FGV cuts cost with unpaid leave to buffer virus impact

by ALIFAH ZAINUDDIN/ pic by RAZAK GHAZALI

STATE palm oil firm FGV Holdings Bhd is asking staff to take a minimum two-day unpaid leave per month from July until December this year as it seeks to cut costs and keep workers on the payroll.

The plantation giant, which has struggled to post an annual profit in the last two years, has made it mandatory for its top executives to take the unpaid leave, while others are advised to do the same, according to a memo sighted by The Malaysian Reserve.

In the company-wide memo sent on Sunday, FGV CEO Datuk Haris Fadzilah Hassan said the group will also implement other cost-cutting measures to cope with the shortfall, including reducing vehicle allowances, deferring promotions and pay raise, and freezing overseas travel.

“This is a difficult move and the management understands the impact it has on the financial position of FGV staff, but these are necessary measures that are temporary to safeguard the company’s short-term financial position,” Haris Fadzilah said in the memo.

FGV did not immediately respond to requests for comment.

The company has 50,000 employees and plantation workers in total, with over 150,000 small farmers in its supply chain.

The company swung to a net loss of RM142.35 million in the first quarter ended March 31, 2020, after posting its first quarterly profit in the preceding quarter following six successive quarterly losses. Year-on-year, FGV’s net loss widened from RM3.37 million a year ago.

Revenue also saw a 15% drop to RM2.78 billion from RM3.28 billion, due to poor crop weather which pushed production of fresh fruit bunches (FFB) down 33%, with FFB yield at its lowest in 36 months.

In a letter to shareholders in April, chairman Datuk Wira Azhar Abdul Hamid (picture) said FGV’s ongoing plan to diversify its revenue base, as well as optimise its land use and resources, have been disrupted by the Covid-19 pandemic which have affected prices and supply chains.

Azhar highlighted the company’s plans to go back to basics by venturing more into food production, which would see it become a major player in the food industry. However, he said these plans must be executed at a faster pace.

“My commitment to you and to all our stakeholders is, your board and management will work through this crisis and the impending challenges of the post Covid-19 Movement Control Order. We will focus on our goals and we will deliver,” he said.

The impact of the Covid-19 pandemic has forced FGV to close five mills in Sabah between March and April. The company expects improved weather conditions to boost its performance in the second half of the year, with sales forecast to pick up in tandem with production.

FGV shares ended four sen or 4.57% higher at RM1.03 yesterday.