PETALING JAYA: The Pakatan Harapan government’s manifesto to raise minimum wage to RM1,500 should not be made mandatory for the plantation sector, according to Sime Darby Plantation Bhd.
The plantation giant’s executive deputy chairman and managing director Tan Sri Mohd Bakke Salleh (pic) said the proposal to increase the minimum wage from the current RM1,000 threshold, would hike production costs and affect domestic plantation players negatively.
He also said the Malaysian Palm Oil Association is working on a petition related to the matter which would be submitted to the Government upon finalisation.
“In the event the election promise to raise minimum wage is fulfilled, it would have a major impact on the financial performance of all plantation companies. This is largely because of the industry’s labour-intensive nature.
“Currently, labour costs constitute about 26% of the total cost of production. Should this RM1,500 minimum wage be effective, the labour costs would move up to 35% of total cost of production.
“On per tonne basis, the higher minimum wage would translate into an additional cost of about RM185 per tonne of crude palm oil (CPO),” Bakke told a media briefing on Sime Darby Plantation’s financial results for the first nine months of financial year 2018.
In its manifesto for the 14th General Election, Pakatan promised to raise the minimum wage to RM1,500 nationwide during its first term in power. Of which, 50% of the wage hike would be defrayed by the Government.
The new government also planned to raise the minimum wage in Sabah and Sarawak to be equal to that of the peninsula.
Sime Darby Plantation recorded a 93%-increase in net profit on a year-on-year (y-o-y) basis to RM1.7bil in the first nine months ended March 31.
The surge in bottom line was primarily attributed to stronger overall fresh fruit bunches (FFB) production, lower finance costs and non-recurring gains.
The group’s revenue in the period was up by 1.73% y-o-y to RM11.29bil from RM11.09bil a year earlier.
For the third quarter ended March 31, Sime Darby Plantation’s earnings was down by 39% y-o-y to RM249mil.
The group said its third quarter performance was affected by lower production of FFB particularly in Indonesia, Papua New Guinea and Solomon Islands.
It was also affected by lower average CPO price and palm kernel price realised.
However, this was mitigated by lower finance costs incurred in line with lower borrowings during the quarter.
Its revenue declined 15.8% to RM3.66bil in the three-month period.
Earnings per share in the third quarter fell to 3.7 sen from six sen a year ago. The company did not declare any dividend for the quarter in review.
Bakke said the group was encouraged by the earnings for the financial year to-date notwithstanding the challenging business environment that has impacted its performance in this quarter.
“We remain steadfast to deliver satisfactory results and we believe we are on track to achieve this on the back of continuous efforts to enhance productivity and cost efficiency.
“We are confident that the efforts to improve operational performance such as accelerated replanting, mechanisation and water management will support the achievement of our targets,” said Bakke.