By ALIFAH ZAINUDDIN / pic TMR FILE PIX
FGV Holdings Bhd, the world’s largest crude palm oil producer, has remained in the red at the start of the year, with a net loss of RM3.37 million recorded in its first quarter ended March 31, 2019 (1Q19), against a net profit of RM1.13 million reported in the previous year’s corresponding period, as a result of the weak crude palm oil (CPO) prices.
The diversified plantation group also struggled with the decline in average selling price of sugar and impairments in its sugar and logistics businesses respectively, cutting revenue by 8.9% year-on-year (YoY) to RM3.28 billion from RM3.6 billion the previous year.
FGV, however, posted improvements in the plantation sector with a net profit that improved by more than half to RM39.83 million from the RM19.46 million that was reported last year.
FGV group CEO Datuk Haris Fadzilah Hassan attributed the better performance to the tightening of procurement process involving capital and operating expenditures, as well as implementing new tasking systems and processes for infield workers.
“These efforts are starting to bear fruit,” Haris Fadzilah said in a statement on Bursa Malaysia today.
He added that other estate and milling transformation initiatives have also shown promising results.
The company also saw a 6% YoY increase in its fresh fruit bunch (FFB) production to 1.05 million MT from 991,000 MT in 1Q18.
FFB yield had also increased to 4.38 MT/ha, up 11% from 3.96 MT/ha in the previous corresponding period.
CPO oil extraction rate showed slight improvement, increasing total CPO production by 14% to 762,000 MT compared to 670,000 MT previously.
Improved production volumes and enhanced operational efficiencies had resulted in lower ex-mill costs by 20% in 1Q19 to RM 1,378 per tonne from RM 1,728 in 1Q18. The sector also benefited from a net reversal of impairments of receivables amounting to RM48 million.
The group’s downstream business also performed better for the period under review. The implementation of the B10 biodiesel mandate, which came into effect in February 2019, led to higher sales.
Additionally, its palm kernel processing business also recorded a higher margin.
Meanwhile, MSM Malaysia Holdings Bhd, FGV group’s sugar business, plunged into the red for the quarter with a net loss of RM3 million against a profit of RM22 million.
The loss was a result of a decline in average selling prices by 11% and 15% in the domestic and industry sectors respectively, as well as a 12% increase in refining cost of RM362 per MT.
FGV’s logistics and support businesses sector had also posted a loss of RM17 million, a sharp decline from a profit of RM24 million in the previous corresponding quarter.
This was due to provisions for the Mutual Separation Scheme and impairments on overdue balances in line with MFRS 9 requirements.
“This financial year has started with clear signs that FGV is on track to turnaround its operations.
“While we continue to monitor all our initiatives, FGV is also exploring strategic initiatives to reduce the dependence on palm oil and the impact of CPO prices. I am confident that we will be able to achieve the targets set for the financial year 2019,” Haris said.