IOI Corporation announced that within the next few months, it will be undergoing an audit supervised by one of its key customers and assisted by a reputable international labour rights consulting group. The names of the key customer and labour rights consulting group were not disclosed.
The audit will cover a broad spectrum of IOI’s operating units and will seek to ascertain any non-compliance with labour policies or unsatisfactory working conditions faced by the group’s 16,000 workers in Malaysia. We believe over 90% of the workers are foreigners.
This was in response to Finnwatch’s report published on 30 June 2021. Finnwatch conducted an investigation through video interviews with seven workers using a mobile phone connection. The interviews were then translated by the complainant. There were also photographs of employees’ living conditions.
IOI said that Finnwatch’s report failed to differentiate between recruitment fees and collection of illegal monies from the workers at their source country by an unknown person, who is unverified and undocumented.
IOI added that the reimbursement of illegally collected monies would only encourage further collection of money from the workers and could violate anti-corruption and anti-bribery regulations.
The seven workers are from India and based at Makassar Estate, which is one of IOI’s 103 plantation operating units in Malaysia. Collectively, IOI employs 16,000 workers.
Finnwatch’s complaint comes after a recent petition to the US Customs and Border Protection (CBP) by migrant worker and labour rights activist Andy Hall on alleged forced labour conditions at IOI’s operations in Malaysia.
A ban by the US CBP, if any, would not have a significant earnings impact on IOI. The USA accounted for only RM204.9mil or 2.6% of IOI’s revenue of RM7.8bil in FY20.
However looking at the experiences of several plantation companies, we believe that a ban would hurt IOI’s credibility and reputation. It would take time for the US CBP to lift the ban after it is imposed.
A silver lining is that IOI will be auditing its plantation operation units in Malaysia soon. Hence the group can take corrective action after the audit is completed. This should help alleviate future complaints and provide assurances to IOI’s key customers.
We maintain HOLD on IOI with a fair value of RM4.20/share.
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