FGV expects challenges amid labour shortage, volatile CPO prices

However, the group remains on course with its strategies to reposition FGV to be the leading agribusiness player

By SHAHEERA AZNAM SHAH / Pic by RAZAK GHAZALI

FGV Holdings Bhd expects its core business of oil palm cultivation to continue to be impacted by the insufficient workforce at its plantations coupled with anticipated volatility in crude palm oil (CPO) prices.

However, FGV group CEO Datuk Haris Fadzilah Hassan (picture) said the group remains confident in repositioning FGV as one of the prime players in agribusiness to enhance its downstream segment.

“FGV anticipates this year to be another eventful year on the back of challenges in labour supply and volatility of CPO prices in our plantation business. Our sugar business will continue to improve its operating and financial performance.

“However, the group remains on course with its strategies to reposition FGV to be the leading agribusiness player to create value in its downstream business,” he said in a statement after the group released its financial performance last Friday.

Haris Fadzilah said FGV is allocating 75,000 tonnes or 20% of its palm kernel expeller (PKE) production as animal feed for local consumption through a distributorship network throughout Malaysia to ensure the supplies are effectively reaching Malaysian farmers.

Recently, FGV partnered the Agriculture and Food Industries Ministry to participate in a large- scale paddy project, namely the Smart SBB.

The planter commenced planting 28ha of MRQ76 fragrant rice seeds gardens in Sungai Leman, Selangor, and Seberang Perak, Perak, which were harvested in January 2021.

The planted seeds are expected to be used to start the 350ha of FGV’s contract farming scheme.

On the withhold release order imposed on FGV’s products by the US Customs and Border Protection (CBP), Haris Fadzilah said the planter is taking a systematic approach in ensuring the rights of workers are respected and protected in addition to eliminating practices that may be indicative of labour exploitation.

“As announced in December 2020, FGV will revisit the appointment of an independent audit firm for an audit of operations within a reasonable time and will continue to engage the CBP accordingly once an independent auditor has been appointed,” he said.

For FGV’s fourth quarter ended Dec 31, 2020, its net profit jumped 87.9% to RM134.93 million from RM71.81 million a year ago due to higher contribution from its plantation and sugar sectors.

Its revenue for the quarter also improved by 27.08% to RM4.01 billion from RM3.15 billion. Its earnings per share stood at 3.7 sen for the quarter against two sen in 2019.

Profit from FGV’s plantations sector rose to RM281 million compared to RM239.15 million in 2019.

The group attributed the gains to the fair value gain on the land lease agreement of RM98.46 million compared to the fair value charge of RM123.72 million in the preceding quarter.

The segment also saw a higher average CPO price realised of RM3,059 per tonne compared to RM2,645 per tonne in the preceding quarter, mainly due to the 22.6% decline in fresh fruit bunches production to 1.04 million tonnes during the quarter.

“Lower yield was achieved at 4.12 tonnes per ha compared to 5.32 tonnes per ha in the preceding quarter, while oil extraction rate increased to 20.79% compared to 20.35% registered a year ago.

FGV also registered gains on the disposal of a subsidiary amounting to RM31.5 million during the quarter.

Meanwhile, its sugar business contributed an operating profit of RM77.43 million compared to a loss of RM56.33 million in a similar quarter in 2019. The segment also recorded a higher margin and increased overall sales volume, and lower finance cost.

For the financial year 2020, FGV registered a net profit of RM150.02 million compared to a net loss of RM246.17 million in FY19, mainly contributed by the all-time high of CPO prices.

Its revenue for the year was RM14.08 billion, a 6.16% increase from RM13.26 billion reported in 2019.

The planter issued a final dividend of three sen per share for the quarter, to be paid on March 31, 2021.

FGV’s share price fell two sen or 1.48% to RM1.33 last Friday with a market capitalisation of RM4.85 billion.


Read our previous report here

High CPO prices propels FGV’s profits in FY20