FGV listing not to be blamed for Felda’s woes


FGV Holdings Bhd stated that it had paid its dues to the Federal Land Development Authority (Felda) and the state agency should not use FGV’s listing in 2012 as the reason for the losses incurred by the state agency.

FGV, in a statement yesterday, refuted Felda’s claims that its IPO contributed to the latter’s financial problems. FGV said proceeds from its IPO were not well invested, which consequently led to it making impairments amounting to RM780 million.

“The real issue is the use of revenue from the IPO, and not the IPO itself. Felda earned RM5.7 billion from this IPO, while FGV earned RM4.5 billion. FGV cannot comment on how Felda used the proceeds from the IPO. Unfortunately, for FGV, part of the proceeds was not well invested,” the statement read.

A Malay language daily last week reported that Felda chairman Datuk Seri Idris Jusoh attributed Felda’s declining revenue over the past eight years to FGV’s IPO.

Idris claimed the state agency should have received RM800 million annually from FGV through the 360,000ha plantation land leased from Felda instead of the RM250 million given.

FGV stated that its 99-year land lease agreement (LLA) suggested the amount payable to Felda is RM248 million a year in addition to the 15% of the operating profit from the LLA land.

“To date, FGV’s responsibility towards Felda, according to the LLA, amounting to RM248 million a year has been fully met. FGV paid more than RM2.5 billion to Felda from 2012 to 2019,” FGV said.

FGV added that the lower than projected contributions to Felda were due to weaker crude palm oil (CPO) prices following the signing of the LLA, coupled with aged trees it inherited from the deal.

“When the LLA was signed in 2011, the CPO price was around RM3,000 per tonne and the projected income of Felda, through the LLA, used the price of RM2,800 per tonne.

“The yield on fresh fruit bunches (FFB) was also lower than expected as 50% of the trees inherited by FGV in 2012 were considered old trees (as they were aged more than 21 years).

“After the IPO, the payment to Felda from FGV did not meet Felda’s projections due to the decline in CPO prices,” FGV said.

The company said it also allocated 15,000ha of land per year for replanting which contributed to FGV’s income reduction.

The costs of fertilisation and rehabilitation amounted to RM300 million per annum.

“As a result, FGV has been able to reduce the percentage of old trees by about 30%. The LLA land is better and much improved compared to those given to FGV during the IPO,” it said.

FGV said Felda’s interest to reclaim the land is permitted according to the LLA. However, it said Felda has not reached out to the company to negotiate further on the matter.

“At the moment, Felda has yet to contact FGV to negotiate matters regarding the LLA. Under the terms of the agreement, termination of the LLA is allowed.

“If Felda issues notice on this matter, FGV will follow the procedures outlined in the LLA,” it said.

The LLA covers only the estates and does not include the oil palm mills currently operated by FGV, it added.

If Felda intends to purchase the oil palm mills, FGV said it should be based on the “willing buyer, willing seller” terms and at current market value, adding that the deal requires the approval of FGV’s shareholders through an EGM.