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(extracted from Annual Report 2016)

On behalf of the Board of Directors, it gives me great pleasure to present the Company's Annual Report for the financial year ended 31 December 2016, our ninth full year of operation since our listing on the Main Market of Bursa Malaysia on 28 August 2007.

2016 Performance

2016 was a difficult year for us as our Group experienced a significant drop in the fresh fruit bunch (FFB) production due to the industry downtrend, coupled with labour shortage and Ganoderma infestation at certain of our estates. Our production dropped by 16% compared to 2015.

Nevertheless, our financial results were marginally improved principally due to better realised selling prices for crude palm oil (CPO) and palm kernel (PK). Revenue for the year was RM384.0 million, an increase of 15% compared to RM334.2 million in 2015 whereas net profit attributable to owners of the Company was RM22.2 million, a marginal increase of 4% compared to 2015 of RM21.3 million.

Achievements of the Year

Despite production downtrend, we managed to achieve a few key successes during the year.

Expansion of land bank

We strongly believe that growth through the expansion of our land bank is crucial and will bring future benefits to the Group. We successfully completed 2 acquisitions and 1 joint venture during the year.

Firstly, the Group acquired 100% equity interest in Telliana Oil Palm Sdn Bhd, a company which owns 3,050 hectares (ha) of vacant land situated at Retus Land District. Secondly it acquired Pinji Mewah Estate measuring 1,908 ha. Pinji Mewah Estate is a plantation, aged between 1 to 4 years and situated at Puyut Land District. Both acquisitions increase our land bank by 11%. Further, the Group also entered into a joint venture with a statutory body to develop 370 ha of land into an oil palm plantation, situated at Karabungan.

We believe that this will result in growth in FFB production in years to come.

Expansion of planted areas

To enable us to move forward, maintain an optimal age profile and achieve maximum FFB yield in years to come, we have developed key strategic objectives to attain our business goals.

Around 400 ha were newly planted and 1,600 ha were replanted in 2016. Besides, about 1,800 ha were declared matured during the year. These newly matured areas are producing crops, contributing to the yield, underscoring the fact that whatever we plant now will benefit the Group in the near future. The planting materials used in our new development and replanting programmes are expected to show improved yields compared to the planting materials used in the last planting cycle.

Dividends

The Board takes into consideration the cash flows requirements for future growth, capital expenditure needs and operational requirements when declaring dividends to the shareholders. In view thereof, the Board has not declared any dividends for the financial year ended 31 December 2016. Nevertheless, we seek the shareholders' indulgence and continuous support and the Board shall endeavour to reward our shareholders accordingly.

Way Forward

In facing the continuous and anticipated challenging business environment, the Board recognises the importance of increasing productivity and improving FFB production. The Board also recognises the need for various improvements in the operations to bring the level of production to that of the industry standards.

Great emphasis continues to be placed to increase productivity and production. Strategies and action plans that were developed are implemented to address various operational issues, giving priorities to significant and pertinent issues.

We will continue to focus on organisational and operational enhancement with the ultimate goal of bringing the Group's FFB production to that of industry level.

We stress the importance of adopting sustainable agriculture practices to ensure sustainability. Our aim is to always ensure that profitability is balanced with the protection of environment and the people. In this regard, a road map for the Malaysian Sustainable Palm Oil (MSPO) certification has been developed and preliminary gap analysis has been conducted. Sustainability is reflected in our Mission : Maximise Stakeholders' Values Through Sustainable Development.

Prospects and Outlook

There is little cause for pessimism regarding the future of palm oil industry. We believe that the Malaysian palm oil industry outlook remains positive both in a mid-term and long-term perspective.

We continue our efforts to grow our business and strengthen our position for the benefit of our esteemed stakeholders and continue to pursue value creation potentials for our shareholders.

Appreciation

We would like to convey our sincerest thanks to our shareholders for their continued support and belief in Sarawak Plantation Berhad. We would also like to thank all the State and Federal Government Ministries, Departments, Statutory Bodies and Regulatory Agencies who have offered us such close cooperation and support during 2016, along with other relevant authorities.

Heartfelt thanks are also due to our joint venture partners, vendors, consultants, professional advisors, service providers and community neighbours for their goodwill and unstinting efforts. Last but not least, we would like to reserve the warmest thanks to our directors and all the employees of SPB for their hard work and professionalism.

Thank you,

Datuk Amar Abdul Hamed Bin Sepawi
Chairman