SUSTAINABLE GROWTH, EMBRACING TECHNOLOGY. • INTEGRATED ANNUAL REPORT 2024 •
QL RESOURCES BERHAD INTEGRATED ANNUAL REPORT 2024 Navigation Icon Cover Rationale Feature Our Core Values QL Resources Berhad is an integrated agro-based business group producing nourishing products from agri resources through four distinct but interconnected business pillars. The company is committed to creating sustainable shared value and is progressively integrating technology to support growth and drive efficiency towards benefiting all stakeholders. 27th Annual General Meeting Vision Mission Create nourishing products from agro resources, leading to benefit for all parties. To be the preferred global agro-based enterprise. Broadcast venue at QL Training Hall No. 16A, Jalan Astaka U8/83, Bukit Jelutong, 40150 Shah Alam, Selangor Darul Ehsan Meeting Platform TIIH Online website at https://tiih.online Thursday, 29 August 2024 10:00 a.m. Personality • Progressive • Trustworthy • Initiative • Humility Values • Integrity • Win-Win • Teamwork • Innovative Stakeholders Vendors and suppliers Investors and shareholders Media Customers Regulators and NGOs Employees Community Capital Inputs Human Capital Natural Capital Manufactured Capital Financial Capital Intellectual Capital Social Capital Business Pillars Palm Oil and Clean Energy (POCE) Marine Products Manufacturing (MPM) Integrated Livestock Farming (ILF) Convenience Store Chain (CVS) Our Growth Strategy Regional Replication Strengthening Value Chain Downstream Integration Sustainably Enhancing Performance Empowering Talents Integrating Technology Enhance Branding & Product Innovation Material Matters Water Security Climate Change Pollution and Resources Occupational Safety and Health Labour Standards Talent Management Supply Chain (Environment) Biodiversity Customer Responsibility Community Contributions Supply Chain (Social) Risk Management Innovation and Technology Anti-Corruption Corporate Governance CC CC PR WS CR SCS CG AC RM IT B SCE OSH LS TM What’s Inside 2 About This Report 30 Overview & FY2024 Sustainability Highlights 35 Stakeholder Engagement 36 Materiality Assessment 3 Principal Activities 4 2024 Key Highlights 6 Our Presence 80 Corporate Information 82 Profile of Board of Directors 96 Key Senior Management 97 Corporate Governance Overview Statement 105 Audit Committee Report 108 Statement on Risk Management and Internal Control 112 Additional Compliance Information 113 Statement of Directors’ Responsibility 115 Directors’ Report 122 Statements of Financial Position 124 Statements of Profit or Loss and Other Comprehensive Income 126 Consolidated Statement of Changes in Equity 128 Statement of Changes in Equity 129 Statements of Cash Flows 134 Notes to the Financial Statements 226 Statement by Directors 227 Statutory Declaration 228 Independent Auditors’ Report 232 List of Properties 234 Shareholders’ Analysis Report 237 Disclosure on Recurrent Related Party Transactions 245 Notice of Annual General Meeting Form of Proxy 8 Chairman’s Statement 12 Group Chief Executive Officer’s Review 14 Strategy 16 Significant Risks & Opportunities 18 Value Creation Business Model 20 Business Review 28 Group Outlook 40 Environmental Responsibility 50 Social Responsibility 68 Governance Responsiblity SEC 1 About This Report SEC 2 QL At A Glance SEC 5 Sustainability Statement SEC 6 Leadership & Governance SEC 8 Appendices SEC 4 Management Discussion And Analysis PG30 Pg 12 SEC 3 Chairman’s Statement QL delivered another year of uninterrupted growth for the financial year ended 31 March 2024. As a leading agrifood producer, QL understands the vital role we play in ensuring food security for the nations we serve. “ “ Pg 8 Financial Statements SEC 7
QL RESOURCES BERHAD INTEGRATED ANNUAL REPORT 2024 2 3 QL AT A GLANCE 2 SEC. About This Report Principal Activities We are pleased to present the QL Resources Berhad (QL) Integrated Annual Report (IAR) 2024. This report covers the key strategies employed, business operations, financial results, corporate governance and risk management measures for the financial year ended 31 March 2024 (FY2024), as well as our future direction. QL transforms agro resources into nourishing protein sources to sustain a growing population through an integrated, scalable and resource-efficient value chain. With internationally certified operations in Malaysia, Indonesia, and Vietnam, we serve both global markets and contribute to domestic food security. Our operations are organised into four complementary business pillars, which offer synergy with one another, contributing to economic and operational sustainability. This IAR contains salient information about the risks faced and opportunities available to QL, as well as the outputs and outcomes of our value creation processes for our stakeholders. We adopt a holistic approach, balancing the interests and needs of stakeholders, with environmental, social and governance (ESG) considerations integrated into our decision-making processes to ensure that we can continue creating lasting long-term value. This report presents QL's past, present, and anticipated performance in a coherent manner to illustrate the company's operating environment and execution of strategy. The Malaysian Financial Reporting Standards are applied in the preparation of QL’s financial statements, which are independently audited. Reporting Philosophy and Principles We are committed to integrating Environmental, Social, and Governance (ESG) principles into our strategies, decisions and operations. We recognise the importance of ESG in creating value for all stakeholders. This report highlights our sustainability goals and progress, and notes the alignment with the United Nations’ Sustainable Development Goals (SDGs) where relevant. For assurance, QL’s Audit Committee approved an internal audit plan to review our Sustainability Statement. The Group Internal Audit Department concluded the review with the issuance of the Limited Assurance Statement on page 78. Sustainability aspects of QL’s activities and how ESG considerations affect QL’s stakeholders are disclosed where practicable. Onward reading about our sustainability practices is on pages 30 - 79. QL continuously engages with internal and external stakeholders to identify matters that can materially affect the company’s ability to generate value. These matters are disclosed in this report with the Material Matters and Materiality Assessment procedure readable on pages 37 - 39. Sustainability Statement Material Matters The QL Board of Directors acknowledges its responsibility in governance to ensure the integrity of this report. We are of the view that this report that is prepared in accordance with the International Integrated Reporting <IR> Framework fairly and factually presents the company’s performance by illustrating material matters that impact QL’s ability to create, preserve, or erode value. Approved by the Board on 10 July 2024. Dr. Chia Song Kun Executive Chairman Mr. Chia Song Kooi Group Chief Executive Officer Approval by the Board This report contains forwardlooking statements which represent our considerations and future expectations. These statements are inherently subject to change due to dynamic developments and therefore involve risk and uncertainty as they relate to future events and circumstances. Hence, such statements must not be construed as predictions or guarantees of future outcomes. Readers are advised not to place undue reliance on forward-looking statements and the assertions made as actual outcomes and performance may be different to those expressed in this report. Forward-Looking Statements • Bursa Malaysia Securities Berhad Main Market Listing Requirements • Bursa Malaysia Securities Berhad Corporate Governance Guide • Malaysian Code on Corporate Governance • International Financial Reporting Standards • Malaysian Financial Reporting Standards • Companies Act 2016 • Global Reporting Initiative (GRI) Standards • International Integrated Reporting Council (IIRC) <IR> Framework Reporting Framework and Guidance • Internal controls and management assurance • Internal audit and compliance • Internal assurance (limited) by Group Internal Audit Department on sustainability matters • External audit by KPMG PLT on financial statement Assurance This IAR contains quantifiable data of our activities and its output, including qualitative outcomes, on our operations from 1 April 2023 to 31 March 2024. Unless stated otherwise, this report encompasses all QL companies’ financial and nonfinancial achievements. Reporting Scope and Boundaries Our aim is to provide a comprehensive and balanced view of our value creation efforts as we endeavour to feed a growing population nourishing products made from agro resources. This IAR is the outcome of the company’s reporting approach as governed by the Board, aimed at strengthening and retaining stakeholder trust through consistent and transparent disclosure. PALM OIL AND CLEAN ENERGY (POCE) CONVENIENCE STORE CHAIN (CVS) INTEGRATED LIVESTOCK FARMING (ILF) MARINE PRODUCTS MANUFACTURING (MPM) ILF produces highquality, nutritious and affordable sources of protein for consumers. Activities in this business pillar encompass the entire value chain, from feed and raw materials trading, feed milling and layer farming to broiler integration. We uphold strict biosecurity protocols and ensure optimal farming conditions to sustainably manage our farm operations. Our direct-to-consumer channel of FamilyMart convenience stores, which is rooted on the konbini concept, offers wholesome, ready-toeat and ready-to-cook meals tailored for contemporary lifestyles. FamilyMart plays an important role in expanding QL’s food production capabilities and distribution channels. The CVS pillar has grown to feature innovative offerings such as FamilyMart Mini smart kiosks, “Food Superstore” concept stores, and halal certified FamiCafé outlets. MPM specialises in producing quality, convenient and nutritious marine-based products. Our holistic value chain comprises upstream-to-downstream activities spanning aquaculture, deep-sea fishing, value-added processing, fishmeal production, surimi and surimi-based products manufacturing, and ready-to-cook food. QL is widely acknowledged as the leading producer of surimi-based food items in Southeast Asia. QL helps businesses fulfil their environmental, social and governance (ESG) requirements through the provision of bioenergy, renewable energy and water treatment solutions. Additionally, we are involved in the palm oil value chain, providing milling services for smallholders and managing 16,000 hectares of palm oil estate.
Produced 1.40 billion standard protein servings Included in FTSE4Good Bursa Malaysia Index (w.e.f. 24 June 2024) Included in FTSE4Good Bursa Malaysia Shariah Index (w.e.f. 24 June 2024) Derived 45.2% energy from renewable sources Planted 5,000 mangrove seedlings since 2022 Avoided 25,796 tCO2e Produced 23.1 million meals Uplifted livelihoods of 895 fishermen via FFAS RM437.85 million PATAMI Revenue RM6.65 billion RM626.53 million PBT Benefitted 11,656 individuals and 176 organisations via Corporate Philanthropy RM14.36 billion market capitalisation Employed 12,270 locals Diverted 95.3% waste from landfill Recognised by Deloitte as a Best Managed Company 2023 Malaysia Installed 26 MWp solar PV & 3,200 ML water treatment capacity for business customers 2024 Key Highlights 2024 Key Highlights QL RESOURCES BERHAD INTEGRATED ANNUAL REPORT 2024 4 5 QL AT A GLANCE 2 SEC.
Convenience Store Chain (CVS) Our Presence Our Presence 1 QL RESOURCES BERHAD QL AGRIFOODS SDN. BHD. (FORMERLY KNOWN AS QL FEEDINGSTUFFS SDN. BHD.) QL FEED SDN. BHD. QL INTERNATIONAL PTE. LTD. No. 16A, Jalan Astaka U8/83, Bukit Jelutong, 40150 Shah Alam, Selangor. Tel : +603 7801 2288 Fax : +603 7801 2222 URL : www.ql.com.my 2 PACIFIC VET GROUP (M) SDN. BHD. QL PACIFIC VET GROUP SDN. BHD. No. 886-C8, Jalan Subang 9, Taman Perindustrian Subang, 47600 Subang Jaya, Selangor. Tel : +603 8024 9508 Fax : +603 8024 9634 Email : pvgmal@pacificvet.com.my 3 QL POULTRY FARMS SDN. BHD. Lot 1338/5, Pajam, 71700 Mantin, Negeri Sembilan. Tel : +606 758 7377 Fax : +606 758 7385 URL : www.qleggs.com 4 QL ANSAN POULTRY FARM SDN. BHD. Lot 2051, 2053, 2054, MK Sidam Kanan, Kg. Paya Union, 09400, Padang Serai, Kedah. Tel : +604 403 2526 Fax : +604 403 4534 5 QL AGROFOOD SDN. BHD. QL AGROVENTURES SDN. BHD. P.O.Box A158, lnanam, 88857 Kota Kinabalu, Sabah. Tel : +6088 422 604 Fax : +6088 421 943 6 QL AGRORESOURCES SDN. BHD. QL LIVESTOCK FARMING SDN. BHD. Tingkat 1, Sublot 2490 Fortune Land, Jalan Rock, 93250 Kuching, Sarawak. Tel : +6082 252 760 Fax : +6082 410 646 7 QL FARMS SDN. BHD. QL BREEDER FARM SDN. BHD. QL TAWAU FEEDMILL SDN. BHD. QL AGROBIO SDN. BHD. TB 50 & 51, Mile 5, Apas Road, 91000 Tawau, Sabah; OR P.O.Box 61651, 91026 Tawau, Sabah. Tel : +6089 917 711/ +6089 917 722/ +6089 917 733 Fax : +6089 912 045/ +6089 913 482 Email : qltawauhq@ql.com.my 12 QL MARINE PRODUCTS SDN. BHD. QL AQUAMARINE SDN. BHD. QL FRESH CHOICE SEAFOOD SDN. BHD. QL DEEP SEA FISHING SDN. BHD. P.O.Box 502, 89208 Tuaran, Sabah. Tel : +6088 791 833/ +6088 791 866 Fax : +6088 791 822/ +6088 787 166 URL : www.qlmarine.com.my 13 QL ENDAU MARINE PRODUCTS SDN. BHD. QL ENDAU DEEP SEA FISHING SDN. BHD. QL ENDAU FISHMEAL SDN. BHD. RIKAWAWASAN SDN. BHD. No. 11, Jalan Merlimau, 86900 Endau, Johor. Tel : +607 794 3814/ +607 794 4087 Fax : +607 794 4088 URL : www.qlendau.com.my 14 QL FIGO (JOHOR) SDN. BHD. HEAD QUARTER: Lot 3627, Jalan Harmoni 1, Taman Harmoni, 81000 Kulai, Johor. Tel : +607 663 7388 Fax : +607 663 7366 15 QL LIAN HOE SDN. BHD. No. 4, Jalan Penaga 9, Kawasan Perindustrian Kata Putri, 81750 Masai, Johor Bahru. Tel : +607 387 5745/ +607 387 5700 Fax : +607 386 1629 Email : sales@lian-hoefood.com.my URL : www.lian-hoefood.com.my 16 QL FOODS SDN. BHD. Lot 9120 & 9121, Jalan Tepi Sungai, 36400 Hutan Melintang, Perak. Tel : +605 641 5805/ +605 641 7954 Fax : +605 641 2257 URL : www.qlfoods.com 17 QL FISHMEAL SDN. BHD. Lot 164, 3314 & 2647, Jalan Tepi Sungai, 36400 Hutan Melintang, Perak. Tel : +605 641 2752 Fax : +605 641 1042 8 PT QL TRIMITRA JI. Sindanglaya, No. 100 Cipanas, Cianjur 43253, West Jawa, Indonesia. Tel : +62 263 515 100 Fax : +62 263 519 966 9 PT QL FEED INDONESIA PT QL AGROFOOD JI. Pangkalan VI RT. 03/RW, 06 Kel. Ciketingudik, Kec. Bantargebang, Bekasi, Jawa Barat, 17153 Indonesia. Tel : +62 21 2296 7444 Fax : +62 21 3396 7437 10 QL VIETNAM AGRORESOURCES LIABILITY LIMITED CO. QL FEEDINGSTUFFS VIETNAM LIMITED LIABILITY CO. QL FARMS (TAY NINH) LIABILITY LIMITED CO. 18 Cong Hoa, Ward 4, Tan Binh District, Ho Chi Minh City (Warehouse No.6), Vietnam. Tel : +84 28384 25131/ +84 28384 28435/ +84 28384 28437 Fax : +84 28384 28434 URL : www.qlvietnam.com.vn 11 LIAN FOO POULTRY FARM SDN. BHD. 21 M/S, Air Hitam Ulu, Masjid Tanah, 78300 Melaka. Tel : +606 556 1900 Email : lianfoopoultry@gmail.com 20 BM GREENTECH BERHAD (FORMERLY KNOWN AS BOILERMECH HOLDINGS BERHAD) HEAD OFFICE: Lot 875, Jalan Subang 8, Taman Perindustrian Subang, 47620 Subang Jaya, Selangor Darul Ehsan. Tel : +603 8023 9137 Fax : +603 8023 2127 URL : www.boilermech.com 21 PT PIPIT MUTIARA INDAH JI. Slamet Riady RT, 26/123, Tarakan, Kalimantan Utara. Tel : +62 551 24 328 Fax : +62 551 32 667 22 QL OIL SDN. BHD. QL BIOENERGY SDN. BHD. QL PLANTATION SDN. BHD. QL TAWAU BIOGAS SDN. BHD. TB 50 & 51, Mile 5, Apas Road, 91000 Tawau, Sabah; OR P.O.Box 61651, 91026 Tawau, Sabah. Tel : +6089 917 711/ +6089 917 722/ +6089 917 733 Fax : +6089 912 045/ +6089 913 482 Email : qltawauhq@ql.com.my 23 QL MAXINCOME SDN. BHD. QL KITCHEN SDN. BHD. No. 16A, Jalan Astaka U8/83, Bukit Jelutong, 40150 Shah Alam, Selangor. Tel : +603 7801 2288 Fax : +603 7801 2222 URL : www.ql.com.my 18 PT QL HASIL LAUT JI. Raya Deansdles KM.81.25, Desa Sedayulawas, Kecamatan Brondong-Kabupaten, Lamongan 62263, Jatim-lndonesia. Tel : +62 322 662 828 Fax : +62 322 663 222 19 KEMBANG SUBUR SDN. BHD. 58-1, Jalan Temenggung 13/9, Bandar Mahkota Cheras, 43200 Cheras, Selangor. Tel : +603 9011 9635/8935 Fax : +603 9011 9935 Email : info@kembangsubur.com.my Palm Oil and Clean Energy (POCE) Marine Products Manufacturing (MPM) Integrated Livestock Farming (ILF) QL RESOURCES BERHAD INTEGRATED ANNUAL REPORT 2024 6 7 QL AT A GLANCE 2 SEC. VIETNAM INDONESIA MALAYSIA 21 22 8 9 18 10 6 7 12 5 4 17 16 1 2 20 19 23 3 11 14 15 13
Chairman’s Statement Chairman’s Statement In FY2024, QL operated in a year where the global economy in 2023 defied expectations, weathering significant headwinds to avoid a recession. Early forecasts painted a bleak picture, but the world demonstrated surprising resilience. A perfect storm of challenges – soaring inflation squeezing consumer spending, interest rate hikes dampening investment, and disrupted trade due to geopolitical conflicts – threatened growth. However, the global economy held firm. While growth slowed, many major economies dodged a recession. In the latest development, QL was added as a constituent of both the FTSE4Good Bursa Malaysia (F4GBM) Index and FTSE4Good Bursa Malaysia Shariah (F4GBMS) Index following the June 2024 review, effective 24 June 2024. These inclusions reflect QL’s progress in implementing strong environmental, social and governance (ESG) practices, as well as our commitment to Shariah compliance. Dr. Chia Song Kun Executive Chairman Hostility in the Red Sea, a critical maritime route, disrupted global trade flows. This, coupled with the Black Sea Grain Initiative not being renewed, strained supply chains, caused input costs to fluctuate and heightened concerns about food security in regions like East Africa, South Asia, Southeast Asia, and East Asia. Being in the business of producing food from agro resources, QL understands the gravity of food security. We remain deeply committed to our role in ensuring food security in the nations we serve. Throughout this period, we exercised prudence, guided by our honed strategy to create value for all. QL continued to strengthen our core competencies and invest in growth channels to drive efficiencies and enhance performance in a sustainable manner. Financial Performance Guided by our 2023 strategic focus, QL delivered another year of uninterrupted growth for the financial year ended 31 March 2024. Our top line expanded RM409.46 million (6.6%) to RM6.65 billion with profit before tax (PBT) recording a solid 30.3% or RM145.70 million year-on-year (YoY) growth to RM626.53 million. All four business pillars reported positive results and progress in their respective strategic business focus. More details can be read in the Business Review pages. Value Creation Performance Our commitment extends beyond just financial metrics. Creating shared value for all stakeholders is embedded in our company ethos. Our strategy, innovation, capabilities, and focus on value creation were recognised by Deloitte in July 2023, when QL was named one of Malaysia’s Best Managed Companies. QL was added as a constituent of both the FTSE4Good Bursa Malaysia Index and FTSE4Good Bursa Malaysia Shariah Index Sustainability aligns with our founding philosophy of value for all. In FY2024, QL undertook a full materiality assessment to ensure our material matters remain synchronous and have continued relevance with stakeholder expectations. We employed the double materiality concept which aims to show the interconnectedness of a company’s impacts on society and the environment with the financial performance as recommended by the Task Force on Climaterelated Financial Disclosures. This resulted in a refined new set of 15 material matters, including two new areas: Customer Responsibility, and Innovation and Technology. A snapshot of our top progress on sustainability matters: • 7.0% GHG intensity reduction (FY2020 baseline: 37.1 tCO2e/RM Mil Revenue; target 20% reduction by FY2026) • 45.2% of QL’s energy requirements derived from renewable resources (977,506.75 GJ); avoided 10,062.95 tCO2e • 95.3% hazardous and non-hazardous waste generated diverted from landfills with 202,482.89 MT recycled or recovered • 100% of our operations assessed for corruption-related risks with no violations of Anti-Bribery Policy • 29.70 training hours per executive and 21.21 training hours per non-executive on average • Set a goal of 8% YoY improvement over three years in LTIFR We are mindful of responsible consumption and seek ways to minimise food waste and maximise community impact. By redirecting almost 22,000 meals to feed the needy and supporting 505 preschoolers in child nutrition efforts, we nourished present and future generations. Additionally, we provided RM22 million in interest-free loans to nearly 900 fishermen via our FFAS to uplift their livelihoods. Heightening our sustainability efforts, we developed 4 new policies, revamped 4 existing ones and enhanced another policy. Progressing Sustainability Detailed reading of our sustainability efforts can be found on pages 30 - 79. Dear Valued Shareholders, QL RESOURCES BERHAD INTEGRATED ANNUAL REPORT 2024 8 9 CHAIRMAN’S STATEMENT 3 SEC.
Chairman’s Statement Chairman’s Statement GOVERNANCE Integrity is the foundation of QL. Acting in good faith, delivering on promises and staying true to our word has earned QL invaluable goodwill among stakeholders. In safeguarding this intangible capital, QL maintains a zero-tolerance stance on bribery and corruption. Our Anti-Bribery Framework was reviewed in FY2024 to ensure continued alignment with the TRUST principles Refresher sessions were conducted for employees to re-emphasise our stance on the matter. To enhance communication of our Anti-Bribery Policy, a series of multi-lingual Anti-Bribery and Anti-Corruption Awareness collaterals have been planned, with the first series disseminated across all business units. QL has also introduced a Supply Chain Policy to set clear guidelines for both procurement activities and suppliers. The policy reflects QL’s commitment to environmental and social sustainability throughout our supply chain, encouraging responsible practices and strict compliance. In our pursuit of continuous improvement, QL Kitchen, CVS’ central kitchen unit, achieved ISO 45001:2018 certification for occupational health and safety. This commitment to a safe workplace extends across all our sites, with a dedicated team actively working towards expanding this certification. We believe occupational health and safety is a fundamental human right and a fundamental principle in our value creation process. Food is a basic human need and we believe in providing accurate and transparent information about our products’ quality, nutrition and safety. Our labelling practices strictly adhere to the Malaysia Food Act 1983, Food Regulations 1985, and incorporate relevant United States Food & Drug Administration’s (FDA) guidelines. This ensures our customers have the information needed to make informed choices. At the same time, our new Responsible Marketing and Advertising Policy ensures ethical and accurate marketing communications, consistent with our values, reflecting our commitment to transparency and ethical conduct. It references the Malaysian Code of Advertising Practice and Malaysian Communications and Multimedia Content Code 2022. In FY2024, we enhanced our data security framework, along with a revamp and implementation plan of QL’s Data Privacy and Security Policy governing the management of personal data collected and processed by QL. This coincides with our increased integration of technology, including upgrading our Enterprise Resource Planning (ERP) system to improve efficiency and scalability. Embracing technology smoothens the path of QL’s compliance, being in the pioneer phase of Malaysia’s e-invoice implementation. Following five years of leadership transition planning, QL has implemented a structured management approach with CEOs and Deputy CEOs in the business pillars. To incentivise and retain key personnel across the group, we propose a share grant scheme, aligning their interests with shareholders through equity participation and motivating them to drive QL’s continued success. QL’s strategic direction is guided by our core values of win-win, innovation, integrity and teamwork, and a strong Board. This lays strong foundation for our business operations, which are enhanced by the personality and culture that have been nurtured throughout the value chain. Regular assessments ensure a well-rounded Board with complementary skills, competencies and qualifications to effectively guide QL and champion stakeholder interests. Our Board practices are benchmarked against the Malaysian Code of Corporate Governance. An independent, externally facilitated evaluation of the Board in FY2024 confirmed the Board’s effectiveness, noting its formality, professionalism, and cohesiveness. The Board Leadership and Board Dynamics and Culture were particularly highlighted. More details about our governance practices can be read on pages 97 - 104. PROSPECTS As we heighten our emphasis on ethical and transparent practices, we are working towards solidifying consumer trust. This is an invaluable asset in a world increasingly concerned about food quality, safety and traceability. We note that geopolitical developments can impact our business. As we continue to execute and advance on our strategy, we keep in mind the uncertainty of posturing and geopolitical tensions. Being a leading producer of food from agro resources, in particular affordable protein for the masses and nourishing food, we are in the position to directly contribute to national food security. Together with our commitment to sustainability, including renewable energy and responsible resource management, QL’s businesses align perfectly with growing global and national emphasis on environmentally friendly practices. As such, QL’s prospects are positive. ACKNOWLEDGEMENTS AND APPRECIATION Our philosophy of creating value for all compels us to continue delivering growth and shared value for stakeholders. QL’s philosophy intertwines with the spirit of sustainability, to ensure we are responsible in our value creation without jeopardising the ability of future generations to meet their needs. We are confident in our strategy that has guided us to our successes today. Honed and focused through the years, the overarching Strategic Business Growth and Strengthening Core Competencies components of our strategic thrusts progress us towards being the preferred agro-based enterprise. Our commitment to creating sustainable value is unwavering and we are convinced the advent of smart technology will support our journey. On behalf of the Board of Directors, I extend appreciation to all stakeholders for their continued faith and trust in QL. A special thank you note to our Independent NonExecutive Director, Cindy Tan, who had served the Board until 30 September 2023. We are grateful for the loyalty and support of my fellow Board members, Management, and all employees for their dedication and commitment to quan li. Strategic Focus for FY2025 Our vision is to be the preferred global agro-based enterprise. To achieve this, we understand that knowing our destination must come accompanied with action, laid out in a clear roadmap that aligns our core values with our endeavour to create shared value for all. Understanding core competencies allows us to identify opportunities that bolster our value chain. To advance on our strategic framework, QL’s 4C approach – Conserve, Continue, Core Focus and Cultivate – is the rubric that guides resource allocation and initiative prioritised. Our fortunes are interwoven with the fabric of the agro-sector prosperity. Recognising the impact of climate change, we are expanding our involvement in renewable energy through BM Greentech Berhad (formerly Boilermech Holdings Berhad). Growing the business at this subsidiary enables us to provide a wider range of sustainability solutions for both internal operations and external customers. This aligns perfectly with QL’s “Sustainably Enhancing Performance” strategy. As part of our strategic direction, QL is divesting our Tawau plantation business in the coming year to redirect resources into other growth channels. This move reflects our intention to gradually shift away from palm oil, focusing on clean biomass and solar energy. We continuously innovate to generate long-term value. Automation streamlines processes while the use of connected sensors enables data collection and analysis for presentation in a dashboard to enhance efficiency and productivity. We are increasing our capacity to capture mission critical information for a data-driven approach and decision-making to drive value. Committed to responsible consumption, we embrace a circular economy approach. Our waste hierarchy system prioritises reduction, reuse, recycling, and recovery. We transform byproducts into valuable inputs, reducing raw material reliance and environmental impact associated with extractions and processing new resources. For example, organic materials become fishmeal and chicken manure transforms into organic fertiliser. QL’s Board leads the strategy setting and oversees its implementation and progress through active participation in operations, ensuring continuous progress towards the creation of long-term value. Collectively, our multi-faceted strategic focus supports the scaling of QL towards our vision. QL RESOURCES BERHAD INTEGRATED ANNUAL REPORT 2024 10 11 CHAIRMAN’S STATEMENT 3 SEC.
Group Chief Executive Officer’s Review Group Chief Executive Officer’s Review QL is unwavering in our pursuit of sustainable value creation for all stakeholders. Our mission of creating nourishing products from agro resources has established us as a trusted food producer in Southeast Asia. We hold the distinction of being the region’s leading producer of surimi-based food items, the preferred egg producer in our countries of operation, and the master franchisee of FamilyMart in Malaysia. Beyond food, QL’s expertise extends to clean energy solutions, encompassing solar PV and biomass technology, as well as water treatment solutions. This allows us to journey alongside other companies and contribute to a more sustainable future. QL’s business pillars operate with a strong focus on responsible resource utilisation. We adopt a circular economy approach, where waste from one business segment becomes a raw material or catalyst for another. For example, almost 25,000 MT of organic waste from our marine processing plants were repurposed into fishmeal for the aquaculture sector. In FY2024, QL delivered a robust performance across our core business pillars. The MPM and ILF pillars delivered exemplary results fuelled by a confluence of factors. Good fish landings, lower input costs for downstream manufacturing and stable selling prices for surimi-based products provided a favourable environment. Beyond these, the broader market offered additional tailwinds. Stable egg selling prices courtesy of the Malaysian government’s intervention on egg price control and subsidy, and an initial decline in commodity prices provided relief to the challenges faced in the Vietnam operations. We were also able to capitalise on the growing ESG trends and the National Energy Transition Roadmap (NETR) in POCE, while CVS expanded steadily with enhanced operational efficiency. These combined elements provided stability and momentum that resulted in a positive performance. Overall, all four business pillars demonstrated QL’s effectiveness in capitalising on evolving market conditions and strategically pursuing sustainable growth. Revenue (RM million) PBT (RM million) 6,652.10 626.53 5,236.05 6,242.64 6,652.10 321.21 480.83 626.53 FY2024 FY2024 FY2023 FY2023 FY2022 FY2022 Guided by our strategy, we executed on the outlined approaches to capitalise on opportunities and strengthen our core competencies to sustain growth. We invested into technology to drive efficiency and countering pressures from competition. Embracing a progressive mindset and fostering a collaborative team spirit to persevere through challenges, QL delivered a strong FY2024 with a new record profit before tax (PBT) of RM626.53 million on the back of RM6.65 billion revenue. Profit after tax and minority interests (PATAMI) increased by 26.2% to RM437.85 million. Mr. Chia Song Kooi Group Chief Executive Officer The business environment for QL’s FY2024 was a complex picture. The glimmers of economic recovery met with significant challenges arising from persisting core inflation globally, new geopolitical tensions, fluctuating commodity prices and extreme weather patterns. As a leading agri-food producer, QL understands the vital role we play in ensuring food security for the nations we serve. We remained steadfast in our commitment to uninterrupted operations, ensuring a consistent supply of nutritious and affordable food while adapting to evolving preferences. More detailed reading about our business performance and operational outlook can be found in the Business Review on pages 20 - 27. QL RESOURCES BERHAD INTEGRATED ANNUAL REPORT 2024 12 13 SEC. MANAGEMENT DISCUSSION AND ANALYSIS 4
Strategy Strategy QL’s vision is to be the world’s preferred agro-based enterprise. We achieve this through continuous innovation, creating “purple oceans” where we offer unique value to stakeholders. This means developing innovative (blue ocean) products and solutions that disrupt established markets (red oceans). Embracing a Sustainable Future: Our Strategic Roadmap Our strategy prioritises sustainable value creation. We manage all forms of capital responsibly, particularly natural and manufactured resources, to ensure we can continue providing nourishing food for generations to come. QL’s strategy has two key components that drive growth and efficiency, allowing us to capitalise on opportunities while mitigating potential risks. Our goal is to achieve sustainable, long-term growth. Strategic Business Growth Strengthening Core Competencies We actively seek new opportunities to expand our reach and impact by constantly innovating to achieve sustainable growth. Our strategy focuses on three growth models, executing via a 4C Approach, which guides how we allocate resources to optimise growth. In FY2024, QL invested RM364.6 million or 5.5% of revenue to grow our businesses strategically. We continuously improve operational efficiency and risk management to stay ahead of the curve. Four enablers facilitate our business objectives. We focus on strengthening these enablers for long-term sustainability. Empowering Talents Core Focus Enhance Branding & Product Innovation Cultivate Integrating Technology Continue Sustainably Enhancing Performance Regional Replication Identify and replicate successful core activity models regionally Strengthening Value Chain Strengthen our competitive advantage by integrating vertically and adjacent value chains Downstream Integration Expand reach and product portfolio to reach new market segments • Prioritise responsible practices, driving positive impacts for the economy, environment, and society • Rigorous, continuous audits across all farms, safeguard animal health and food safety • Prioritising operational safety and health with external validation through audits and certifications • Embracing renewable energy, monitoring water usage, and exploring alternative water sources at all sites • Data-driven approach for efficiency and decision-making in a timely manner • Real-time monitoring at operating sites for effective audit & control, and identify areas for improvement • Embark on data journey for reporting, performance management and continuous improvement culture • Utilise digital platforms to expand customer base and connect in new ways • Knowledge transfer across business units to accelerate improvement initiatives • Invest in ongoing learning, upskilling and employee wellbeing • Foster professional and personal development through merit-based career progression • Robust talent pipeline and succession plan for business continuity • Streamline and professionalise organisation structure • Embrace human rights and fair labour practices, creating a safe and inclusive work environment • Champion innovation and cultivate trust through certified quality and safety to build stronger brands • Stay ahead of the curve via purple ocean strategy, continuously innovating product and service to meet evolving lifestyles • Strengthen sales, marketing, and customer networks to expand our footprint • Comprehensive crisis management plan in preparation for any situation • Adhere to the highest standards, maintain multiple food quality and safety certifications Consolidate and transform to unlock and enhance value • Maintain fishing fleet at 30 vessels • Leverage direct sales channel for QL-branded MPM products • Invest further in Vietnam’s ILF regional operations • Restructure POA Explore and develop new business opportunities for future growth • Optimise QL Kitchen capacity by supplying to other businesses • Develop and increase range of convenient RTE food products • Develop leadership foothold in the residential solar market • Develop AI solutions for business use Nurture and expand existing successful businesses • Replicate raw material trading regionally • Explore different species for aquaculture Prioritise and invest in core competencies to excel in our chosen segments and markets • Expand surimi-based products manufacturing regionally • Evolve and increase CVS touchpoints in high potential locales especially east coast of Peninsular Malaysia • Expand climate solution capability through acquisition • Strengthen CE branding and solutions portfolio Conserve 4C Approach Strategic Business Growth Strengthening Core Competencies QL RESOURCES BERHAD INTEGRATED ANNUAL REPORT 2024 14 15 SEC. MANAGEMENT DISCUSSION AND ANALYSIS 4
Significant Risks & Opportunities Significant Risks & Opportunities Events such as trade wars, wars and disputes arising from global, regional and domestic politics may potentially lead to: • Adverse impact on economy in general • Disruption of global supply chain, hence food insecurity (i.e. shortages & price escalation) • Negative consumer sentiments toward certain business segments affecting their choice of products • Volatile foreign currency fluctuation & commodity pricing environment Mitigation Measures • Close monitoring of global & regional events through various channels and conduct swift assessment and respond where appropriate • Regular management meetings are held to review market data, deliberate on the current events and making commodity trading and currency related decisions • Diversification of market and source of key supplies where necessary • Hedging process is in place to mitigate any impact that may arise from foreign currencies fluctuation Opportunities • Reduced reliance on any single region and leveraging alternative supply sources can lead to long term cost savings and mitigate suppliers concentration risk • Opening up new markets to capture growth opportunities and attract new business partners • Increased adoption of business intelligence (BI) tools, fostering data-driven decision making culture and agile management style that is responsive to changes in the macroenvironment Stakeholders Capital Inputs RM Material Matters M Market Risk Disease Disease outbreak is an industry risk which may lead to lower productivity, and higher mortality rate, leading to losses in poultry farms and aquaculture. Power Failure Any interruption or loss of electricity supply to major equipment can cause high mortality in chicken houses, leading to losses in poultry business. Mitigation Measures • Robust biosecurity monitoring and response mechanism covering activities such as vaccination, regular serology testing, PCR test on chicken and environment to detect presence of pathogen • Periodic compliance audit to ensure that farms uphold biosecurity procedures • Periodic training to ensure high level of biosecurity awareness and culture among employees • Robust preventive maintenance to the electrical equipment and testing functionability of the power generator • Implementation of periodic drills in order to respond appropriately during emergency Opportunities • Continually enhancing robust, high-standard biosecurity protocols could establish QL’s unique competitive advantage Operational Risk O Material Matters CR RM CC SCE Capital Inputs Stakeholders Failure to comply with the environmental legislation (e.g., biodiversity impacts, air emissions and waste discharges, etc.) may lead to fines and penalty, reputational damage and adversely impact surrounding environment. In addition, the Group’s fishery units are faced with situation of potential depleting fish resources where occurrences of low fish cycle could be caused by climate change. Note: In addition, the Board recognised the significance of climate change and its associated risks which are discussed in the Sustainability Statement’s Climate Change section on page 41. Mitigation Measures • Close monitoring and strict compliance with relevant regulations including Environmental Quality Act, 1974 • Continuously reviewing and enhancing fishing vessels’ facility and technology in order to improve the catch rate • Diversifying to alternative ingredients Opportunities • Capitalising on QL’s subsidiary i.e. BM Greentech’s industry leading capabilities to build & implement environmental solutions internally and for other businesses, expanding into a new revenue stream for QL • Developing new food products range with alternative ingredients to capture new market Environmental Risk E Material Matters CC PR WS RM SCS SCE Capital Inputs Stakeholders Poor IT risk management may introduce vulnerabilities such as data security breaches, operational disruptions, potential intrusion/attacks, (e.g. ransomware, phishing & malware). Thus, adversely affect the Group’s reputation, business and financial loss. Mitigation Measures • Continuous enhancement of Group-wide IT Security governance • Introduction of new ERP system • Implementation of program and initiatives such as intrusion detection & prevention, disaster recovery program & periodic penetration test Opportunities • Robust IT security measures can enhance trust and confidence of stakeholders • Continuously modernising IT infrastructure enhances data analytics and insights, while supporting business growth and future scalability IT Security Risk I Stakeholders Capital Inputs Material Matters CR IT RM Halal Compliance Halal certification attests that a product manufactured in full compliance with the precepts of Islamic Law. Halal non-compliance will affect the Group’s reputation and lead to loss of business. Bribery However unlikely it is in the industries QL is operating in, any bribery incident risks stiff penalties. In addition, it could have serious impact on the Group’s reputation and business growth. Mitigation Measures • Implementation and development of Halal Assurance Management System (HAMS) and adherence to JAKIM requirement • Regular internal reviews and external audits • Halal awareness training are periodically provided to employees • Complying fully with the Group’s Anti-Bribery Framework and related regulatory requirements • All the employees including directors are required to acknowledge and abide by the employees code of conduct • Periodic anti-bribery awareness training & communications are provided to all the employees Opportunities • Strengthen market position and expand access in markets that prioritise Halal-certified products including overseas market • Fostering a culture of integrity and ethical behavior leads to better employee engagement and morale Compliance Risk C Food production processes are exposed to various sources of contamination which may be caused by factors such as hygiene, quality of input material, pest etc. Lack of proper food safety standards could affect the Group’s reputation and lead to sales & financial losses. Mitigation Measures • Adoption of various food quality and safety certifications across industries such as HACCP, GMP, MeSTI, Halal and FSSC 22000 • Regular internal and external audits • The use of technology to minimise human contact as well as to detect potential product contamination Opportunities • Continuous enhancement of food safety standards to retain consumer trust and loyalty • Increased adoption of automation & technology to reduce human contact and minimise contamination further improves operational efficiency and food safety standards Food Safety Risk F Stakeholders Capital Inputs Material Matters CR RM SCS Stakeholders Capital Inputs Material Matters CR SCS CG AC RM QL RESOURCES BERHAD INTEGRATED ANNUAL REPORT 2024 16 17 SEC. MANAGEMENT DISCUSSION AND ANALYSIS 4
UN SDGs Value Creation Business Model Value Creation Business Model CAPITAL INPUTS BUSINESS PILLARS MPM ILF POCE CVS OUTPUTS OUTCOMES Produced 23.10 million meals for Malaysians2 (FY23: 19.50 million) Produced 1.40 billion standard protein servings1 (FY23: 1.20 billion) Maintained 99% score of “Fair to Excellent” for QL Eggs and QL Mushroom brand in Consumer Satisfaction Survey Included in the FTSE4Good Bursa Malaysia (F4GBM) Index and FTSE4Good Bursa Malaysia Shariah (F4GBMS) Index 93% employee engagement score for CVS QL practices responsible consumption for sustainable long-term value creation • 977,507 GJ Renewable Energy Generated (FY23: 841,906 GJ)* • 45.2% of QL’s energy requirements derived from renewable resources* • 25,796 tCO2e Emissions Avoided (FY23: 25,154 tCO2e)* • 7.0% GHG Emission Intensity Reduction (FY20 baseline: 37.1 tCO2e/ RM Mil Revenue**; target 20% reduction by FY26)* • 692 m3/RM Mil Revenue Water Withdrawal Intensity (0.7% reduction; FY23: 697 m3/RM Mil Revenue**)* • 5,073 m3 Rainwater Harvested (FY23: 6,754 m3) due to reduced rainfall* • Recycled/recovered 202,483 MT of non-hazardous waste (FY23: 194,237 MT recycled/recovered**)* • Diverted 95.3% of waste from landfills and incineration (FY23: 95.3%)* • 91.9% of chicken manure converted into organic fertiliser (FY23: 95.0%**)* & 8.1% recovered for other usages • Planted 2,000 mangrove seedlings with 95% survival rate after 7 months (FY23: 2,000@99% after 4 months) Safe, quality and nourishing sources of protein produced by integrating technology with best practices and renewable energy solutions • RM6.65 billion revenue (FY23: RM6.24 billion) • 2.60 billion eggs (FY23: 2.40 billion) • 168,000 MT of fish (FY23: 153,000 MT) • 19.53 million broilers (FY23: 19.82 million) • Over 1,400 quality halal certified products (FY23: Over 1,000) • 26.00 MWp solar PV installed for businesses (FY23: 13.40 MWp) • 27 water treatment plants with 3.2 million m3 waste and raw water treatment capacity installed for businesses (FY23: 10, 0.5 million m3) • 49 biosecurity audits (FY23: 52) conducted across 20 farms Sustainable business growth driven by trust and reputation with deep pool of knowledge, experience, and robust systems • Over 10 accepted and trusted brands (FY23: over 10 brands) • Valid Halal and international certifications • Halal certification for FamiCafé outlets • Export to more than 10 countries (FY23: more than 10 countries) • QL Poultry Academy training completed at 4 farms, intensifying poultry farming knowledge • Initiated integration of Farm Management System and new ERP system, improving efficiency and productivity pages 28 - 29 pages 38 - 39 Note: * Information pertains to subsidiaries reported within the Sustainability Statement ** Restated with revised calculation 1 Based on average protein serving of 26g (recommended average daily protein intake by USDA Dietary Guidelines), computed using production volume for MPM and ILF businesses. 2 Based on average 2,000 calories per meal per day (recommended daily calories intake by the Ministry of Health Malaysia), computed using CVS meal production. Sustain long-term shareholder value by optimising financial resources including equity and debt • Resilient business performance, PATAMI: RM437.85 million (FY23: RM346.82 million) • Total proposed dividend payment: RM158.21 million (FY23: RM170.36 million) Cumulative shareholder return since listing in year 2000: 13,000% ROI (FY23: 12,700%) • Total finance cost: RM72.02 million (FY23: RM64.48 million) Safe and conducive working environment with personal and career development paths to nurture an engaged workforce• • RM661 million paid in salaries and wages (FY23: RM571 million) • 300,807 upskilling and training hours (FY23: 219,491) • 380 enrolled in Leaders Enhancement and Development (LEAD) Programme (FY23: 373) • Completed third batch of Accelerated Learning Process Programme with 27 participants • Group-wide Occupational Safety campaign over 3 weeks • ISO45001:2018 certification obtained for QL Kitchen • Maintained 0 substantiated complaints of human rights violations • Established goal of 8% YoY improvement in LTIFR over three years UN SDGs To be the preferred global agro-based enterprise. OUR VISION • 2,161,706.80 GJ energy consumed • 3,085,930 m3 water withdrawal • 31,959 solar panels installed (+1,802 from FY2023) • Total of 5,000 mangrove seedlings planted to-date pages 20 - 27 pages 80 - 113 page 35 Win-Win Integrity Teamwork Innovative pages 16 - 17 Material Matters Stakeholder Engagement Outlook Operational Environment Risks & Opportunities Governance NATURAL CAPITAL • Inclusive and diverse workforce of over 16,331 employees across 4 business pillars • Training and development programmes to nurture and upskill employees • Ongoing ISO45001 audits HUMAN CAPITAL • Over 30 operating entities • Operating in 3 countries • 2 central kitchens • Climate solutions engineering • 7,000 MT per annum ready-to-cook food plant in Johor commissioned in December 2023 • Acquired new layer farm in Melaka with a 600,000 epd operation MANUFACTURED CAPITAL • Open communication channels and dialogues between QL and stakeholders ensuring a mutually beneficial relationship • Distributed RM939,546 net profit to support the community at large SOCIAL CAPITAL • Quality and halal certified products • Best practices and 10 food safety and quality certifications • QL Poultry Academy INTELLECTUAL CAPITAL • Total equity: RM2.9 billion • Total borrowings: RM1.3 billion FINANCIAL CAPITAL Regional Replication Strengthening Value Chain Downstream Integration Integrating Technology Sustainably Enhancing Performance Empowering Talents Enhance Branding & Product Innovation STRATEGIC BUSINESS GROWTH STRENGTHENING CORE COMPETENCIES Build and maintain relationship with stakeholders across operational locations by playing a role in socio-economic developments • 51.5% of QL’s total procurement spend was on local suppliers • Enhanced the livelihoods of 895 fishermen through FFAS (FY23: 924) • Impacted 11,656 lives via over RM939,500 distributed through Corporate Philanthropy initiatives (FY23: 11,900 lives; RM835,600) • 12,770 locals employed in our operations (FY23: 11,619) • 4,849 suppliers signed QL’s Suppliers and Business Associates Code of Business Ethics (FY23: 3,433) • 505 kindergarten children from vulnerable communities provided with daily protein requirements for 11 months (FY23: 207 children for 6 months) • 6,336 kg of food or 21,979 meals channelled to vulnerable groups • Formalised 4 new policies, revamped 4 policies and enhanced 1 policy on ESG matters MISSION We create nourishing products from agro resources, leading to benefit for all parties. QL RESOURCES BERHAD INTEGRATED ANNUAL REPORT 2024 18 19 SEC. MANAGEMENT DISCUSSION AND ANALYSIS 4
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