase from its previous record of RM518.3 million in FY2021 when the company’s PAT climbed 29.7%. In the three-year period in review, PAT growth was strongest in FY2020 at 41% to RM399.5 million from RM283.3 million in FY2019.

UP’s ROE was also on the rise over the past three years — 15.5% in 2020, 19.6% in 2021 and 21.6% in 2022. As such, the company’s adjusted weighted ROE over three years came in at 19.8% — the highest in the plantation sector.

The handsome profits enabled UP to reward shareholders with bumper dividends, even though the payout was not at record levels. The plantation group declared a dividend per share of RM1.40 (including a special dividend of 30 sen) for FY2022, RM1.15 for FY2021 and 85 sen FY2020.

UP’s strong profit was driven mainly by high crude palm oil (CPO) prices, a very commendable performance in its downstream segments and, notably, the successful steps it has taken towards mechanisation and minimising crop losses in an environment of severe labour shortages and weather-related problems.

It is worth noting that the FY2022 record financial result was achieved despite paying higher tax of about RM45 million as a function of the one-off prosperity tax and one-off voluntary payment of RM24.7 million related to the reimbursement of its guest workers’ past recruitment fees, which they had paid to third parties.

Additionally, unfavourable weather conditions also caused significant flooding in its estates during the final quarter of the year, which negatively impacted production. However, UP managed to minimise its crop losses, thanks to higher field productivity driven by the group’s strategy of operationalising new innovations and in-field mechanisation.

UP’s CPO production increased 0.7% to 209,020 tones in 2022 from 207,504 tones in 2021. The increase was mainly driven by the concerted efforts to enhance its operational efficiencies throughout the plantation value chain, thereby minimising crop losses. The increase in production was positively impacted by larger areas entering maturity at the newly acquired Tanarata Estate.

UP anticipates a challenging operating environment ahead. “Amid that, there is a need to adapt to the changing environment by having an open mind, remaining agile and by having the courage to innovate and stimulate progress while ultimately preserving our core values,” chairman Datuk Mohamad Nasir Ab Latif wrote in its latest annual report.

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