C A S E

Asian Journal of Case

Research
4(S): 95 119 (2011)

The Pirates of the Silverland (Palm Oil Piracy)

AINI AMANa*, AZBIR ABU BAKARb, NIK NAZLI NIK AHMADc,
SHARIFAH KHADIJAH ALHADDADd, SHUGUNA NAGALINGAMe
AND SYAMZURIZHAM ZAINULb

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

School of Accounting, Faculty of Economics & Business, Universiti Kebangsaan Malaysia

A member of the Malaysian Institute of Accountants (MIA)
c
Kulliyyah of Economics & Management Sciences, International Islamic University Malaysia
d
Faculty of Accountancy, Universiti Teknologi MARA
e
School of Business, HELP College of Arts and Technology
*
Corresponding author: E-mail: aini@ukm.my
a

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Asian Journal of Case Research (AJCR)

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.

The Prevalence of Oil Piracy

A major problem faced by transport companies is oil piracy. The drivers of the
palm oil tankers are usually involved in siphoning the CPO and selling them to
syndicates. As reported in Starprobe (9 June 2009), approximately 1% of local
production of CPO, i.e. 0.18 million metric tonnes valued at RM325 million,
are lost annually to these oil pirates. CPO theft in the country has come to a
critical point. Transport companies are typically held responsible for such thefts
as they usually take place under their watch and these companies are bound to
compensate the refineries for such losses. According to a report (Starprobe, 9
June 2009), Crude Palm Oil worth billions of ringgit is being siphoned off by
syndicates while being transported from mills to refineries. The culprits involved
in the racket include tanker drivers, depot operators and transporters. The report
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The Pirates of the Silverland (Palm Oil Piracy)

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).

COMPANY HISTORY AND OVERVIEW

Palm Haul Sdn. Bhd. (PHSB) was a small and medium sized enterprise in the
CPO transportation business located in Taiping, Perak. Established in 2002, it had
about 200 employees, out of which, 80% were in operations, primarily, drivers
of the companys customised tankers. PHSB owned a fleet of 80 tankers, most of
which, were fully depreciated. The company started with an initial capital outlay
of RM2 million, and maintained an average annual turnover of RM25 million.
Despite its turnover level, PHSBs annual gross profit margin hovered around
only 10% over the last few years, which was reasonably below the industry
average of 30%.
The company was being managed by En. H. Rossly, CEO and son-in-law
of its founder, Datuk S. Najeed, a retired chief engineer from the Ministry of
Transport, and PHSB Chairman. In addition to Rosmee, the latters daughter,
who was PHSBs accountant cum finance director, the companys Board also
consisted of two senior executives who were in charge of human resource and
administration respectively. Though Rossly was in charge of the companys
overall operations, key decisions remained the prerogative of his father-in-law
due to the latters established contacts with the Ministry and the refinery business
that were scattered throughout Peninsular Malaysia. The following Figure 1
provides the organization chart for PHSB.

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Asian Journal of Case Research (AJCR)

Figure 1 PHSB organisation chart

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.
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The Pirates of the Silverland (Palm Oil Piracy)

In turmoil, Rossly pondered on how he was to approach the task. I think I

will need some help here, he thought. He then remembered that he had a friend
who was a management consultant. Rossly decided to call upon the services of
Mukhriz Mohd to assist him with the task. He called his friend and explained the
situation. Mukhriz requested that Rossly called for a meeting of his key personnel
to brief both Rossly and him on the current position in PHSB. Rossly called for an
executive meeting on the same afternoon of 13 June 2009.
The meeting was attended by Rosmee Rossly (Accountant cum Finance
Director), Ramli Ali (Human Resource Manager), Aliah Ibrahim (Administration
Manager), Mukhriz Mohd and Rossly. Rossly quickly introduced Mukhriz to his
team, and then proceeded to brief his team of his meeting with Datuk Najeed.
Rossly had this to say:
Rossly

: Good afternoon everyone. Thank you for coming

at so short a notice. Before I start, let me firstly
introduce Mukhriz Mohd. He is a university
friend of mine. He currently runs a management
consultancy firm and I have invited his to assist
us.
This morning I was summoned to Datuk Najeeds
room. Oilene, one of our major customers had
just called him this morning complaining about
the quality of our consignments to their refineries.
Apparently, the CPO we deliver were either
delivered short or contaminated with water
or sludge. Oilene is finding it very difficult to
process the CPO thereafter as the contamination
is affecting their processing plant. Oilene claims
that consignments from PHSB were causing more
problems than other consignments by their other
transporter, Tiger Oils Transporters. The General
Manager of Oilene, Gary Tan told Datuk Najeed
that Oilene had to shut down the plant to clean
out the sludge almost on a weekly basis and this
was affecting their delivery timelines as well as
the quality of the oil they produced. To top it,
there had been many occasions our consignment
delivered did not tally with amounts listed on the
delivery orders. These consignments were short
delivered.

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Asian Journal of Case Research (AJCR)

So, Gary had indicated to Datuk Najeed that

if the situation does not improve over the next
month, they would be considering not renewing
the contract this June. If Oilene does not renew
their contract, PHSBs future is at stake. They are
one of our major clients. If we lost their custom,
we would be in trouble.
Apart from that, Rosmee your father also had
a look at the 1st quarter 2009 results that you left
on his table last night. He is not a happy man.
He is demanding to know why PHSBs results
were so bad this quarter as compared to the
same period last year. Boy, he was furious! He
had demanded that I come up with a report that
identified the major issues that had lead PHSB to
this situation.
Were in a quandary. Thats why I invited Mukhriz
to assist us. Hes experienced in preparing such
reports. I think well have to bring Mukhriz up to
speed on PHSBs operations and current position.
Rosmee, can you start off the meeting by giving a
rundown on your area of responsibility and your
views on your fathers reaction upon reading your
report?

Rising compensation to CPO shortfall and low operating margins

Rosmee provided a brief on her area of responsibility.
Rosmee : Good morning everyone. Let me walk you
through the last quarters performance. I believe
I can identify why Datuk Najeed was upset this
morning. A review of PHSBs first quarter of 2009
financial statements shows a significant amount
of compensation being paid out. This expense is
related to the total payments made by PHSB for
the shortage of CPO when the tankers arrived at
the respective refineries.
As you can see, PHSB has to compensate the
refineries for the amounts that we short- deliver
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The Pirates of the Silverland (Palm Oil Piracy)

to them. The tankers are loaded with the amounts

stated in the delivery orders. However, by the time
the tankers arrive at the refineries, the quantities
delivered are short. This has been happening
quite often as late.
Rosmee then directed the team to the companys two-year financial reports
that she had ready with her to highlight her concerns on the compensation payments
(Appendix A). She specifically pointed out that the compensation payments (staff
salaries and allowances) had been double in 2009.
Rosmee : Id appreciate your opinion on this issue. I cant
pinpoint the cause or reason.
Ramli Ali : I think it is linked to the need for some quick
cash by the drivers during that particular period.
What do you all think?
Aliah

: Maybe. Maybe it has to do with escalating

personal expenses during the year-end. You know
that practically all the major festivities occur
during this period. Maybe thats the reason.

Rosmee : Oh! I didnt think of that. That could well be the

reason. How can we address this issue then?
Ramli Ali : I think I have a possible solution. Ill present it
later.
This revelation caused enormous concern to Rossly as he knew Datuk S.
Najeed would be distressed over the issue. He would demand that this shortcoming
be nipped in the bud before it tarnished PHSBs reputation with the label of not
being a reliable transport company. Judging by PHSBs six-year performance, the
problems escalated because no controls had been implemented thus far to plug the
problem. The significant amount of compensation costs had significantly offset
the companys profit margin in the last quarter to an all-time low.

High Oil Pilferage

Rossly addressed the issue of high oil pilferage.
Rossly

: OK. Thank you very much, Rosmee, for your

briefing. I think you need to understand current
operations to appreciate what Rosmee is trying
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to highlight to you. So Im going to brief you on

the CPO transporting activities. A fair percentage
of the CPO that is loaded onto our tankers at the
mills never arrived at the destinations. Thousands
of metric tonnes either end up missing, with the
tankers not arriving at the refineries, or when
they (tankers) eventually do, and the CPO is
transferred, the quality of the oil is compromised.
Many of the tankers that do not reach the
refineries are, instead, found abandoned by
the roadside, and empty, with the drivers also
missing.
We also have problems with our insurers. PHSB
is insured against Goods-in-Transit and, with
the many cases of tankers being abandoned, our
insurer, Allianz Insurance, is now threatening to
increase the insurance premiums.
Aliah

: So, how are we to address this problem?

Rossly

: I read this report just the other day. The Siddhu

Brothers Group, a transporter of CPO, just like us,
was reported to have saved thousands of ringgit
by using the Fleet Management System. (Please
refer to Star Online, 9 June 2009, Appendix F)
The system seems like a possible solution to our
problem. Id like to find out more about this system.
Rosmee, can I task you to collect information on
the system?

Rosmee : Sure. Ill get you the information within the next
couple of days.
Rossly

: Thanks. Oh! By the way, I believe MPOB

is thinking of making it compulsory for all
transporters of CPO to be licensed and equipped
with the Fleet Management System, so I guess it is
inevitable that we find out the cost.
Id like to also inform you that the quality of the
CPO can be possibly compromised in other ways
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The Pirates of the Silverland (Palm Oil Piracy)

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?

High Abseenteeism/ Driver Shortage

Ramli started his presentation by stating that the problem that PHSB was faced
with was not merely limited to smaller transport companies. With greater attention
to operate closer to just-in-time, the transport companies were pressured to deliver
CPO to the refineries on time.
Ramli Ali : The greatest challenge facing the transport
industry is driver shortage. This is compounded
by the fact that most companies require drivers to
be on the road for days at a time. And of course,
theyll be tired after their stint.

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Asian Journal of Case Research (AJCR)

The irregular routes and the days away from

home are difficult for many drivers. Another
issue which I think is a problem is the matter of
the remuneration package that these drivers are
getting from PHSB.
Ramli went on to explain that, since PHSB was a small family-owned
company, it was unable to provide an attractive remuneration package to the
drivers. The bigger players in the market, on the other hand, were able to draw
drivers into their employ with benefits and bonuses, which smaller companies
were unable to match.
Ramli Ali : Rosmee! Coming back to our earlier discussion
of high pilferage during the months of November
January, I feel that we can mitigate the problem
by declaring year-end bonuses to the drivers. After
all, if were spot-on on the reason for the pattern
of pilferage, then we should be able to understand
that the drivers are compelled to pilfer because
they need the money.
By giving them bonuses, well be able to aid the
drivers in meeting their year-end expenses, thus
reducing the temptation to pilfer from our stock.
Im quite sure the bonuses will be much lower
than the compensation that we are paying now to
the refineries. Itll help us with the retention of
our drivers too. Theyll not be easily poached by
the bigger companies then.
Together with the Vehicle Tracking System that
Rossly is proposing to purchase, Im confident that
well be successful in minimising the pilferage.
Rossly

: You think so? Worth looking into it, though.

Ramli, can you look into the matter of a good
compensation package for our drivers? Look
at the industry players and what they give their
drivers. See what we can do for our drivers.
We may not be able to match the big players, but,
at least, we can make it more difficult for them
to poach our drivers indiscriminately. Can you
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The Pirates of the Silverland (Palm Oil Piracy)

quickly come up with a proposal?

Ramli

: Sure. Ill put my feelers out to gather some

information on the industry norm from the
Malaysian Industrial Development Authoritys
(MIDA) homepage. Ill come up with a proposal
for a remuneration package for our drivers soon.
Give me a couple of days.

Rossly

: Thanks, Ramli. Now, lets hear from Aliah. Aliah,

can you brief us on the administration of PHSB?

High Cost of Maintenance

Aliah Ibrahim was responsible for logistics management of PHSB. The
maintenance of the tankers came under her purview.
Rossly

: Aliah, I noticed, from Rosmees presentation

earlier on the financial reports, that our
maintenance cost for the upkeep of vehicles is
pretty highfor the previous quarter! Thats quite
high! Any particular reasons? It looks like it could
have contributed towards our low profit margin
last quarter.

Aliah

: Im not so sure, Boss. I know the price of diesel

has gone up many folds in the past few years.

Rossly

: I know that. Im not talking about the fuel cost. I

understand that its high. My question is why our
maintenance cost is high.

Aliah

: Im sorry. I dont know why! My time is occupied

with the daily need to perform vehicle and driver
allocation and scheduling. This is still being
done manually. Its time consuming! Every time
a driver does not turn up for work, Ill have to
reschedule the delivery route and the allocation of
drivers. I dont have the time to schedule regular
maintenance on the tankers!

Rossly

: What! You mean to say our vehicles are not

serviced regularly?
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Asian Journal of Case Research (AJCR)

Aliah

: No. I wait for the drivers to complain before I

send the tankers for service and repairs.

Rossly

: How is it that your time is tied up with the

scheduling? You dont have time to do anything
else? What about your other administrative
duties?
And, back to the issue of maintenance, havent
you heard of prevention is better than cure or
a stitch in time saves nine? Itd be cheaper for
us to carry out preventive maintenance rather
than wait for the tankers to break down before
repair or replace the spare parts. No wonder our
maintenance costs are high. I want you to stop
this practice immediately!

Aliah

: Im already hard pressed for time as it is. I will

need additional assistance.

Rossly: Before I bring in help, can you please identify your

bottlenecks? I want you to look into the matter
and resolve it as soon as possible. Come up with
suggestions. We will then look at it together, ok?
High vehicle maintenance is another issue that confronts transport companies.
Many of the transport companies operate tankers well past their useful life. It is a
fact that the tankers used to transport CPO have to be customised and, therefore,
cost more than that of a normal tanker. Moreover, the lead time for the delivery of
new tankers have to be planned well ahead due to the customisation needed. With
the transport companies own reluctance to replace their tankers promptly, they
consequently face unnecessary high vehicle maintenance costs.
These factors put the transport companies under severe pressure to return
positive bottom-lines. The result is that an increasing number of transport
companies are showing narrower gross profit margins, with some companies
opting out of the business. Companies that want to continue in the industry have
to take a long hard look at their strategic plans, in order for them to successfully
manage their business in the future.

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

OTHER PAYABLES & ACCRUALS

TERM LOAN - PAYABLE WITHIN 12

MONTHS

BANK OVERDRAFT

PROVISION FOR TAXATION

TRADE CREDITORS

765,332

500,000

548,088

6,664,869

281,378

289,820

OTHER RECEIVABLES, DEPOSITS AND

PREPAYMENTS

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

PROPERTY, PLANT & EQUIPMENT

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

Palm Haul Sdn Bhd

(Incorporated in Malaysia)

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

The Pirates of the Silverland (Palm Oil Piracy)

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

TERM LOAN - PAYABLE AFTER 12

MONTHS

DEFERRED TAXATION

803,432

7,155,563

3,337,426

LONG TERM LIABILITIES

5,155,563

2,000,000

RETAINED EARNINGS

2,000,000

4,047,984

2,366,620

8,478,289

SHARE CAPITAL

FINANCED BY

NET CURRENT ASSETS

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

Asian Journal of Case Research (AJCR)

RM

RM

RM

2007
RM

2006
RM

2005

RM

2004

109
29,533
612,238

DEPRECIATION

4,005,793

PETROL

LICENSE, PERMIT AND

INSPECTION

5,565,383

39,660

UPKEEP AND
MAINTENANCE

282,380

8,033,421

SALARIES AND ALLOWANCES- DRIVERS

COMPOUND AND PENALTY

2,064,333

INSURANCE & ROAD TAX

1,060,513

COMPENSATION

264,412

CLEANING

TYRES AND TUBE

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

24,876,333 20,433,865 19,322,443 17,555,333 16,084,453 15,334,321

SPARE PARTS

LESS: DIRECT COST

TURNOVER

2008

31/03/2009

FOR THE YEAR ENDED 30 JUNE

INCOME STATEMENT

Palm Haul Sdn Bhd

(Incorporated in Malaysia)

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

22,804,989 17,060,288 15,559,919 13,480,386 13,339,648 12,811,590

NET PROFIT / (LOSS) FOR

THE YEAR

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

EMPLOYEE PROVIDENT FUND

GIFT & DONATION

GENERAL & LIFE INSURANCE

LEGAL & DOCUMENTATION

MEDICAL

PRINTING & STATIONERIES

4,342

450,000

EX-GRATIA

SOCSO

213,544

ELECTRICITY & WATER

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

FOR THE YEAR ENDED 30 JUNE

ADMINISTRATIVE AND OPERATING EXPENSES

Palm Haul Sdn Bhd

(Incorporated in Malaysia)

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

The Pirates of the Silverland (Palm Oil Piracy)

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

TERM LOAN INTEREST

76,433

76,444

8,646

RM

2008

12,963

RM

BANK OVERDRAFT INTEREST

2009

112,652

50,543

56,466

5,643

RM

2007

97,420

49,754

43,133

4,533

RM

2006

FOR THE YEAR ENDED 30 JUNE 2009

FINANCING EXPENSES

23,433

43,233

1,013,432

89,432

23,422

381,332

1,332

3,242

BANK CHARGES AND INTEREST

FINANCING EXPENSES

UPKEEP OF OFFICE

1,231,119

TELEPHONE & FAX

TRAVELLING

42,111
98,343

STAFF TRAINING

389,333

STAFF REFRESHMENT

STAFF SALARIES AND ALLOWANCES

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

Asian Journal of Case Research (AJCR)

The Pirates of the Silverland (Palm Oil Piracy)

Palm Haul Sdn Bhd

(Incorporated in Malaysia)
CASH FLOW STATEMENT
AS AT 31 MARCH 2009

2009
RM

CASH FLOWS FROM OPERATING ACTIVITIES

Profit/(Loss) for the year before taxation

(1,818,137)

ADJUSTMENTS
Depreciation
Bank Charges
Bank Overdraft Interest
Term Loan Interest

644,452
12,963
76,444
54,868

Operating Profit before working capital

(1,029,410)

WORKING CAPITAL CHANGES

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

Net Cash Flows From Operating Activities

804,841

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment

(578,443)

Net Cash From Investing activities

(578,443)

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Asian Journal of Case Research (AJCR)

CASH FLOWS FROM FINANCING ACTIVITIES

Term Loan

(13,088)

Net Cash From Financing Activities

(13,088)

NET INCREASE/(DECREASE) IN CASH FLOWS

Cash at beginning

213,310
(421,372)

Cash at end

(208,062)

Cash at end represented as follows:

Fixed Deposits
Cash at Bank & In Hand
Bank Overdraft

289,820
45,241
(543,123)
(208,062)

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The Pirates of the Silverland (Palm Oil Piracy)

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

PALM HAUL SDN BHD

COMPENSATION COST - RM
FROM 2007 TO 2009
MONTH
July
August
September
October
November
December
January
February
March
April
May
June

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

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Asian Journal of Case Research (AJCR)

APPENDIX C
Fleet Management System
Star On-line-Tuesday June 9, 2009

Firm tracks drivers to curb palm oil theft

By ELAN PERUMAL and STUART MICHAEL
PETALING JAYA: The theft of crude palm oil (CPO) in the country is alarming, forcing industry
players to come up with their own mechanism to contain the problem.
The Sidhu Brothers Group, which has been in the business of transporting CPO for more than 30
years, seems to have come up with a formula to deal with the siphoning of CPO which takes place
between the times the commodity is transported from the mill to the refinery.

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.

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The Pirates of the Silverland (Palm Oil Piracy)

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

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Asian Journal of Case Research (AJCR)

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

1st day heat to 26.5C, not < 26C

2nd day heat to 29.5C
3rd day heat to 38C
4th day heat to 46C
5th day heat to 49 - 50C and keep at 50C without fail to port of discharge. The
temperature must never be higher than 55C, since palm oil rapidly becomes rancid.
Tank wall heating must be reduced on unloading.

Too great or rapid an increase in temperature entails considerable losses in quality.

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The Pirates of the Silverland (Palm Oil Piracy)

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

Lorry and truck driver

Lorry and truck driver
Lorry and truck driver(calculated)

2006
2007/8
2009/10

Minimum

Maximum
RM

628
734
778

1,676
1,692
1,770

Other Employment Benefits

Apart from salaries, other employment benefits can include medical, social
security, annual bonus, accident protection, pension scheme and the Employer
Contribution Fund. An annual leave of 10 to 14 days is typically provided together
with an annual salary increment, calculated based on a certain percentage of the
basic salary based on performance. These vary between companies.
Source: Persekutuan Majikan Malaysia (MEF) - www.mef.org.my

119