Leaders of the pack: Golden Hope's new CEO puts focus on the downstream: in a series of...

From a rural background growing up in a village in Malaysia, you could say that Sabri Ahmad has stayed in agriculture throughout his career, although now on a far grander scale. The 56-year-old was appointed the new CEO of Golden Hope Plantations in January this year.

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Ahmad is modest about why he thinks he was chosen for the job.

But he believes one of the reasons is that he has been through all the divisions of the company--marketing, overseas operations, plantations ...--which gives him the experience to steer the company's future operations.

"My experience will help Golden Hope define its future direction as a fully integrated company, not just focusing on plantations. We strongly believe in the downstream. Ultimately, it is important to have downstream development protect the upstream industry.

"For Malaysia and for our industry, we have to go beyond just being a very efficient palm oil producer. We have to go beyond just selling commodities."

Moving downstream is a phrase Ahmad returns to time and time again.

"Of course, we are very strong in the plantation business."

Golden Hope has finalised a RM3.6bn (US$947M) share-swap arrangement with sister company Island & Peninsular (I&P) which has resulted in Golden Hope divesting its property interests to I&P to focus on plantations and gaining 99.6% control of I&P's plantation unit, Austral Enterprise Bhd (see also OFI, News, January 2004).

"With the additional 60,000ha we will acquire from our merger, we will be the second largest plantation owner in Malaysia, after Fclda (Federal Land Development Authority), which has 800,000 ha of land."

Ahmad says the fact that parent company Permodalan Nasional Berhad (PNB) chose Golden Hope to take over I&P's plantation interests is an endorsement of the company. The PNB group is Malaysia's leading investment institution with a total managed fund of some RM40bn (US$10.5bn) and was set up in 1978 to promote share ownership among Malaysians.

"The challenge for me now is to make sure that Golden Hope moves in an effective manner downstream," Ahmad says.

"We have to be involved in marketing, distribution and R&D. Our focus is industrial ingredients for food manufacturers.

"We see ourselves as a global player; as an oils and fats solution provider for companies like Nestle, United Biscuits, Kentucky Fried

Chicken and Procter & Gamble." Ahmad says although companies like Cargill and ADM are far ahead of Golden Hope, they are the companies to benchmark against.

Cargill is a much bigger player, providing food, agriculture and risk management products and services; and operating in 60 countries employing about 100,000 people.

Golden Hope, in comparison, employs about 12,000 people and owns 17 palm oil mills, a distribution centre in Germany and a refinery each in Malaysia, the Netherlands, Vietnam. China and Bangladesh.

It has oil palm hectarage in Indonesia; owns 50% of the oleochemicals Cognis group in Malaysia; and it owns Golden Jomalina Food Industries, one of Malaysia's largest producers of palm oil products (see 'Golden Hope Facts at a Glance', page 41,for more details).

Yearly, Golden Hope produces nearly 550,000 tonne of CPO and PKO. "About 80% of this we use for cooking oils, industrial margarine, bakery fats and shortenings and other products," Ahmad says. "The remaining 20% is sold both locally and overseas."

Challenges and achievements

One of the main challenges and key achievements Ahmad remembers is going into Vietnam 12 years ago. "We were pioneers in Vietnam going into refining. It was a different culture. But we are doing well--our brand is No. 2 and we want to expand further."

Another milestone was Golden Hope's purchase of Unimills BV in January 2002 from Anglo-Dutch multinational Unilever for US$60M. Unimills is the second largest oils and fats blend manufacturer in Europe with 450,000 tonne/year of processing capacity and a refinery, hydrogenation, pumpable shortenings and fats packaging plants.

Ahmad says the first two years of operation since the acquisition have been good.

"But in the future, we will see more competition and our margins being challenged."

Golden Hope faces stiff competition in Europe. Loders Croklaan--part of the Malaysian IOI Group--announced this year that it would start building Europe's largest palm oil refinery, and fractionation plant in Rotterdam with a processing capacity of 900,000-1M tonne/year. And Singapore-based Kuok Oils & Grains plans to invest about US$30M to build a palm oil refinery in Rotterdam (see OFI News, July 2004). The Kuok, IOI/Loders Croklaan, existing Cargill and Golden Hope/Unimills refineries will bring total annual refining capacity at Rotterdam to more than 20M tonne.

Ahmad would not comment directly on the moves but says competition is good.

"It sharpens you--makes you more efficient. End users are going to get value for money in terms of ingredients. And I am sure there is potential for more palm oil to go into Europe especially because of the trams fatty acids issue and with the accession of new EU countries."

Future growth

Expansion into Eastern Europe and Russia is one area where Ahmad sees future growth coming from. China and India are other key markets.

"They have big populations and import some 9M tonne of oils and fats, nut all of it palm oil."

Ahmad says expansion for Golden Hope in these countries would come not from refining but in the marketing and distribution of palm oil.

North America also offered potential with increasing consumer concerns about trams fatty acids (TFA) and future labelling requirements for TFA content in food.

Ahmad says he is not talking of replacing soft oil with palm but of working in partnership to create blends.

Issues for the palm oil industry

TFAs is one issue he sees as important for palm oil.

"We are also committed to sustainability and good practice in terms of the environment."

Organic palm oil is something Golden Hope has started on a small scale with 400ha designated for a commercial scale trial.

"We are also focusing on food safety and traceability. Unimills, for example, takes about 200-300,000 tonne of our CPO. Customers buying products from Unimills know that the CPO comes from our plantations--we can trace all this."

Background

Ahmad has come a long since growing up in a village.

His first job was with the Ministry of Agriculture from 1970-1985.

"This is my second job." (He has been with Golden Hope since 1985).

"I believe in being loyal to the company, hard work and getting people to work as a team."

He says his wife, who is a professor at the University of Malaysia, has been very supportive. They have been married since 1971 and have two daughters and two grandchildren.

A holistic approach is Ahmad's corporate philosophy.

"In business, profits are yen' important. But society must benefit as well and employees must enjoy working in the company."

As for the future, he says Golden Hope will continue looking for opportunities and smart partnerships; and working with customers to deliver the types of properties they want in oils and fats.

Golden Hope facts at a glance

In financial year ending June 2003:

PLANTATIONS AND MILLS

Fresh fruit bunch production: 2,106,956 tonne.

Palm oil extraction rate: 20.98%

Crude palm off production: 438,796 tonne

Palm kernel oil production: 108,484 tonne

Total Malaysian estates: 64 totalling 132,580ha--66% in Peninsular Malaysia, 25% in Sabah, 9% in Sarawak.

Total Malaysian planted area: 124,553ha comprising 90% oil palm, 9% rubber and balance in fruits and some R&D trial plots of other crops

Indonesia: Joint venture companies have obtained rights for 34,000ha of land. Of these, 7,565ha in three estates have been planted with oil palms.

Estates operation are consolidated into five companies--Golden Hope Plantations Bhd, Golden Hope Plantations (Peninsular) Sdn Bhd, Golden Hope Plantations Sabah (Sdn), Golden Hope Plantations (Sarawak) Sdn Bhd and Golden Hope Overseas Plantations Sdn Bhd.

Total mills: 17 mills with three new mills commissioned for commercial operation. Two new mills are expected to be operational next year.

OILS AND FATS

A new Oils & Fats Division has integrated all refining activities in the Netherlands (Unimills), Malaysia (Golden Jomalina) Vietnam (Golden Hope-Nhabe) and China (Jiangyin-Golden Hope).

Malaysia: Golden Jomalina produces refined palm oil products and PKO. About 80% of products are standard refined products mainly exported as a commodity. The balance is made up of packed products (such as shortening, industrial margarine, ghee and cooking oil) and customised palm oil products for frying, in dairy products and for colouring and food ingredients. Markets are Malaysia, Europe and Far East. Turnover in 2003 was RM818M (US$215.2M) compared with RM604M (US$158.9M) for previous year.

Vietnam and China: Golden Hope-Nhabe and Jiangyin-Golden Hope produce and market mainly cooking oil for domestic markets. In China, an edible palm oil refinery was set up in 1995. In Vietnam, the company was able to penetrate Cambodia with sales of Marvela brand bottled oil and the installation of a new refinery was completed.

Bangladesh: 60/40 joint venture with Singapore-based Kuok Oils & Grains in refining and cooking oils.

The Netherlands: Unimills, acquired in January 2002, produces blends and modified (hydrogenated, interesterified) oils for the margarine and bakery industries and for technical applications. Main markets are Europe, including Eastern Europe, and North Africa. Turnover in Europe for 2003 was RM1.12bn (US$294.7M) compared to RM782M (US$205.7M) in previous year. Traceable palm products were also introduced.

FINANCES:

Pre-tax profit: RM360.3M (US$94.8M)

(For further background, see also OFI January 2003, 'Malaysian giants expand')