SIME Darby Plantation Bhd has acknowledged that it found several challenges to address International Labour Organisation (ILO) standards which have been increasing over the past few years.
These challenges include, the remote location of its plantation estates, interpretation of recruitment cost, and resetting certain culture standards (on group wide basis), according to Hong Leong Investment Bank (HLIB) Research.
As per the Withhold Release Order (WRO) issued by US Customs and Border Protection (CBP) against Sime Plantation, below are the four highlights of the research house’s virtual briefing session on with the company’s management:
- The management is hopeful to complete the assessment by early-2022;
- Sime Plantation faces several challenges in addressing ILO standards (as mentioned above);
- Sime Plantation is still in compliant with the Roundtable on Sustainable Palm Oil (RSPO) standards as RSPO carries its own audit on the company’s practice; and
- The exercise involves cost of RM20-RM25 mil arising from the assessment process.
“The management is trying to expedite the assessment in certain areas (particularly, in Sabah and Sarawak which have already transitioned from Phase 1), and is hopeful to complete them by early-2022,” projected analyst Chye Wen Fei in a company update.
“Upon completion of the assessment report by Impactt (which will consist of findings and recommendations), Sime Plantation will then work with Impactt on a corrective action plan.”
To re-cap, the US CBP had on Dec 30 last year issued a WRO on Sime Plantation to ban imports of palm oil from the latter over allegations of forced labour in its production process.
In March this year, Sime Plantation appointed Impactt Ltd (an ethical trade consultant with specific expertise in detecting and remediating forced labour issues in company supply chain) as a third party assessor to its Expert Stakeholder Human Rights Assessment Commission.
On July 15, Sime Plantation dissolved the Commission as it was unable to complete the assessment due to movement and travel restrictions (as a result of the COVID-19 pandemic), hence the evaluation exercise was taken over by the company’s sustainability committee.
Pending the release of Sime Plantation’s 2Q FY2021 results on Aug 18, HLIB Research has maintained its “buy” rating on Sime Plantation with an unchanged sum-of-parts target price of RM5.05.
At the close of today’s trading, Sime Plantation was up 5 sen or 1.46% to RM3.48 with 1.8 million shares traded, thus valuing the company at RM24 bil. – Aug 11, 2021
