Huge bonus payout for Sime Darby bosses

By Habhajan Singh and John Gilbert
Free Malaysia Today
November 8, 2012

Unionists riled up over 20 months’ bonus paid to plantation managers and senior staff for 2011.

KUALA LUMPUR: A good number of plantation managers and senior staff at conglomerate Sime Darby Bhd took home bonus payouts ranging from 12 to 14 months with their September pay cheque.

Some planters and staff from other divisions of one of the largest government-linked corporations (GLC) received bonuses of as much as 20 months for the bonus payout for 2011, according company officials.

It is understood the highest payout against what is seen as meagre bonuses given to lower-level workers at its wholly-owned subsidiary, Sime Darby Plantation Sdn Bhd, has raised the ire of its unionists.

“It’s a planters market [at the moment]. Last year, most plantation companies would have paid out good bonuses,” said one industry executive.

Sime Darby declined to comment on the bonus payout, with one offical saying that staff remuneration information was confidential.

All Malayan Estate Staff Union (AMESU), the union outfit for the plantation workers, is looking at the issue with a view to taking further action, sources familiar with the union told The Malaysian Reserve.

The issue comes at a time when Sime Darby is seeking shareholders’ approval for a proposed performance-based employee share scheme of up to the company’s 10% issued and paid-up ordinary share capital.

The proposed scheme, to be voted at its extraordinary general meeting (EGM) today, is meant to award shares to selected employees for the “attainment of identified performance objectives” of the group. It is supposed to “attract, retain, motivate and reward” the “valuable selected employees,” the company said in a circular to shareholders dated Oct 16.

Absolute discretion

The number of shares offered to a selected employee is at the “absolute discretion” of a committee established to implement and administer the scheme, with a cap of not more than 10% of the shares allotted for the scheme, the document added.

The big bonus payout, especially for planters, was attributed to the good crude palm oil (CPO) prices last year.

“For the plantation managers and staff who had done their bit to ensure profitability and good management, they would have qualified for the bonus payout. The bonus is tied to performance,” the executive added.

The division had earned an average CPO price of RM2,925 per metric tonne (MT) for financial year 2011 (FY11)/FY12, compared with RM2,906 per MT in the corresponding period last year, according to its 2012 annual report.

On average, Sime Darby plantation managers earn a basic monthly salary of RM7,000 to RM10,000 while the senior managers earn between RM13,000 and RM30,000.

Hence, a manager with a RM10,000 monthly salary who received a 14-month bonus would have taken home an annual gross salary of RM260,000.

A senior manager at the upper end of the pay spectrum, who also got a 14-month bonus payout, would have taken home a gross annual salary of RM780,000.

That would be close to RM822,000 that Sime Darby’s non-executive chairman Musa Hitam earned for FY11/ FY12. “Of course, not everyone got that. Some got less, maybe seven months. It’s tied to their key performance indicators [KPIs]. They must hit their KPIs to qualify for the bonus,” the executive said.

For the financial year ended June 30, 2012, Sime Darby, on the whole, posted RM4.2 billion in net profit on the back of RM47.6 billion in revenue. The net profit, which was up 13% from the year before, was also 27% higher than the FY11/FY12 KPI target of RM3.3 billion.

Largest contributor

On revenue count, the plantation division’s share was 29.7%, making it the largest contributor to revenue.

“At the other companies, they may not have received such high bonuses, but they would have been rewarded in several other ways.”

“To start with, they may have a higher basic salary. They may also receive other perks,” said another plantation executive.

Sime Darby president/group chief executive and also executive director Mohd Bakke Salleh’s remuneration for FY11/FY12 was RM5.24 million.

In his report in the 2012 annual report, Mohd Bakke noted that the plantation division’s “continued focus on strengthening operational efficiencies” resulted in an increase in the oil extraction rate (OER) to 21.8% in FY11/FY12 from 21.4% the year before.

The improvement in the OER, coupled with higher average CPO price, ensured that the division’s performance for the year “remained healthy”, he added.

The plantation division contributed RM3.2 billion to the group’s pretax profit despite a lower fresh fruit bunch (FFB) production due to the prolonged dry spell and palm stress, according to its 2012 annual report.

As one of the world’s largest palm oil producers, Sime Darby noted that in the 2012 annual report that its plantation division produces about 2.44 million tonnes or approximately 6% of the world’s CPO annually.

Its upstream operations span across Malaysia, Indonesia and Liberia with a land-bank totalling 878,797ha, of which 522,489ha have been planted mainly with oil palm and some rubber, it added.

The division operates and manages 201 estates, 62 mills and nine refineries worldwide, employing around 80,000 people, it said.

For FY11/FY12, Sime Darby’s plantation division achieved a pretax profit of RM3.2 billion, down 3% from the preceding year, due to the reduction in FFB production which had declined by 3% to 9.8 million MT, compared to 10.1 million MT in the same period last year.

However, on a group basis, the decline in FFB production was mitigated by higher average CPO price earned and the improvement in the OER, the company noted.

This content is provided by FMT content partner The Malaysian Reserve.