KLK Recruitment Issues Not Systemic, Unethical Recruitment Practices Investigated

Kuala Lumpur Kepong Berhad (KLK) is confident of resolving recruitment issues raised in a Nepali media report recently. These issues are isolated rather than systemic as Malaysian corporations, KLK included, have tightened  their recruitment process as well as improved working and living conditions for guest workers.

Kenanga Investment Bank’s (Kenanga) Company Update today (May 7) said they maintain their forecasts, TP of RM23.00 and a MARKET PERFORM call.

On 26 April 2024, KLK’s website highlighted that one of its subsidiaries, KL-Kepong Rubber Products Sdn Bhd (KLKRP), indirectly engages SOS Manpower Services (SOS) to recruit workers in Nepal and that SOS was recently reported to be involved in unethical recruitment practices by Nepal-based Sajha Sabal Media.

KLK also stressed that it is launching an investigation into the matter immediately even though the group has strict no recruitment-or-related fee imposed on guest workers since 2018 and that such policy has been tightened further in 2022.

Independent investigator appointed. On 29 April 2024, KLK provided the following updates:

a) SOS is not directly appointed by KLKRP but through its Malaysian agent, Agen Perkerjaan UKHWAH Sdn Bhd which in turn engaged SOS to help recruit workers from source countries such as Nepal.

b) Concurrent with the group’s own internal investigation, KLK has also engaged a third party to provide an independent unbiased assessment of the alleged claims.

c) Arrival of incoming workers from Nepal has been temporarily halted and KLK is ready to terminate any arrangements if need be.

Isolated impact. While investigations are still ongoing, Kenanga expects the impact is be contained even in the worst-case scenario for several reasons below:

a) KLKRP is the glove manufacturing arm of KLK and the purported Nepali recruitment issue does not involve the group’s upstream plantation unit.

b) The group currently employs only 160 Nepali workers out of a total workforce of over 60,000. Another 140 of Nepali workers are due to arrive which is now temporarily halted pending the inhouse investigation and independent third-party assessment.

c) Since 2018-19, when some Malaysian glove manufacturers were drawn into controversy over guest workers recruitment and their working conditions, many Malaysian corporates including KLK have strived to further improve guest workers recruitment, as well as their working and living conditions.

Kenanga said KLK’s track record has also been good with a defensive balance sheet, and the group is still in expansionary mode. However, its downstream earnings have been facing more headwind than usual, hence Kenanga’s more cautious MARKET PERFORM call.

Previous articleCIMB Group Places High-Priority On Income Sustainability As Profit Comes First
Next articleSamaiden Poised To Reap Stronger Earnings In 2H2024

LEAVE A REPLY

Please enter your comment!
Please enter your name here