FGV to sell loss-making China subsidiary for RM100m

By MARK RAO / Pic By MUHD AMIN NAHARUL

FGV Holdings Bhd intends to divest its loss-making China-based subsidiary for 165 million yuan (RM99 million) as part of its rationalisation plans to exit non-performing businesses.

The agri giant noted that it inked an equity transfer agreement with Grand Industrial Holding Co Ltd to dispose of its 100% stake in FGV China Oils Ltd — a Shenzhen-listed edible oil refiner and marketer in the Chinese markets.

In an exchange filing yesterday, FGV said the China-based company has been loss-making since the planter acquired the asset back in 2015, due to market disparity arising from competition coming from regional suppliers.

“The proposed disposal is in line with FGV’s plans to rationalise and divest its non-performing businesses and to streamline the group’s activities, with a clear focus on maximising returns from performing businesses,” it said.

The move is in line with FGV’s three-year transformation plan to ensure its resources are best utilised to concentrate on the group’s core business.

The China-based subsidiary has raked up RM120.25 million in losses from 2016 to 2018. It posted a loss after tax of RM25.43 million last year, while revenue amounted to RM577.79 million.

FGV initially invested 320 million yuan in the company, thus resulting in a loss of 220 million yuan from its investment — excluding conversion gains or losses.

The integrated oil palm planter said the divestment is subject to shareholders’ approval at an upcoming general meeting to be convened at a later date.

Subject to these approvals being obtained and barring unforeseen circumstances, the proposed disposal is expected to be completed by end-2019 or the first quarter of next year.

FGV continues to make headlines after its major shareholders moved to reject the remuneration package for the company’s board of directors last month.

The Federal Land Development Authority (Felda), Koperasi Permodalan Felda Malaysia Bhd and the Armed Forces Fund Board made the call as they found the directors’ remuneration to be unreflective of FGV’s fiscal performance.

A total directors’ payout of RM5.74 million was announced for the year ended Dec 31, 2018, despite posting RM1.08 billion in net losses.

The company is already saddled with high levels of debt, a total of RM12.64 billion in liabilities in 1Q19 against a total asset base of RM19.21 billion, and there are concerns that its land lease agreement (LLA) with Felda will be terminated.

FGV plans to shift its focus on downstream activities if the latter event materialises, nonetheless, the terminated LLA stands to immobilise the company’s 68 mills as two-thirds of the fresh fruit bunches processed here are sourced from Felda settlers.

The company’s shares closed flat at RM1.12 yesterday with 3.81 million shares exchanging hands.