It’s Felcra, not Felda — time to get it right


Felcra is still making a profit despite being marginal, says Mohd Nageeb (Source: MPOA)

There is no denying that when one thinks of Felcra Bhd, one is reminded of the Federal Land Development Authority (Felda). More often than not these days, such reference is more of an insult than a compliment.

It is no wonder that Felcra’s newly appointed chairman Datuk Mohd Nageeb Abdul Wahab has made it his priority to conduct a management audit. He wants to distance the state-owned agency from other scandal-plagued entities like Felda and Lembaga Tabung Haji.

“The whole idea is to clear external perceptions that we are another GLC (government-linked company) that is not doing well and there is a lot of hanky-panky business going on.

“If we do a management audit, we can uncover it. If everything is alright we can confidently say that there is nothing wrong with us.

“We will be very specific, we are going to get independent professionals to do it. It is not done internally. The board is very clear about the future direction of Felcra,” he said at the agency’s first press conference in years.

As a plantation industry veteran, Mohd Nageeb wants to make Felcra big, even to the efficiency level of palm oil giants like Sime Darby Plantation Bhd.

But to do that, the agency — which was largely created to help the poor — needs to undergo a major revamp.

Boardroom Changes

Mohd Nageeb’s appointment as Felcra chairman to replace controversial Kinabatangan MP Datuk Seri Bung Moktar Radin was the first step taken by the new Pakatan Harapan government to revive the state-owned enterprise.

Mohd Nageeb, with 39 years of experience in the plantation industry, is part of Putrajaya’s new intent to exorcise GLCs of politicians and appointed heads with links to the previous ruling government.

His credentials include his previous post as Sime Darby Plantation Sdn Bhd senior VP and plantation head, as well as the current CEO of the Malaysia Palm Oil Association.

Felcra has also appointed chartered accountant Mohd Nazrul Izam Mansor as the CEO. His 20-odd years in the corporate world will help him revive the badly tainted company.

“I will give my full support and commitment to restore Felcra. As the chairman has said, it is not on a good footing and we hope to bring the company to a higher ground,” the 43-year-old said.

Just when you think Malaysia has a brain drain problem, Mohd Nageeb said Felcra is expected to welcome four other members to its all-professional board soon.

Realigning Priorities

Felcra’s situation isn’t as bad as claimed, said Mohd Nageeb.

He added that Felcra is still making profit despite being marginal. What is more important is that it does not have any borrowings.

Felcra’s main objective is to give dividends to the 120,000 settlers that live on its land. The problem with Felcra, though, is cost.

Instead of channelling its income to its stakeholders or investing in relevant businesses, the plantation-based company found itself in unfamiliar territory, developing a luxurious condominium in the heart of Kuala Lumpur (KL) and owning a football club.

Some RM200 million have been pumped into the development of the Menara Felcra project. Another RM8 million is needed annually to keep the Felcra Football Club alive.

To address these misgivings, Mohd Nageeb said he will consolidate some of the projects and axe the non-profitable subsidiaries.

“We will relook into all of our subsidiaries. We may close those that are non-performing such as our property business. We will look back at whether we should be in property when our core objective is on social obligation.

So far, we have spent RM200 million on Felcra Properties Sdn Bhd, but we have yet to receive any income,” he said.

Felcra’s subsidiaries are involved in a wide range of sectors including real estate, sports, education and training, fertilisers and livestock.

Mohd Nageeb said he plans to dispose of units that are not in line with the company’s social mission.

“Our fertiliser unit is making money. That is something we plan to keep. Then, our livestock division has potential because the government is encouraging GLCs to look at food security, so that is another area where we see a potential for growth.

“We are also considering paddy. That is another area that will provide food security to the country, so we want to be part of that,” he said.

Diversifying Crops

Capitalising on the new government’s focus to enhance food security, Mohd Nageeb said Felcra will optimise its 40,000ha landbank.

Efforts are currently underway to convert rubber-planted areas with oil palm. Selected areas will be earmarked with other crops such as bamboo and paddy.

“We are looking at them. The problem is, for horticulture crops, you need a small area — 40,000ha is huge. But, we are still reviewing. We have not finalised the options,” he said.

Expansion into other crops would cushion the impact of falling crude palm oil (CPO). Mohd Nageeb’s industry knowledge tells him that the current stockpile will not boost prices anytime soon.

“The current CPO price of RM2,200-RM2,300 per tonne is still profitable, but the margins are getting depleted. But with the current CPO stockpile in the market right now, we don’t see any uptrend in prices anytime soon…unless something wrong happens,” he said.

Felcra dividends are based on yields produced by settlers. When prices are low, so are the dividends.

“The only way to address this is to manage things efficiently…by bringing down operational costs and improving production,” Mohd Nageeb said.

It is easier said than done. Theories are based on logics. But with a giant like Felcra, a turnaround will not be simple.