Kuala Lumpur Kepong Bhd (KLK) traces its origins back to 1906 when the Kuala Lumpur Rubber Co Ltd was set up in London to oversee 600ha of rubber plantations in Malaysia. In 1960, the company changed its name to Kuala Lumpur Kepong Amalgamated Ltd (KLKA), and through various acquisitions, its landbank had then increased to 29,843ha.
KLK was incorporated in 1973 and under a scheme of reconstruction took over the assets and liabilities of KLKA. The move to bring its domicile back to Malaysia was initiated by KLK’s founder, the late Tan Sri Lee Loy Seng.
Today, KLK is a large multinational in plantation, manufacturing, property development and retailing. The group has a landbank in excess of 250,000ha. While plantations remain its core business, KLK has expanded downstream into resource-based manufacturing, in particular oleochemicals and rubber processing. It also owns premium toiletries brand Crabtree & Evelyn, which is retailed in 28 countries.
KLK CEO Tan Sri Lee Oi Hian shares with The Edge Financial Daily his strategies and dreams for the company.
TEFD: What are the company’s strengths and advantages?
Lee: We are one of the pre-eminent plantation companies because of our established regional footprint in both Malaysia and Indonesia. Currently, our plantation landbank is located in Peninsular Malaysia (71,692ha), Sabah (40,359ha) and Indonesia (139,126ha).
We have a strong and experienced management team with core competencies required by our various business segments. Our plantation division is a beneficiary of the excellent agriculture research undertaken by KLK’s agronomic team that has been instrumental in developing our agricultural best practices and improving our productivity through high-yielding planting materials and tissue culture.
KLK is one of the largest producers of basic oleochemical and derivative products ranging from fatty acids, glycerine, fatty alcohols, methyl esters and methyl ester sulphonates. The oleochemical plants are located in Malaysia, Europe and China with industry-leading operating efficiencies and are highly cost competitive. We have also developed a strong distribution network which has a good customer base covering key markets.
Our successful vertical integration of our upstream oil palm plantation operations with our downstream oleochemical operations has created significant and sustainable synergies for the KLK group.
What have been the major achievements of the company in the past four years?
We have been able to increase our annual fresh fruit bunch production to 3.2 million tonnes (FY10) from 2.4 million tones (FY07) through a concerted replanting programme in Malaysia and the expansion of our landbank in Indonesia.
Our plantation landbank increased to 251,196ha in FY10 from 203,322ha in FY07 and our yield per mature ha over the past four years has been consistently higher than the industry average. Coupled with rising crude palm oil prices spurred by strong demand, plantation revenue increased to RM3.5 billion in FY10 from RM2 billion in FY07.
We are pleased to have secured RSPO certification for our entire operations in Sabah, making available close to 180,000 tonnes of certified sustainable palm oil in the market. We are now pursuing the same certification for all our operating centres in Malaysia and Indonesia.
We have significantly increased our oleochemical footprint during this period. The oleochemicals division has been able to increase its production capacities organically through acquisitions, plant expansion and de-bottlenecking of existing operations. With these measures, manufacturing revenue has grown to RM3.3 billion in FY10 from RM2 billion in FY07.
Net profit for the KLK group has grown to RM1.012 billion in FY10 from RM694 million in FY07. This is an impressive compounded annual growth rate of 13% per annum over the period.
What are the major challenges your company faced over the years and how did you overcome them? Is there anything else you would have done differently?
One of the major challenges facing KLK over the years is the need to increase its plantation landbank and address the issue of the shortage of labour. With the shortage of suitable plantation land in Malaysia, KLK decided to expand its landbank in Indonesia due to its vast agriculture potential, proximity and cultural similarity. KLK benefited from being one of the first movers in Indonesia and has since grown its Indonesian operations to achieve its objective of increasing yields and productivity.
The lack of skilled plantation labour is a problem faced by the entire plantation industry. To meet this challenge, KLK has developed a programme to upgrade housing and amenities for its plantation employees, and skills through training. In line with this, we have our corporate social responsibilities to ensure that the local community benefits in tandem with the growth of the group.
Rising cost driven by inflation is another challenge faced by the plantation industry. Efficiency and improved productivity mitigate rising costs. We have improved oil palm cultivation by investing significantly in agriculture research which has resulted in the use of tissue culture technology to produce better clonal planting materials. We have also improved our yields through responsible best agricultural practices.
The challenges faced by our oleochemicals division are improving its market share and profitability. In pursuit of becoming a global leader in oleochemicals, KLK has increased its production capacity and efficiency to achieve better economies of scale and at the same time, increasing its distribution network. Significant investment has been made to have the entire infrastructure in place to achieve these targets.
How is the company positioning itself within the industry? What are your strategies to grow market share and your plans for the future?
Being a responsible global player in the palm oil industry, KLK aims to secure sustainability of its upstream and downstream plantation operations. Currently, KLK ranks among the top three plantation companies in Malaysia. Our short-term target is to grow our total plantation landbank to 300,000ha. The KLK group targets new oil palm plantings of 10,000ha per annum to ensure future production growth is sustainable.
KLK aims to establish its oleochemicals operations as a major global player. We have a considerable advantage, in terms of competitiveness and cost efficiency, over our competitors as we are a vertically integrated manufacturer with the supply chain sourced from our plantation operations. Our oleochemicals operation has a strong in-house team which is able to leverage on future opportunities.
We will continue to enhance our production value chain for our plantation and oleochemicals businesses. Further land acquisitions in Indonesia and other parts of the world are being explored to increase the group’s plantation landbank. Selective and complementary oleochemicals acquisitions will further help consolidate our position as a global leading oleochemicals producer.
What is your dream for your company? How would you like to see it in 10 years’ time?
The fact that KLK has been operating successfully for more than a century is a culmination of the vision of its founders, the sustainable policies and practices implemented by the management and the good working relationship between shareholders and all stakeholders. We therefore believe in continuing with these principles which have guided us all these years.
We will strive to be the preferred producer and supplier of sustainable and innovative oil palm and rubber products, as well as palm-based oleochemical products and derivatives. In addition, we shall explore all opportunities to expand our landbank beyond its current geographic reach.
We will also increase our oleochemical product portfolio where there are synergies. Leveraging on the strategic location of our landbank in Peninsular Malaysia, we will take further steps to enhance our property development business so that it will be a major contributor to the KLK group’s profits in time to come.
This article appeared in The Edge Financial Daily, November 8, 2011.
KLK was incorporated in 1973 and under a scheme of reconstruction took over the assets and liabilities of KLKA. The move to bring its domicile back to Malaysia was initiated by KLK’s founder, the late Tan Sri Lee Loy Seng.
Today, KLK is a large multinational in plantation, manufacturing, property development and retailing. The group has a landbank in excess of 250,000ha. While plantations remain its core business, KLK has expanded downstream into resource-based manufacturing, in particular oleochemicals and rubber processing. It also owns premium toiletries brand Crabtree & Evelyn, which is retailed in 28 countries.
KLK CEO Tan Sri Lee Oi Hian shares with The Edge Financial Daily his strategies and dreams for the company.
TEFD: What are the company’s strengths and advantages?
Lee: We are one of the pre-eminent plantation companies because of our established regional footprint in both Malaysia and Indonesia. Currently, our plantation landbank is located in Peninsular Malaysia (71,692ha), Sabah (40,359ha) and Indonesia (139,126ha).
We have a strong and experienced management team with core competencies required by our various business segments. Our plantation division is a beneficiary of the excellent agriculture research undertaken by KLK’s agronomic team that has been instrumental in developing our agricultural best practices and improving our productivity through high-yielding planting materials and tissue culture.
Lee: We will strive to be the preferred producer and supplier of
sustainable and innovative oil palm and rubber products.
sustainable and innovative oil palm and rubber products.
KLK is one of the largest producers of basic oleochemical and derivative products ranging from fatty acids, glycerine, fatty alcohols, methyl esters and methyl ester sulphonates. The oleochemical plants are located in Malaysia, Europe and China with industry-leading operating efficiencies and are highly cost competitive. We have also developed a strong distribution network which has a good customer base covering key markets.
Our successful vertical integration of our upstream oil palm plantation operations with our downstream oleochemical operations has created significant and sustainable synergies for the KLK group.
What have been the major achievements of the company in the past four years?
We have been able to increase our annual fresh fruit bunch production to 3.2 million tonnes (FY10) from 2.4 million tones (FY07) through a concerted replanting programme in Malaysia and the expansion of our landbank in Indonesia.
Our plantation landbank increased to 251,196ha in FY10 from 203,322ha in FY07 and our yield per mature ha over the past four years has been consistently higher than the industry average. Coupled with rising crude palm oil prices spurred by strong demand, plantation revenue increased to RM3.5 billion in FY10 from RM2 billion in FY07.
We are pleased to have secured RSPO certification for our entire operations in Sabah, making available close to 180,000 tonnes of certified sustainable palm oil in the market. We are now pursuing the same certification for all our operating centres in Malaysia and Indonesia.
We have significantly increased our oleochemical footprint during this period. The oleochemicals division has been able to increase its production capacities organically through acquisitions, plant expansion and de-bottlenecking of existing operations. With these measures, manufacturing revenue has grown to RM3.3 billion in FY10 from RM2 billion in FY07.
Net profit for the KLK group has grown to RM1.012 billion in FY10 from RM694 million in FY07. This is an impressive compounded annual growth rate of 13% per annum over the period.
What are the major challenges your company faced over the years and how did you overcome them? Is there anything else you would have done differently?
One of the major challenges facing KLK over the years is the need to increase its plantation landbank and address the issue of the shortage of labour. With the shortage of suitable plantation land in Malaysia, KLK decided to expand its landbank in Indonesia due to its vast agriculture potential, proximity and cultural similarity. KLK benefited from being one of the first movers in Indonesia and has since grown its Indonesian operations to achieve its objective of increasing yields and productivity.
The lack of skilled plantation labour is a problem faced by the entire plantation industry. To meet this challenge, KLK has developed a programme to upgrade housing and amenities for its plantation employees, and skills through training. In line with this, we have our corporate social responsibilities to ensure that the local community benefits in tandem with the growth of the group.
Rising cost driven by inflation is another challenge faced by the plantation industry. Efficiency and improved productivity mitigate rising costs. We have improved oil palm cultivation by investing significantly in agriculture research which has resulted in the use of tissue culture technology to produce better clonal planting materials. We have also improved our yields through responsible best agricultural practices.
The challenges faced by our oleochemicals division are improving its market share and profitability. In pursuit of becoming a global leader in oleochemicals, KLK has increased its production capacity and efficiency to achieve better economies of scale and at the same time, increasing its distribution network. Significant investment has been made to have the entire infrastructure in place to achieve these targets.
How is the company positioning itself within the industry? What are your strategies to grow market share and your plans for the future?
Being a responsible global player in the palm oil industry, KLK aims to secure sustainability of its upstream and downstream plantation operations. Currently, KLK ranks among the top three plantation companies in Malaysia. Our short-term target is to grow our total plantation landbank to 300,000ha. The KLK group targets new oil palm plantings of 10,000ha per annum to ensure future production growth is sustainable.
KLK aims to establish its oleochemicals operations as a major global player. We have a considerable advantage, in terms of competitiveness and cost efficiency, over our competitors as we are a vertically integrated manufacturer with the supply chain sourced from our plantation operations. Our oleochemicals operation has a strong in-house team which is able to leverage on future opportunities.
We will continue to enhance our production value chain for our plantation and oleochemicals businesses. Further land acquisitions in Indonesia and other parts of the world are being explored to increase the group’s plantation landbank. Selective and complementary oleochemicals acquisitions will further help consolidate our position as a global leading oleochemicals producer.
What is your dream for your company? How would you like to see it in 10 years’ time?
The fact that KLK has been operating successfully for more than a century is a culmination of the vision of its founders, the sustainable policies and practices implemented by the management and the good working relationship between shareholders and all stakeholders. We therefore believe in continuing with these principles which have guided us all these years.
We will strive to be the preferred producer and supplier of sustainable and innovative oil palm and rubber products, as well as palm-based oleochemical products and derivatives. In addition, we shall explore all opportunities to expand our landbank beyond its current geographic reach.
We will also increase our oleochemical product portfolio where there are synergies. Leveraging on the strategic location of our landbank in Peninsular Malaysia, we will take further steps to enhance our property development business so that it will be a major contributor to the KLK group’s profits in time to come.
This article appeared in The Edge Financial Daily, November 8, 2011.
