Labour crunch, Covid-19 to drag SDP’s FY20 performance

SDP foresees its production to be impacted by the shortage in foreign labour as its efforts to recruit locals has not been very successful

by SHAHEERA AZNAM SHAH/ pic by MUHD AMIN NAHARUL

SIME Darby Plantation Bhd said the constraints on access to labour, volatility of crude palm oil (CPO) prices and a potential second wave of Covid-19 infections will impact its earnings for the financial year ending Dec 31, 2020.

The group expects fresh fruit bunches (FFB) production to be flat barring any extreme weather abnormalities that could further drag its performance.

For the second quarter ended June 30, 2020, SDP posted a net profit of RM378 million from RM27 million made last year as a result of stronger CPO and palm kernel prices realised during the quarter.

Revenue for the April-June period was RM3.22 billion, a 12.21% increase from RM2.87 billion last year.

SDP declared an interim dividend of 2.57 sen per share and a special interim dividend of 1.45 sen per share, payable on Nov 26, 2020.

For the second half 2020, SDP foresees its production to be impacted by the shortage in foreign labour as its efforts to recruit locals has not been very successful, said its group MD Mohamed Helmy Othman Basha (picture; centre).

Mohamed Helmy said the group has only been able to recruit some 300 locals to fill 2,000 vacant positions at its plantation after the government enforced the international lockdown beginning March to curb the spread of Covid-19.

“Our plantations are heavily dependent on foreign workers as about 75% of the workers at the plantations are consisted of foreign labours. The industry essentially will not exist in its current form without the workers.

“We hope there will come a time for the government to allow the planters to recruit (foreign) labour again. We are doing everything we can to recruit locals in all the states that we operate, but the success has not been good,” he said at a media briefing in Kuala Lumpur yesterday.

On an average, Mohamad Helmy said each harvesting worker could collect between 1.5 tonnes and two tonnes of palm fruits on a daily basis.

While the impact of the pandemic has forced plantation companies to reconsider the industry’s dependency on foreign labour, Mohamad Helmy said SDP plans to bring down the portion of its foreign labour workforce by 5%.

“If we could reduce our dependence on foreign workers from 75% currently to 70%, it is considered a success. It is a tall order,” he said.

Mohamad Helmy expects the CPO price to hover between RM2,500 and RM2,600 for the rest of this year, while its FFB production is expected to be at 9.8 million tonnes.

“This year, Malaysia’s production will be slightly lower compared to 2019 due to labour shortage,” he said.