Lee: ‘We cannot compare with Indonesia in terms of land size, so
we have to improve on oil extraction rates and look into other ways
of becoming more efficient.’

16/03/2013 (The Star) - Better productivity and innovation are key components in keeping the labour-intensive plantation industry competitive, said Tan Sri Lee Oi Hian, the chief executive officer of plantation giant Kuala Lumpur Kepong Bhd (KLK).

“Innovation is a step-by-step process which has to be carried out consistently,” Lee said at the Global Malaysia Series.

Take oil palm planting materials, for example. The product was a result of cumulative improvement for more than two decades, he said.

Lee pointed out that Malaysia had to up the competition in the plantation industry in various ways, as the country might lack certain advantages like land-bank and labour supply compared with neighbouring competitor Indonesia.

“We cannot compare with Indonesia in terms of land size, so we have to improve on oil extraction rates and look into other ways of becoming more efficient,” he said.

On the current palm oil price, Lee told reporters: “It is supported by the big discount of US$250 (RM780 per tonne) to soybean oil.”

Bloomberg data showed that spot crude palm oil (CPO) closed at RM2,407 per tonne, a 34% discount to soybean oil prices.

Weaker palm oil prices and higher wages pushed KLK's net profit down to RM1.2bil in 2012 from RM1.5bil in 2011.

Lee said the company had been allocating a budget of more than RM1bil for an ongoing downstream activity expansion in the past three to four years.

It was also expanding its oleochemical business and was constantly on the lookout for new opportunities in the plantation-related industry, he said.

It is reported that the company had been quietly buying farm land in Australia as a diversification strategy.

Lee also said the company would focus on improving productivity in maintaining the company's performance in an environment where CPO prices were trading at low levels.

Increasing productivity per worker and production yield per hectare were some of the ways to achieve efficiency, he added.

All these could be achieved by adopting more efficient harvesting methods and creating better tools, among others, opined Lee.

Ranking 14th in Forbes Malaysia's 50-richest list, people are keen to know how Lee ran his business and what kind of business decisions he might have regretted.

“You must have a good macro view of the industry you are in, and at the same time, know a fair amount of details (of the business),” he said, conceding that KLK could be a tad too conservative at times.

“When opportunities come by, you will see that some of them can be missed, while others might transform the business. These are opportunities that you do not want to miss,” he said.

His advice to budding entrepreneurs? “Do not buy something you cannot afford.”

Another point to be noted was the need to be aware of the red flag when the non-core business was occupying too much of one's time and attention.

Hence, it was important to get the big picture and direction of the company right, he said.

He also urged entrepreneurs to look at Asean as a market due to the immense opportunities available, especially with the Asean Free Trade Agreement, which would see more doors opening for them.

“Businesses tend to look to entering developed nations, but we do not have to look that far, as opportunities are just right in front of us,” he said.

Running the plantation heavyweight as the second-generation head honcho, Lee also talked about his view on succession planning.

“We are conscious of that and start building people who are capable in the family. The person must also have a good attitude,” he said, adding that the successor would be chosen through meritocracy.