PPB Group Berhad - Company Profile, Information, Business Description, History, Background Information on PPB Group Berhad

17th Fl. Wisma Jerneh
38 Jalan Sultan Ismail
50250 Kuala Lumpur

Company Perspectives:

Mission Statement: Striving continually to strengthen our position as a market leader in our core businesses and expand into other related activities to increase shareholder value.

History of PPB Group Berhad

One of Malaysia's largest companies, and one of the largest conglomerates in the ASEAN market region, PPB Group Berhad has established diversified operations ranging from food to cinemas to water and wastewater engineering. Foods remain PPB's historic and primary business, accounting for 90 percent of the company's revenues of M$7.86 billion ($2 billion) in 2002. More than 72 percent of those sales are generated through the company's vertically integrated edible oils, especially the oil palms business, through publicly listed subsidiary PPB Oil Palms (PPBOP). Sugar refining and cane plantations, the company's original business, added 9 percent to sales, while grain and feed milling, through the company's majority shareholding in FFM Bhd, another publicly listed subsidiary, added 8 percent to sales. The mature Malaysian market, coupled with strict price control on basic food items, has encouraged PPB to seek international growth for its food operations, and the company has entered Indonesia, Vietnam, Singapore, and other countries in southeast Asia and elsewhere in the world. Other operations under the PPB umbrella include businesses involved in packaging, livestock farming, and cinemas, through Golden Screen Cinemas. Despite its continued focus on foods, PPB is in the process of reinventing itself for the new century, targeting the water and wastewater engineering market for future growth. The company, through engineering subsidiary Chemquest, also publicly listed, has acquired a major share of the consortium holding the concession for the Sungei Semenyih Dam and Water Treatment Plant, and has plans to enter the Chinese market in 2003. Although PPB is itself traded on the Kuala Lumpur stock exchange, the company is controlled by the Kuok Group, one of the region's top conglomerates.

Immigrant Trading Origins in the Early 20th Century

PPB's history paralleled the rise of the Kuok family in Malaysia through the 20th century. In 1909, Kuok Keng Kang immigrated to then-British controlled Malaysia from his home in China's Fujian province. Kuok began trading rice, sugar, and flour, and formed his own company, Tong Seng & Co. Kuok's business flourished, despite his inability to speak English. Yet from the start, Kuok had taken care to build strong ties with the Malay community--which, although the majority population, were soon to be overshadowed economically by the ethnic Chinese population there.

Like most of the country's Chinese immigrants, Kuok placed a high value on education, sending his three sons, Robert, Philip, and William, to study overseas. Robert, born in 1927, was sent to Raffles, in nearby Singapore. The outbreak of World War II cut short Robert Kuok's education, however. Nonetheless, at school, Robert Kuok had become friends with Tun Abdul Razak and Tun Hussein Onn, both of whom later became Malaysian prime ministers. Another classmate was Lee Kuan Yew, who became the first prime minister of Singapore after its independence.

Returning home, Robert Kuok joined Mitsubishi, which, among other trading activities, had gained a monopoly on rice imports. The younger Kuok became fluent in Japanese and rose to become head of the rice import operation, while the elder Kuok received a license to act as a wholesaler. Following the war, the Kuoks began supplying foodstuffs to the Japanese prisoner of war camp in the province, which led in turn to the Kuok family gaining control of the wholesale market for essential foodstuffs in their South Johore region.

Kuok Keng Kang died in 1948. Robert Kuok and brother Philip, together with other members of the family, went into business together, forming Kuok Brothers Sdn Bhd. (The third brother, William Kuok, had joined the Malaysian Communist Party and was killed by the British in 1952.) After Philip Kuok turned to politics, Robert Kuok became the force behind the family business--starting the career that was to make him one of Asia's most respected and admired businessmen.

Faced with tough competition in the rice market in the early 1950s, Kuok switched the company's focus to another important commodity, sugar. As he explained to Forbes: "The sugar trade was conducted in English, which put me in a stronger position. I was reading Reuters." Backing his sugar business, Kuok moved to London for a time, where he learned--and mastered--the commodities trading business.

When Malaysia gained its independence in 1957, Kuok's political friendships, as well as the new Malaysian government's economic policies, which encouraged import substitution, enabled the company to grow strongly into the 1960s. The company began acquiring sugar plantations and, in 1959, established its own refinery arm, under Malayan Sugar Manufacturing Company. That company, backed by the Malaysian government, operated as a joint venture with Nissin Sugar Manufacturing and Mitsui Bussan Kaisha, both Japanese companies.

The government's import substitution-based economic policy also led Kuok into another important food commodity, flour milling, and the company founded Federal Flour Mills Berhad (FFM) in 1962. In the meantime, Kuok, who had continued to acquire sugar plantations, stepped up his sugar commodity trading activities through the 1960s. By the end of the decade, Kuok, who at times controlled more than 10 percent of the world's sugar supply, had earned the nickname "The Sugar King."

Founding a New Conglomerate in the 1970s

The Malaysian government faced increasing pressure to establish a more equitable distribution of wealth in the country, where the ethnic Chinese minority controlled most of the country's economic wealth. Kuok, who had shifted the base of his growing and increasingly international business empire to Singapore, had nonetheless maintained his family's close ties in Malaysia. Kuok also favored the distribution of wealth to the ethnic Malay population as a means of ensuring political and economic stability in the country. In 1968, Kuok took the first step toward converting part of his holdings into a "Malaysian" company, forming Perlis Plantations Bhd, which took over the company's Malaysian sugar plantations interests. Perlis Plantations then launched a 50-50 joint venture, Kilang Gula Felda Perlis Sdn (KGFP), to establish a sugar cane mill and refinery complex.

Civil unrest in 1969, accompanied by violent protests against the ethnic Chinese population, brought a new government to power, which instituted a new wave of economic reform designed to promote the emergence of a wealth base among the ethnic Malay population. In response to these reforms, Kuok took Perlis Plantations public in 1972, listing its shares on the then-joint Malaysia and Singapore stock exchange. By then, Kuok's business interests had taken him into a number of new areas, notably hotel and real estate development, under the Shangri-la Hotel group.

Perlis Plantations itself began seeking to diversify in order to reduce its initial reliance on its sugar plantations business. In 1976, the company acquired Kuok's Malayan Sugar Manufacturing Company, thereby becoming a truly vertically integrated sugar concern. That acquisition also gave Perlis a number of secondary acquisitions, with operations and shareholdings in such areas as hotels, packaging, and shipping.

Perlis Plantations continued to serve as a vehicle for much of Kuok's Malaysian business interests, as Malaysian government policies continued to emphasize ethnic Malaya priorities. At the same time, Perlis Plantations itself pursued a diversification of its activities, particularly with its absorption in 1979 of Mineral Securities Malaysia (later Minsec), which controlled the tin mining concern Rahman Hydraulic Tin, a public company since 1973. In 1980, Perlis Plantations added to its mining interests with iron ore specialist South Island Mining Company. Both companies brought Perlis rubber plantation operations, while the Minsec acquisition added property development holdings as well.

Property development took on added importance in the group in the 1980s, with the 1982 acquisition of Tai Yan Realty, which operated especially in the Cheras area of Kuala Lumpur, and the purchase of 34 percent of nationally operating Shaw Brothers in 1983. The Tai Yan acquisition was later renamed PPB Hartabina.

In 1986 the company's property development interests led it into retailing, through the Chujitsu Superstore chain. Over the next decade, the company developed its retail operations into a chain of more than 35 supermarkets. The company also built up a string of discount stores. In 1996, Perlis Plantations formed a joint venture with The Netherlands' Ahold, which sought entry into the Malaysian market, transferring its supermarkets into a new joint venture, Tops Retail (Malaysia). After several years of losses, however, Perlis Plantations sold its 35 percent stake in Tops to Ahold in 2000. In that year, Perlis Plantations shut down its discount store operations as well, exiting the retail market.

Another offshoot of its property development business was a move into cinema operation, after the company formed the joint venture Golden Screen Cinemas (originally Golden Communications) with Hong Kong's Golden Harvest International. That entity grew into Malaysia's largest cinema operator in the 1990s, with 14 cinema complexes, including an 18-screen theater in Kuala Lumpur, the country's largest. Yet the cinema operations were to remain relatively minor for the company, reaching just 1 percent of total revenues by the end of the 20th century.

Instead, Perlis Plantations had found a new area of growth: oil palm plantations. The company's first move into this area--which was to become its major revenue center through the 1990s--came in 1986, when it established a 9,000-hectare plantation under Sarema Sdn Bhd. The following year, Perlis Plantations acquired a 60 percent stake in Sapi Plantations, which added more than 14,000 hectares of oil palm plantations under the company's control. That acquisition, which added refinery operations as well, also enabled Perlis Plantations to move toward becoming a vertically integrated palm oil company.

From Oil Palms to Engineering in the New Century

Perlis Plantations continued to add new business areas at the end of the 1980s and the beginning of the 1990s. In 1987 the company acquired a majority stake in parent Kuok Group's flour operations, FFM. That company, which had gone public in 1982, had itself undergone a diversification, with businesses including animal feeds, livestock breeding, and a commodities brokering operation handling wheat, maize, and soybeans.

In 1987, also, Perlis Plantations took over another piece of the Kuok Group's Malaysian holdings when it acquired the Rasa Sayang Beach Hotels resort, which was later regrouped under Kuok's flagship hotel empire, Shangri-la. The Malaysian wing of that company was listed on the Kuala Lumpur stock exchange in 1992, with Perlis Plantations retaining a major shareholding until 1999, when it transferred its holding to the hotel chain's parent group Shangri-la Asia.

Perlis Plantations continued to add palm oil plantations in the 1990s, with a total of nine plantations in Malaysia by mid-decade. In 1995, the company's growing interest in that market led it to move overseas, with the acquisition of a majority stake in a 10,000-hectare plantation in Sumatra, in Indonesia. In 1997, Perlis Plantations reorganized its Malaysian oil palm plantations business, merging those operations into a single entity, PPB Oil Palms (PPBOP). The company then spun off PPBOP as a public company on the Kuala Lumpur stock exchange, keeping a majority share.

While the company built up its oil palm business--which grew to represent more than 70 percent of the company's total revenues by the end of the 20th century--it also had been investigating other business areas. In 1993, the company made one of its first moves into Indonesia, acquiring latex glove manufacturer PT Healthcare Glovindo. That investment was to prove less than successful, however, and by the beginning of the next year had slipped into losses.

A more prominent extension came with the company's purchase of a 40 percent stake in Chemquest Sdn Bhd, an environmental engineering firm focused on water and wastewater management projects and related areas. In 1998, Perlis Plantations increased its holding in Chemquest to 55 percent, while the Kuok Group took the remaining minority stake. Two years later, Chemquest, through its 25 percent stake in Konsortium Abass Sdn Bhd, won the 30-year concession to operate and manage the Sungai Semenyih Dam and Water Treatment Plant. In that year, Perlis Plantations changed its name to PPB Group.

If Chemquest remained relatively small, accounting for just 2 percent of the company's total revenues in 2002, it became PPB's spearhead for its future transformation. With the maturity of its core Malaysian foods market presenting the company with limited growth potential, PPB adopted a new, two-pronged strategy. On the one hand, PPB intended to internationalize its essential foods businesses, extending operations into new territories, such as Vietnam, Singapore, China, and other ASEAN member markets, a move begun in 1999 with the opening of a flour milling operation in Vietnam under FFM. In 2002, PPBOP boosted its Indonesian position with the purchase of PT Kerry Sawit Indonesia, part of the Kuok Group's Kerry Foods business. The purchase boosted PPB's total Indonesian oil palm plantation holdings past 100,000 hectares.

The second prong of PPB's new growth strategy involved an emphasis on its development into an important environmental engineering and wastewater management player in the region. As Chairman Ong Ie Cheong told the Star: "We will nurture the engineering division through acquisitions and joint ventures. We will tie up with well-known names to enter China. There is enormous growth potential for infrastructure development." The company expected its engineering division to represent as much as 25 percent of its total sales before 2010.

As part of its reorientation, PPB began shedding businesses, including its sale of its share of Tops to Ahold, and its divestment of its Shangri-la holding. The company also announced its intention to shed its money-losing Glovindo division in 2003. Instead, PPB announced a M$350 million investment program that year, with the majority of those funds earmarked for FFM and PPBOP. In 2003, also, the company's Chemquest subsidiary expected to sign a contract to build a sewage treatment plant in China. Although that contract was postponed due to the Severe Acute Respiratory Syndrome (SARS) outbreak that year, the company expected the completion of the contract to provide a springboard for its expansion into China.

Robert Kuok in the meantime remained at the head of one of Asia's largest business empires--with a publicly listed worth of more than $7.5 billion and estimates of the group's private holdings ranging to three times as much and more. PPB, which remained the historic base of Kuok's empire, had itself grown into a major regional conglomerate, with revenues of more than M$7.8 billion ($2 billion) in 2002. The company's willingness in the past to reinvent itself--from sugar to palm oil to environmental engineering concern--pointed the way to continued success in the future.

Principal Subsidiaries: Ampang Leisuremall Sdn Bhd (55%); Astakonas Sdn Bhd; FFM Bhd (54%); Kembang Developments SDN BHD; Kiland Gula Felda (50%); Malayan Sugar Manufacturing Co. BHd; Masurna Trading Co. LTd.; Malaysian Bulk Carriers Sdn Bhd; Perlis Sdn Bhd (50%); PPB Corporate Services Sdn Bhd; PPB Hartabina SDN Bhd; PPB Oil Palms Bhd (55.8%); South Island Mining Co. Sdn Bhd.

Principal Competitors: Wilmar Holdings Pte Ltd.; Goodman Fielder Ltd.; Asia Food and Properties Ltd.; COFCO International Ltd.; Sam Yang Corp.; Golden Hope Plantations Bhd.


Additional Details

Further Reference

User Contributions:

Comment about this article, ask questions, or add new information about this topic: