Professional Documents
Culture Documents
ABSTRACT
It was 13 June 2009 and Encik (En.) H. Rossly, the Chief Executive
Officer (CEO) of Palm Haul Sdn. Bhd. (PHSB), a transporter of crude
palm oil (CPO) based in Taiping, Perak, was confronted by his fatherin-law, Datuk S. Najeed, owner-cum-founder of PHSB. It was evident
that Datuk Najeed was furious. He had just received a phone call from
one of the general managers of Oilene Refineries Sdn. Bhd., a major
customer of PHSB, complaining about the quality of the CPO delivered
by PHSB and its subsequent impact on Oilene Refineries inability to
fulfil customer orders. Desperate to placate the management of Oilene,
Datuk S. Najeed wanted PHSB to immediately look into the matter.
Datuk Najeed had also, on the same morning, reviewed PHSBs
first quarter of 2009s financial report and he was not happy. Profits
had dropped significantly compared to the same period last year. If
Oilene could not be placated and, as a consequence, decide to leave
their custom, it would be likely that PHSB would run into trouble to
return profits for the coming financial year. It was with these issues
in mind that Datuk Najeed summoned En. Rossly to his room. Datuk
Najeed insisted that En. Rossly investigate the matters and report to
him within one week with possible solutions.
Keywords: SME Sector, Corporate Governance, Management,
Auditing
95
BACKGROUND
Industry Overview
Transporting crude palm oil (CPO) is a niche market. There are approximately
1,500 tankers transporting CPO from the mills to refineries in the country. The
operations take place in palm oil estates, scattered throughout the Peninsular and
East Malaysia, where palm kernels are harvested and transported to respective
mills where they are processed for CPO extraction. Larger palm oil estates have
their own mills while smaller holdings send their palm kernels to co-operative
mills for processing. Once the CPO is extracted, it is then sold to refineries where
it is refined for local consumption or export. These refineries are concentrated in
areas where palm oil cultivation is a major activity, such as Banting, Pasir Gudang
etc.
The refineries largely outsource the transport of CPO to companies that
specifically cater to this niche market. The tankers used will have to be somewhat
customised in order to carry the CPO from the mills to the refineries. Approximately
17.73 million metric tonnes of CPO are moved across the nation from mills to
refineries annually. The transport of CPO is, therefore, a very lucrative business
that is able to generate approximately RM50 million a year. It is a fact that the
transport companies are located in the vicinity of the palm oil estates and the
refineries. Competition is robust within this community of transport companies. If
one company loses a contract, chances are that there will be many others waiting
to pick up the contract. Gross profit margins are usually around 35% - 45% and,
as the administrative overheads are usually low, these companies stand to make
a reasonable net profit if they operate efficiently. In the same breath, companies
can attract losses if management are not alerted to the Achilles Heel of the
business, namely, rising Cost of Sales, due to high vehicle maintenance costs and
likely compensation payments to refineries for short delivery of CPO.
states that between 100 and 200 litres of CPO are generally siphoned off from
each tanker.
In an effort to overcome this problem, several major players in the
industry commissioned a fleet management system that could track the routes
of its drivers. This initiative was also supported by the Malaysian Palm Oil
Board (MPOB), amidst a proposal consideration to mandate all CPO transport
companies to be licensed (Star Online, 9 June 2009). I want to tighten up the
loopholes. The transporters need to be licensed , as said by Tan Sri Bernard
Dompok, Malaysias Plantation Industries and Commodities Minister (Business
Times, 11 June 2009). The report also states that, under existing MPOB (Quality)
Regulations 2005, anyone found guilty of either stealing or contaminating CPO
can be fined up to RM250,000, or incarcerated for two years, or both. However,
the authorities have been unable to catch the culprits red-handed.
Dr. Mohd Basri Wahid, Director-General, MPOB, adds: The amount
siphoned off is replaced with liquid such as water, used oil or sludge so the endbuyer will not realize the theft. This is where the problem starts. This sort of
additive can result in contamination of the crude palm oil which will go through
the processes at refineries. The presence of such substances can affect the quality
of the end product for export. (Starprobe, 8 June 2009).
97
On the average, PHSB transported 3000 tonnes of CPO daily from palm oil
mills to the respective refineries that purchased the oil from oil palm plantation
companies and cooperative mills. PHSB was able to secure service contracts that
were renewable on a five-year basis with these refineries. Given a stable market
for refined palm oil at both national and global levels, and Datuk S. Najeeds
cordial relationship with the industry players, PHSB saw no possible glitch in
renewing its contracts that were due to expire come June 2009.
Like many of the transport companies involved in the business, PHSB also
faced problems with its drivers embroiling in oil piracy. The practice of siphoning
CPO and adulterating the consignment with water was so rampant that a number
of PHSBs customers, i.e. the oil refineries, had threatened to change their custom
to other more reliable transport companies.
CURRENT POSITION
Looking at the turn of events from the meeting, Rossly realised that he had a big
task ahead of him in the coming week before he faced Datuk Najeed with the
report. His father-in-law had demanded that he presented possible solutions to
the issues faced by PHSB and got them back on track. Judging by Datuk Najeeds
disposition, Rossly realised that his father-in-law expected a comprehensive
report that would clearly discuss PHSBs problems, and not a quickly assembled
two-page statement. He rapidly concluded that he had to review PHSBs current
position immediately.
98
99
Rossly
Rosmee : Sure. Ill get you the information within the next
couple of days.
Rossly
too.
Palm oil is always transported in tankers. To
be able to pump the oil out of the tankers, there
must be a required pumping temperature. This is
only possible, if the oil has been kept at a liquid
stage during transportation (above a minimum
temperature). Loading, travel and pumping
temperatures have to be precisely complied with,
since any change in consistency, which may
occur during transportation, can compromise
the quality of the CPO. If the oil solidifies in the
tankers, it cannot be liquefied again, even by
forced heating.
If forced heating is attempted, the oil can end up
melted, scorched, discoloured and rancid. CPO
requires particular temperature conditions. A
written heating order must be obtained from the
consignor before loading is begun. This order
must always be complied with during the entire
transport chain. (Tables 1 & 2 of Appendix G)
provide information on approximate temperature
ranges required during the transportation chain.)
Ramli, can you now brief us on your earlier
comment about a possible solution to the pilferage
problem?
103
Rossly
Aliah
Rossly
Aliah
Rossly
Aliah
Rossly
Aliah
WHATS NEXT?
Rosly turned to face Mukhriz Mohd and said, You know what you have to do
now?
106
107
182,736
12,526,273
45,241
13,121,083
FIXED DEPOSIT
CASH AT BANK
603,015
500,000
543,123
54,007
BANK OVERDRAFT
TRADE CREDITORS
765,332
500,000
548,088
6,664,869
281,378
289,820
9,054,318
1,476,484
CURRENT LIABILITIES
10,585,675
1,084,416
4,111,545
11,701,606
4,106,183
RM
RM
TRADE RECEIVABLES
CURRENT ASSETS
2008
31/3/2009
45,212
968,222
500,000
453,112
2,305,433
8,697,355
154,221
273,182
1,432,444
6,837,508
3,136,786
RM
2007
AS AT 30 JUNE
BALANCE SHEET
RM
2006
12,211
1,034,443
500,000
34,555
454,334
3,663,641
101,333
265,225
65,123
3,231,960
4,793,653
APPENDIX A
Financial Reports
236,731
500,000
165,322
560,234
1,003,474
297,411
257,500
45,321
403,242
5,042,374
RM
2005
531,311
500,000
123,333
694,211
1,046,531
234,221
250,000
32,133
530,177
5,309,943
RM
2004
101,222
634,572
658,974
43,100
45,653
570,221
259,675
RM
2003
98,543
195,325
294,497
23,221
3,233
268,043
114,152
RM
2002
8,159,529
6,472,803
5,337,426
108
200,534
1,003,966
8,159,529
790,344
345,033
1,135,377
6,472,803
DEFERRED TAXATION
803,432
7,155,563
3,337,426
5,155,563
2,000,000
RETAINED EARNINGS
2,000,000
4,047,984
2,366,620
8,478,289
SHARE CAPITAL
FINANCED BY
10,754,463
7,562,162
1,075,856
200,534
875,322
6,486,306
4,486,306
2,000,000
7,562,162
4,425,376
4,271,979
6,421,751
1,183,978
200,534
983,444
5,237,773
3,237,773
2,000,000
6,421,751
1,628,098
2,035,543
4,583,561
1,148,898
105,322
1,043,576
3,434,663
1,434,663
2,000,000
4,583,561
(458,813)
1,462,287
4,507,619
1,665,222
133,211
1,532,011
2,842,397
842,397
2,000,000
4,507,619
(802,324)
1,848,855
182,855
4,112
4,112
178,743
78,743
100,000
182,855
(76,820)
735,794
114,781
4,321
4,321
110,460
10,460
100,000
114,781
629
293,868
RM
RM
RM
2007
RM
2006
RM
2005
RM
2004
109
29,533
612,238
DEPRECIATION
4,005,793
PETROL
5,565,383
39,660
UPKEEP AND
MAINTENANCE
282,380
8,033,421
2,064,333
1,060,513
COMPENSATION
264,412
CLEANING
847,323
613,233
30,584
2,158,211
3,043,432
35,401
283,453
7,504,256
1,567,554
1,034,098
193,533
596,533
611,044
29,630
2,995,441
2,974,343
19,754
259,643
6,122,033
645,222
1,130,555
150,221
622,033
601,344
25,406
3,010,211
2,832,333
23,054
265,041
4,492,116
345,111
1,233,343
159,075
493,352
478,422
19,322
3,165,561
3,123,431
25,212
213,565
4,134,335
1,534,442
163,055
482,303
450,211
20,544
2,853,229
2,948,554
12,422
235,211
4,259,322
1,422,043
156,843
453,211
SPARE PARTS
TURNOVER
2008
31/03/2009
INCOME STATEMENT
40,643
9,863
103,056
128,467
53,045
356,332
39,053
12,977
43,221
1,233,322
RM
2003
35,832
7,893
78,345
79,943
34,299
298,543
23,103
10,499
29,055
865,322
RM
2002
The Pirates of the Silverland (Palm Oil Piracy)
110
144,093
SCHEDULE II
(1,818,137)
5,155,563
3,337,426
ACCUMULATED PROFIT /
(LOSS) B/F
ACCUMULATED PROFIT /
(LOSS) C/F
3,889,481
3,745,388
5,155,563
4,486,306
669,257
2,704,320
138,665
2,565,655
16.51%
8.33%
SCHEDULE I
3,373,577
2,071,344
4,486,306
3,237,773
1,248,533
2,513,991
112,652
2,401,339
19.47%
3,762,524
3,237,773
1,434,663
1,803,110
2,271,837
97,420
2,174,417
23.21%
4,074,947
1,434,663
842,397
592,266
2,152,539
56,004
2,096,535
17.06%
2,744,805
842,397
78,743
763,654
1,759,077
54,366
1,704,711
16.45%
2,522,731
ADMINISTRATIVE AND
OPERATING EXPENSES
FINANCING EXPENSES
LESS :
GROSS PROFIT
78,743
10,460
68,283
378,382
3,422
374,960
36.22%
446,665
786,657
10,460
10,460
257,350
2,986
254,364
30.95%
267,810
597,512
Asian Journal of Case Research (AJCR)
111
110,345
43,260
15,322
23,443
23,879
12,033
MEDICAL
4,342
450,000
EX-GRATIA
SOCSO
213,544
1,500
800,000
DIRECTOR FEES
50,444
32,214
DEPRECIATION
SECURITY CHARGES
134,445
CONSULTANCY FEES
SECRETARIAL FEES
20,000
2,313
54,333
1,500
24,553
12,473
12,233
41,222
98,054
150,000
109,484
400,000
32,533
76,332
15,000
RM
AUDIT FEES
ADMINISTRATIVE EXPENSES
2008
RM
31/03/2009
2,397
54,221
1,500
19,754
10,432
35,666
14,223
12,776
50,413
150,000
90,221
400,000
32,111
78,554
15,000
RM
2007
1,984
52,544
1,500
15,322
7,563
12,333
10,532
9,743
48,029
150,000
80,223
400,000
30,122
53,445
10,000
RM
2006
1,231
43,901
1,500
10,223
8,943
11,033
10,399
42,075
150,000
75,332
400,000
29,333
48,921
12,000
RM
2005
996
40,299
1,500
32,111
7,244
12,366
5,477
38,413
150,000
79,244
400,000
23,511
45,922
12,000
RM
2004
234
2,355
1,500
8,794
1,112
1,322
7,120
50,000
9,083
80,000
2,344
5,000
RM
2003
132
1,211
1,500
10,344
907
400
2,787
50,000
7,833
50,000
2,311
5,000
RM
2002
SCHEDULE I
4,022
112
2,565,655
3,745,388
2,401,339
12,044
985,333
86,211
21,222
320,112
5,206
3,943
43,666
854,065
69,222
18,344
300,238
4,320
1,222
2,174,417
53,586
138,665
54,686
144,093
76,433
76,444
8,646
RM
2008
12,963
RM
2009
112,652
50,543
56,466
5,643
RM
2007
97,420
49,754
43,133
4,533
RM
2006
FINANCING EXPENSES
23,433
43,233
1,013,432
89,432
23,422
381,332
1,332
3,242
FINANCING EXPENSES
UPKEEP OF OFFICE
1,231,119
TRAVELLING
42,111
98,343
STAFF TRAINING
389,333
STAFF REFRESHMENT
2,456
STAFF INCENTIVE
56,004
51,233
4,771
RM
2005
2,096,535
24,065
983,421
70,962
15,221
150,622
5,310
2,043
54,366
50,133
4,233
RM
2004
1,704,711
18,053
650,245
50,311
10,943
120,111
3,422
2,543
2003
3,422
3,422
RM
254,364
10,933
34,855
16,432
34,221
23,222
622
1,654
2,986
2,986
RM
2002
SCHEDULE II
374,960
12,311
78,422
24,054
28,644
59,333
1,221
2,111
2009
RM
(1,818,137)
ADJUSTMENTS
Depreciation
Bank Charges
Bank Overdraft Interest
Term Loan Interest
644,452
12,963
76,444
54,868
(1,029,410)
Trade Receivables
Other Receivables, Deposit and Prepayments
Trade Creditors
Other Payables & Accruals
Cash generated from operations
Bank Charges
Bank Overdraft Interest
Term Loan Interest
(1,115,931)
392,068
2,647,462
54,927
1,978,526
(12,963)
(76,444)
(54,868)
1,834,251
804,841
(578,443)
(578,443)
113
(13,088)
(13,088)
213,310
(421,372)
Cash at end
(208,062)
289,820
45,241
(543,123)
(208,062)
114
APPENDIX B
PALM HAUL SDN BHD
CRUDE PALM OIL (CPO) - TONNE
FROM 2007 TO 2009
MONTH
2007
2008
2009
July
August
September
October
November
December
January
February
March
April
May
June
432
512
583
698
629
733
498
628
981
921
898
1 091
983
1 023
1 139
1 209
912
893
1 391
891
998
1 011
1 092
1 492
1 982
1 891
1 983
2 191
988
911
781
1 891
2 011
-
8 604
13 034
14 629
2007
2008
2009
10 822
55 634
23 887
40 988
34 112
52 099
31 840
45 210
102 998
130 067
117 565
94 111
139 584
104 353
101 394
139 221
104 922
130 982
104 211
187 202
123 443
143 844
194 287
129 483
209 432
187 344
132 921
209 482
307 211
429 483
259 421
199 556
-
645 222
1 567 554
2 064 333
115
APPENDIX C
Fleet Management System
Star On-line-Tuesday June 9, 2009
Movement tracker: An FMS device installed in the cab of a CPO tanker has saved thousands for at
least one transport company. The company, which has been using the Fleet Management System
(FMS) since February last year to track the route of its drivers, has managed to resolve the CPO
theft problem.
Its commercial director Jimmy Sidhu said the introduction of the FMS had enabled the company to
save RM36,000 a month, as previously the transporter had to bear the cost if there was a shortage
of CPO when their oil tankers reached the various refineries.
Sidhu said the firm also had to deal with a 10% increase in fuel cost if some of these oil tankers head
for the hot spots, normally located in the suburbs.
The FMS system allows us to track rogue drivers. So far, we have traced 108 cases of CPO theft
and terminated the services of 18 drivers, Sidhu told the Starprobe team in an interview.
The company, which has a fleet of 80 oil tankers, transports an average of 3,000 tonnes of CPO
daily. The FMS is a modified system from British company Minorplanet plc and is supplied locally
by CSE Multimedia Technologies Sdn Bhd.
The system marks the date and time the tankers enter a hot spot and how long they stop at rest areas
and eating shops. Sidhu said the system also allowed the company to locate more than 70 hot spots
in the peninsula where CPO siphoning was rampant.
There is a panic button installed near the drivers seat in every oil tanker which enables the
driver to alert headquarters if the tankers are hijacked or experiencing any difficulty. When our
oil tankers go off the original route and head to one of the hot spots, the FMS system will detect
it, so the drivers know the risks they are taking if they work with syndicates to steal CPO, said
Sidhu. He urged the Government to give incentives to transport companies to curb CPO theft such
as exemption from vehicle insurance or road tax.
116
APPENDIX D
Fleet Management System provides innovative technology solutions that enables
companies to gain real-time control of their distribution processes, including
customer deliveries, vehicles, and drivers. Customers can take back control of the
traditional black hole in distribution. For more information, please refer to the
following website.
http://www.fleetmanagementsystems.com.au/index.php?action=aboutus/Who
WeAre
117
APPENDIX E
Approximate Temperature Ranges Required During the
Transportation Chain
The following Table merely constitutes a rough estimate of appropriate temperature
ranges. Temperatures may deviate from these values, depending on the particular
transport conditions.
Table 1 Temperature ranges
Designation
Temperature range
Loading temperature
Favourable travel temperature
40C
30 - 35C, not < 25C
approx. 35C
41 - 31C
approx. 35C
49 - 50C, not > 55C
approx. 50C
Solidification temperature
Pumping temperature
The rate of heating should be no greater than 8C/day. The travel temperature
must be complied with as far as possible during transport, to minimise oxidation
processes. Towards the end of the voyage, the temperature of the oil must
be slowly raised to the appropriate pumping temperature. Unless otherwise
recommended by the consignor, the following plan may, for example, be used for
heating (gradual heating to prevent singeing, which causes the colour to darken
and value to be lost due to rancidity):
Table 2 Heating plan
118
APPENDIX F
Salary Guide for Truck Drivers
An extract from the Malaysian Industrial Development Authoritys (MIDA)
website displayed salary rates for lorry and truck drivers as follows:
Table 1 Salary rates for lorry and truck drivers (MIDA)
Non-executive position
Year
2006
2007/8
2009/10
Minimum
Maximum
RM
628
734
778
1,676
1,692
1,770
119