FGV: Still no decision on Felda’s LLA, Perspective Lane’s offer

by SHAHEERA AZNAM SHAH / pic by RAZAK GHAZALI

FGV Holdings Bhd has yet to receive any official notices from the Federal Land Development Authority (Felda) regarding the latter’s intention to terminate the land lease agreement (LLA) involving 360,000ha of plantation land.

The group has also made no decision on Perspective Lane (M) Sdn Bhd’s (PLSB) proposal to inject its oil palms assets into FGV, minus its sugar business in the proposal submitted.

FGV group CEO Datuk Haris Fadzilah Hassan (picture) said any further development on the LLA negotiations will be made jointly by the two parties concerned.

“The situation is very much status quo. It has been agreed if there is any further development, both Felda and FGV we will make a joint announcement,” he said during a virtual media briefing yesterday.

If the lease agreement is terminated, FGV is expecting RM3.5 billion to RM4.3 billion in compensation based on its internal assessment of its financial performance in 2020, the projection for 2021 and other various factors.

“Felda has not indicated any valuation of the compensation, but the calculation is a fixed formula stipulated in the agreement where it depends on the performance of the related assets.”

He explained the calculation of the compensation is based on the land size, as well as its replanting activities, and an 18-month notice is required prior to the termination date for plantation areas of more than 10,000ha.

Responding to queries on Felda’s interest to buy palm oil mills owned by FGV, Haris Fadzilah said negotiations on the potential sale will be on a “willing buyer willing seller” term and separate from the LLA negotiations.

“The LLA only governs the oil palm estates that are currently on a 99-year lease to FGV and not the oil mills that are owned by FGV.

So, any discussions and interests shown towards the oil mills will have to be taken on a commercial basis. As of now, no discussion has taken place on that,” he said.

Presently, FGV owns 68 palm oil mills in Malaysia. Some 30% of the fresh fruit bunches (FFB) processed at the mills are from the LLA land, while the remaining 70% come from Felda settlers and third-party suppliers.

“Even without the LLA land, we still need the mills to process 70% of the FFB, and it is a critical part of FGV’s capabilities in terms of FFB processing and going further into the downstream market,” Haris Fadzilah said.

He added that no official price tag has been determined for the mills, but cited RM1 million is required to construct every one tonne-capacity of an oil mill based on the current market valuation.

Haris Fadzilah also clarified the proposal submitted by PLSB does not include the group’s sugar business under Central Sugars Refinery Sdn Bhd (CSR).

“We have received the official letter and our team is clarifying the proposal in terms of which assets will be injected.

“We are in the process of determining the assets and there is no mention of CSR to be part of the injections into FGV,” he said.

In a filing to Bursa Malaysia last month, FGV disclosed that Perspective Lane has submitted an expression of interest to be a shareholder in FGV through an injection of plantation assets.

Haris Fadzilah, meanwhile, said FGV is in the process of appointing auditors and consultants to assist in its petition against the US’ withhold release order (WRO) on FGV’s products as required by the US Customs and Border Protection (CBP).

“The CBP has mentioned that an independent consultant is required to audit our operations.

“However, there is no specific area mentioned, so we are very much ‘guessing’ in terms of what the gaps are. We were also pointed to 11 measures, which are the standards measures under the International Labour Organisation.

“Given that kind of starting point, we are doing our own assessment internally, in regards to our practices and policies which have been improved since 2018,” he said.

In September, the CBP detained all palm oil and palm oil products made by FGV, as well as its subsidiaries and joint ventures, based on the information that there’s alleged use of forced labour.

FGV Holdings Bhd posted a net profit of RM136.89 million for its third quarter ended September 2020 (3Q20), against a net loss of RM262.41 million last year, mainly contributed from the higher crude palm oil (CPO) prices and lower losses incurred by its sugar sector.

Revenue for the quarter rose 12.4% year-on-year to RM3.99 billion due to higher product prices.

FGV said its CPO price realised for the quarter averaged RM2,645 per tonne and was higher than the average price realised of RM1,983 per tonne in 3Q19. Shares of FGV ended at RM1.22, four sen or 3.39% higher yesterday, giving it a market capitalisation of RM4.45 billion.


Read our earlier report here