Corporate Information » Chief Financial Officer's Statement
* Extracted from Integrated Report 2022
Boustead Plantations Berhad delivered a higher profit before taxation of RM729 million for the financial year ended 31 December 2022. This was mainly attributable to gains on disposal of plantation land and higher palm product prices, mitigating the impact of lower FFB production coupled with higher operating costs and unfavourable fair value movement of FFB. As a result, profit for the year saw a significant improvement to RM589 million.
To strengthen our reporting standard for FY2022 Integrated Report, we have included the GRI content index of which the details can be found on pages 262 to 266.
"The Group generated positive cash flow for the year, recording a net increase in cash and cash equivalents to RM83 million, from RM38 million in the previous year."
Mohamad Mahazir bin Mustaffa
Strenghtening Balance Sheet
In line with our consistent drive to ensure prudent debt and balance sheet management, the Group recorded lower borrowings of RM857 million. This was supported by scheduled instalments of term loans and repayment of short-term loans utilising proceeds from the disposal of our Kulai Young land.
To unlock value during the year, we undertook the strategic disposal of plantation land, netting a one-off gain of RM459 million.
This included the disposal of the Kulai Young land and partial disposal of land at our Bukit Mertajam Estate. In addition, our land at Telok Sengat Estate was also acquired by the Government.
Review of Income Statements
The Group registered a record-high revenue of RM1.2 billion for the year, marking an improvement from RM1.1 billion in the previous financial year. This was primarily driven by higher palm product prices.
- Operating Cost
Total operating costs increased to RM882 million. This was mainly attributable to higher fertiliser and diesel prices, as well as the revised minimum wage policy and adverse impact of FFB valuation.
- Gain on Disposal of Land
During the year, the Group recorded gains on the disposal of land totalling RM459 million. This was primarily from the sale of our Kulai Young land for a gain of RM364 million. Meanwhile, the partial disposal of land at our Bukit Mertajam Estate delivered a gain of RM91 million, while the Government acquisition of our Telok Sengat Estate land netted the Group a gain of RM4 million.
- Finance Cost
Finance costs were reduced to RM34 million compared to RM48 million in the previous fiscal year. This was largely due to effective capital management which had a direct knock-on effect on reducing our borrowings for the year.
- Taxation and Zakat
Taxation and zakat increased to RM140 million as a result of the impact of Cukai Makmur. However, the effective tax rate for the Group was lower than the statutory tax rate due to the lower tax rates applicable to gains on disposal of land.
Review of Statements of Financial Position
The Group’s total assets and total equity for the year improved to RM4.2 billion and RM2.9 billion respectively, while net assets per share increased to RM1.33.
- Total Assets
Total assets rose to RM4.2 billion compared with RM4.1 billion in the previous financial year. Total receivables increased to RM132 million, arising from the proceeds of the sale of our Bukit Mertajam land. Our cash balance also grew to RM166 million due to the balance of proceeds from the disposal of our Kulai Young land.
- Total Liabilities
The Group’s total liabilities came in at RM1.4 billion, slightly lower than RM1.5 billion in the last financial year. This was as a result of a reduction in our borrowings for the year.
- Total Equity
Total equity increased to RM2.9 billion. This was mainly due to the higher shareholders’ equity of RM3.0 billion, compared with RM2.7 billion last year. The driving factor was the improved profitability for the year.
Review of Statements of Cash Flow
The Group generated positive cash flow for the year, recording a net increase in cash and cash equivalents to RM83 million, from RM38 million in the previous year.
Contributing to this was the higher collection from customers due to higher palm product prices, as well as the proceeds from the disposal of the Kulai Young land. This allowed the Group to fund our working capital internally and pare down borrowings, whilst cushioning the impact of our lower net cash inflow from operations for the year, which reduced to RM320 million owing to increased operating expenses and higher taxation and zakat paid.
Moving forward in 2023, the global economy faces a challenging outlook on the back of headwinds and rising inflation. Despite this, the plantation sector continues to hold positive prospects as palm product prices are expected to stabilise following market volatility in 2022. Despite the uncertainty in vegetable oil prices, we expect CPO prices to remain moderate in 2023 as palm oil production in Malaysia is forecasted to increase with recovery in labour supply.
Leveraging our solid foundation, we will continue to ensure effective cost and cash flow management, while maintaining a healthy balance sheet to support the sustainable growth of the Group.
MOHAMAD MAHAZIR BIN MUSTAFFA
Chief Financial Officer
28 April 2023