POINTERS: 2013 Market Directions - Planters Perspectives

By: Mr. Mohamad Helmy Othman Basha, FCCA

He is Head, Plantation Upstream, Sime Darby Plantation Sdn Bhd. Educated in the United Kingdom in Professional Accountancy (ACCA), he started his employment in Wellers, an accountancy firm based in Oxford, United Kingdom. Upon his return to Malaysia, he joined Shell Malaysia. He spent 7 years in this Shell Group of companies where he was posted to various places within Malaysia. In 1997, he joined Kumpulan Guthrie Berhad as Finance & Administration Manager, where he was first based in the Property Division and was subsequently promoted as General Manager, Finance of Kumpulan Guthrie Berhad, General Manager, Guthrie Landscaping Sdn. Berhad and General Manager, Finance, Property Division. Encik Helmy was later promoted to Group General Manager, Finance in 2001 in charge of Group Treasury as well as Minamas Plantation, Indonesia (Finance). He later joined the holding company where he was in charge of the Group Finance operation including the raising of RM 1.5 billion Islamic Financing in December 2000 to finance the acquisition of Indonesian plantation. He was posted to Minamas Plantation, Indonesia in 2001 while at the same time in charge of the Guthrie Group Treasury function in Kuala Lumpur. He spent more than 3 years in Indonesia and saw the country in turmoil in 2000 and the progress it made since then. He went back to Guthrie HQ in 2004 where he became Head, Marketing and later in the same year he was posted to a new position as Head, Corporate Planning & Strategic Development. In mid 2006, he became the Head, Plantation Malaysia for Guthrie as well as CEO of Highlands & Lowlands Berhad and Guthrie Ropel Berhad. He played a key role in the merger between Sime Darby, Guthrie and Golden Hope in 2007, being involved in both Plantation and HR. After the merger, he was made the Senior Vice President and Head of Plantation Upstream looking after the whole of operations in Malaysia as well as expansion in Malaysia, Indonesia, Africa and other countries. He travels extensively to African countries mainly in West Africa and Central Aftrica.

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It is a no brainer that with the continuing of growth in population and with people getting more affluent, consumption of food and for that matter all consumables and customer products will increase likewise. Although it will take sometime for the per capita consumption of oil and fat of developing countries to catch up with their counterparts in the developed world, any small increase in per capita coupled with the increase in population will have a major impact on the overall demand of vegetable oils.

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Questions & Answers (4) :

Mohammad Jaaffar Ahmad

11 years ago

Dear En. Helmy, congratulations and I admired your courage to state that even at RM2,500 per tonne for CPO price, the plantation is still making a good margin. This question was also asked by Bloomberg recently to one big plantation company. The answer is RM2,500 per tonne is a fair price for CPO and anything above is bonus. Of course, there are always sceptics who argue about the cost of production for smallholders and new planting areas. What is your view on the minimum wage for workers in Malaysia? Shouldn't they deserved a fair support for their contribution to the plantation industry? TQ

Helmy Othman Basha

11 years ago

Thanks En Mohd Faiz. The average cost of production for Malaysian companies is between RM1000-RM1300 for ton of CPO. This is still a good margin even at CPO price of RM2500/mt. The only problem is when people are used to CPO price of RM3000/mt, any drop is making a lot of people excited. I believe In the next few years, cost of production will not go that high and the good margin is still there. Agreed that Indonesian cost is currently lower than Malaysia. However their cost is going up at a much higher rate on yearly basis compared to ours due to higher increment on labour cost. For the last 5 years, their wages increase by more than 10% on yearly basis and will continue to do so. Moreover since there is zero mechanisation in Indonesia which consequently means they use more labour per hectare, the impact on wage increase is greater there. In less than 3 years from now, Indonesian cost will overtake Malaysian cost and it is hard for them to bring it down. Furthermore, logistics cost in Indonesia especially in Kalimantan is between 3-4 times higher than ours

MOHD FAIZ ABD RAHMAN

11 years ago

What is your opinion on this, your compeiveness profitability of Malaysian companies and way forward?

MOHD FAIZ ABD RAHMAN

11 years ago

Dear Mr. Mohamad Helmy, with regard to Malaysian palm oil compeiveness, you are not only competing with other vegetable oil but also to Indonesian palm oil. In term of production cost, Indonesian palm oil is more compeive due to its economic of scale, labour cost and increasing efficiency of Indonesian in producing palm oil.