Sime Darby Plantation has stated that it plans to employ 100% local workers by the end of 2027 with a minimum wage of RM3,000, MIDF views this plan as positive as it will lessen the dependency risk of foreign labour in the estates amidst the increase in its FFB evacuation,
Under its “Project Local” plan the palm oil plantation group has stated its interest in proceeding with the 2027 target, the research house opines that this will be aided by more mechanisation, automation and digitalisation in place to increase productivity level (achieve lower unit cost as compared manual labour cost) apart from making the jobs and task easier and not laborious. The company would have to change the stigma surrounding plantation activity known as a 3Ds job (dirty, dangerous and difficult).
With the industry’s minimum salary around RM1,500 to 2,000 currently, MIDF believes an increase of +50% to +100%
to average RM3,000 salary will be the major factor encouraging local talents to enter the plantation area with automation revolving around it. Hence, this latest development would therefore reduce the risk of dependency on foreign labour and enable the estate to draw in local more talents, while enhancing the company’s FFB evacuation process as well as ensuring the Social pillar under the ESG issues is upheld.
Operational-wise, as of now Sime Plant’s headcount in Malaysia’s estates comprises 60% foreign and 40% local (FY21: 63% foreign and 37% local) out of c. 25,000 workers. The company aims to increase its land-to-labour ratio to 1:17.5 ha by 2025 from the baseline of 1:14.8 ha currently. Their mechanisation Transformation Unit (MTU) and Robotics Centre, would create a better path for its mechanisation process in estates areas. Aside from note, the company used to have a normal chisel and sickle for their harvesting activities, but now they are using motorised chisel and sickle, and in the future, overall, there would be a combination of Hybrid/UGV + robotic arm, drones and onboard CPU and detection system for the upstream activities.
As for the outlook, due to a shortage of skilled harvesters, which stood at about 2,468 as of Dec 2022, Malaysia’s FFB output
for the 4QFY22 and FY22 performance was only 865 Mt (-19% yoy) and 3,513 Mt (-24% yoy), as compared to 1,072
Mt and 4,630 Mt, respectively. This year, we predict that FFB output will increase by +12% to 9.2 Mt (management
guidance 10-15%) on the back of better performance of Malaysia estate as a result of the improvement in the labour
shortage, in which the company anticipates receiving c. 3,000 to 4,000 on May 23.
Overall, MIDF remains bullish on SDPL outlook due to 1) FFB yield/mature of 16.6/ha, which ranks among the top tiers,
2) fairly prime palm tree’s age profile of 12.1 years, still impressive given their large planted area, and 3) well the integrated operation, where the manufacturing segment, which accounts for roughly 26% of group profit, will assist
withstand and decline in average selling price for CPO – thus, lowering the volatility of earnings.
