3 4 From Humble Beginnings, to Today KLK OLEO started in the 1990s as a basic oleo producer. Through organic growth and acquisition of established and reputable organisations, KLK OLEO has diversified into downstream derivatives and specialty chemicals. KLK OLEO is proud of its platform which is based on renewable resources and all its manufacturing sites are fully RSPO certified.
5 6 Discover the Great Potential of Oleochemicals Integrated Business Value Chain Oleochemicals are substances derived from plant oils or animal fats and are segregated into two categories, basic oleochemicals and derivatives. They are renewable resources and environmentally compatible. Palm Kernel Oil The strong synergy between KLK and KLK OLEO has gained the trust of our customers as the reliable sourcing partner. Glyceryl Esters Fatty Esters
7 8 NEONAL Alkaline Cleaners IMBELOX Press Felt Cleaners DAVOSLIFE E3 PALMERA Dimer Acids Isostearic Acids SYMPATENS Isostearic Acid Esters
9 10 Hedging Naturally Very few companies in the country are like Kuala Lumpur Kepong Bhd (KLK). They have been around for 110 years, growing from a palm oil and rubber plantation business back in the day to one of the largest oleo-chemical producers in the world. To get to know them better and upon the invite of KLK s Chief Executive Officer, Tan Sri Lee Oi Hian, I paid them a visit. Ten minutes in, it became clear to me that what sustains the century-old pulse of this company was the deep importance its leadership placed on innovation. A soft spoken and true gentleman at heart, Tan Sri Lee shared an impressive evolution of KLK, from humble plantation company to its ambitious ventures downstream and going global. It is interesting to note that even a company with such heritage and established business practices, innovation is integral to their business strategy and processes. When the Palm Oil and Rubber lab happened in 2010, we challenged the industry to expand more aggressively downstream. The industry at the time was predominantly upstream, where exports were three times greater than that of the downstream sector. The problem with this was when commodity prices dropped, the industry was hard hit. Expansion into the downstream is seen as a form of natural hedging. KLK, together with the other large companies responded positively to the challenge. Therefore, EPP6 and EPP8 were set up to incentivise companies to go downstream, specifically into oleo derivatives. KLK was one of the first to jump on this boat. Very quickly, they devised their biggest move in innovation. They began to be very focused in prioritising efforts that will capture the lucrative downstream oleo-derivatives segment. They began heavily investing in their downstream R&D. Over the past years, KLK engaged in projects to increase the capacity and introduce new downstream specialty products. New technologies were acquired. The best people were brought in. This was not just a domestic strategy. KLK looked to Europe. In recent years, KLK made two strategic investments in Germany. The first acquisition was in 2010 when KLK bought a plant on the river Rhine in Germany, now known as KLK Emmerich GmbH. The plant, which is also over 100 years old with world-scale assets, has production facilities which manufacture a range of fatty acids, hydrogenated fatty acids and glycerine by splitting of vegetable oils. In 2015, KLK bought a plant in the City of Dusseldorf, which is the centre of a very key chemical region in Germany, also along the River Rhine. This plant produces both vegetable-based as well as tallow-based oleochemicals, giving KLK a much more complete oleochemical portfolio in the European region. By making this move, KLK is strategically situated close to key customers and raw material supply routes in the heart of Europe. They have become a major oleochemical manufacturer and supplier to new European markets. Going back to the big picture of the industry, we anticipated that crude palm oil prices would decrease at some point, and we were not far off the mark, as prices have fallen by 53% since 2011. Production of downstream products also proved to be more lucrative per unit revenue, at 50% more compared to up/mid-stream products. If companies did not diversify and go downstream, they would not have benefited from these larger margins. Our economic sectors have the potential to diversify, but R&D and innovation is critical. There are many individuals like Tan Sri Lee and companies like KLK. Companies can range from 110 years old to 10 years old to perhaps five, but the underlying spirit to succeed is to realise that you don t always have to fight for the pie, but to broaden your horizon. Megatrends exist in all economic sectors. The Palm Oil industry is no different. KLK has not just survived but capitalised on such movements in the commodity market. Crude Palm Oil (CPO) prices are cyclical. If entirely focused on upstream activities, business performance is over reliant on and will fluctuate according to the health of CPO prices. This sparks the impetus for players to go downstream to build resilience and unlock new value. This is the megatrend. KLK s strategy to go downstream, is what I like to term as, being naturally hedged. A little bit of KLK is in everything we consume, from the moment we wake up to the time we go to sleep. They are like the Intel of the Palm Oil industry. For example, the toothpaste and skincare products that we use in the morning contain palm-based glycerine and emulsifier. Our breakfast and lunch are prepared with cooking oil made from palm olein. For general health, tocotrienol makes a very potent anti-oxidant supplement. Throughout the day, the various detergents and cleaning products are filled with surfactants. Not forgetting that our diesel contains 7% of palm biodiesel, a sustainable source of clean energy. Our lovely wives use body and hair care products that contain fatty acids and emollients these are just to mention a few. Today, KLK stands globally competitive, selling to 123 countries at last count, which would roughly be 63% of the world s countries. This is truly a Malaysian company that has made it. This article was featured in Transformation Unplugged, a bi-monthly blog by Dato Sri Idris Jala, CEO of the Performance Management and Delivery Unit (PEMANDU) under the Prime Minister s Department, tasked to spearhead Malaysia s National Transformation Programme (NTP). All rights reserved by PEMANDU.
11 12 Meeting Everyday Needs 7AM Good Morning 6 1 4 2 5 3 Personal Care Bringing Out Beauty from Nature Home Care Gentle Heroes at Home 1 PALMESTER Decyl Oleate 4 KOSTERAN Sorbitan Esters 6 PALMFONATE Sulphonated Methyl Esters 2 PALMESTER EGDS KOTILEN Polysorbates GREENBENTIN MLS PALMESTER Cetyl Palmitate 5 PALMERA Isostearic Acid GREENBENTIN XES 3 PALMOSALT NP Series SYMPATENS Pentaerythrityl Tetraisostearate SYMPATENS Isopropyl Isostearate
13 14 Enriching Human Lives 6PM Family & Friends Time 1 3 4 2 Food & Nutrition Giving the Vitality in Supplements and Diet Lubricants Power Worker in Smooth Operations 1 PALMESTER Medium Chain Triglycerides 2 PALMESTER Stearyl Oleate 4 PALMESTER Trimethylolpropane Esters DAVOSLIFE E3 Tocotrienols Carotenoids 3 PALMESTER Lauryl Oleate PALMESTER Trimethylolpropane-complex Ester HEDIPIN Series
15 16 Impacting Lives Worldwide Netherlands Dr. W. Kolb Nederland Germany KLK Emmerich KLK Emmerich (Dusseldorf Site) China Taiko Palm-Oleo (Zhangjiagang) Indonesia KLK Dumai Belgium KLK OLEO Metrics (FY 2015 / 2016): Manufacturing Capacity 3 million metric tonnes per annum Employees 3,000 Countries We Supply To 123 KLK Tensachem KLK OLEO Revenue USD1.87 billion Switzerland Kolb Distribution Manufacturing Facilities Head Office Malaysia Davos Life Science KLK Bioenergy KL-Kepong Oleomas KSP Manufacturing Palmamide Palm-Oleo Palm-Oleo (Klang) Regional Head Offices Sales & Marketing Network
17 18 Advancing Through Research & Innovation Our R&D Network Malaysia Established in 2007 as the global R&D facility, the Malaysia R&D Centre has grown tremendously to support our global business operations and continues to leverage on partner relationships on numerous collaboration projects. The Malaysian R&D team is specialised in organic synthesis, spearheading advanced analytical support, driving the innovation of high-value applications for oleochemical derivatives. Switzerland As the Centre of Excellence for surfactants technologies, our Swiss R&D Centre continues to focus on the development of nonionic and anionic surfactants through customer-orientated support in household, industrial & institutional (I&I), personal care, lubricant and paper chemical industries. Singapore Located at Singapore s Biopolis international research and development centre for biomedical sciences, our Singapore R&D Centre is dedicated to studying the benefits of phytonutrients in everyday life especially in the field of Health Care and Functional Food applications via rigorous biological research.
19 20 Supply Chain Mapping Barn owl (Tyto Alba Javanica) as predator of rats in oil palm plantations KLK OLEO is committed to transform and strengthen our supply chain by putting in place a commercially viable supply chain mapping process with the objective of achieving sustainable responsible sourcing. With the inherent complexity in our business model, our traceability is mapped to the palm oil mill level and the data provided are based on our best estimates. For more information, please visit www.klk.com.my. KLK OLEO - Source Mapping to Palm Oil Mill Information correct as of 30th September 2016 KLK Plantation RSPO Certification Information correct as of 30th September 2016 Indonesia - 40% Malaysia - 100% Certified Non certified Mapped to source - 88% KLK Plantation Source Mapping Source Mapping to Palm Oil Mill - by material type Number of Palm Oil Mills Number of Palm Oil Mills - 100% mapped to Plantation ASEAN Palm Kernel Oil 97% 3% Malaysia 14 9 Europe 75% 25% Indonesia 12 10 China 81% 19% Number of Palm Kernel Crushing Plants & Refineries Number of Palm Kernel Crushing Plants & Refineries - 100% mapped to Palm Oil Mill ASEAN Palm Oil 99.6% 0.4% Malaysia 3 2 Europe 88% 12% Indonesia 4 2 China 63% 37% Antigonon Leptopus Cassia Cobanensis Turnera Subulata Integrated Pest Management - Planting of beneficial plants to provide shelter and supplementary food such as nectar to encourage the population of predators and parasites.
21 22 Values Matter, Society Matters We are a socially responsible corporate citizen, Responsibility initiative. The Corporate Social Our commitments: committed to the communities we operate in to Responsibility programmes are designed to deliver a sustainable future. help the employees build teamwork, establish engagement, and to nurture them to become In achieving these goals, three core elements - Education, Community and Environment are established as pillars of the Corporate Social responsible corporate citizens. Community Caring for people Education Inspiring the next generation Environment In harmony with nature