CORP BRIEF: Sime Darby Plantation and F&N

by TMR / pic by TMR FILE

Forced labour issue can hurt Sime Darby Plantation’s credit quality

THE forced labour findings by the US Customs and Border Protection against Sime Darby Plantation Bhd (SDP) could be credit negative as it will keep social environmental social and governance (ESG) risk high for the palm oil producer, says Moody Investor Service. In a statement released yesterday, Moody’s noted the situation could damage SDP’s relationship with customers and other stakeholders while a large loss in earnings and will weaken its credit quality. “The risk would arise if other countries or companies institute restrictions on purchasing palm oil from SDP, if SDP’s lenders pull funding for the company because their sustainability policies could restrict them from lending to companies alleged to have violated international labour standards,” the report stated. Although SDP stated it has not yet received details around the forced labour findings, it will continue to engage with the US Customs and its various stakeholders to resolve the allegations and take any corrective action required to protect workers’ rights. SDP has appointed an independent third-party consultant to validate and identify issues over the payment of workers’ wages. “The immediate risks to SDP’s credit quality as a result of the forced labour findings are not yet quantifiable, these allegations could impact on SDP’s credit strength in the future as strong labour policies and processes are essential for palm oil companies,” the investor service added. SDP is the world’s largest producer of certified sustainable palm oil with around 20% of global sustainable supply.

F&N posts lower net profit for 1Q

FRASER & Neave Holdings Bhd registered a lower net profit of RM92.9 million for the first quarter ended Dec 31, 2021 (4Q21) against a net profit of RM136.8 million in 1Q20 due to commodity price pressures and the impact from the floods at the end of last year. The fast-moving consumer goods company also suffered foreign exchange translation loss from a weaker Thai baht, its exchange filing yesterday stated. Revenue for the quarter was RM1.11 billion versus RM1.08 billion in 1Q20 despite the disruption at its flood hit manufacturing facilities in Shah Alam. Earnings per share for the quarter was 25.4 sen. Following the recent floods in December 2021, the F&N’s manufacturing facilities in Shah Alam was distorted but resumed operations in stages by mid-January. “We will continue to drive sales for the coming festive seasons and for the rest of the year, particularly for beverages and ready-to-drink dairy business, and out-of-home channels,” it added. The company is set to focus on its exports and the halal packaged food that will be the main growth pillar for the group.