FGV needs model change

  • Business
  • Friday, 20 Jan 2012

KUALA LUMPUR: Felda Global Ventures Sdn Bhd's (FGV) current business model, which is heavily dependent on crude palm oil (CPO) prices, is not sustainable, said president and chief executive Datuk Sabri Ahmad.

“Heavy reliance on one segment exposes the company to violent fluctuations in commodity prices,” he said, although the current CPO price of over RM3,000 a tonne was giving good returns to plantation companies.

Hence, he said, FGV's business model must change to steadily increase profit and not be overly exposed to fluctuating commodity prices.

“One way this can be done is by expanding the downstream activities,” he told Bernama.

Sabri, who has extensive experience in the industry, notably as a previous chairman of Malaysian Palm Oil Board, said better premium margins were usually in the end-consumer products.

“For that, we need a partner to readily bring in the technology and strong marketing network,” he said, adding that this was the very reason FGV was seeking a global partner that could fill the gap.

FGV holds a 49% stake in Felda Holdings Bhd, while Koperasi Permodalan Felda (KPF) has the balance 51%.

Three foreign banks, Morgan Stanley, JP Morgan and Deutsche Bank, along with two local banks, Maybank and CIMB, have been appointed to undertake the listing exercise.

Sabri said the global partner was expected to come up with a number of capabilities such as a good global marketing network and enhanced technology. Talk is rife that global trading giants such as Archer Daniels Midlands Co and Bunge Ltd are among those parties.

Sources said FGV had screened a number of potential partners and that it had six to choose from. However, Sabri was tight-lipped over this, noting that the board would make the final decision after due diligence.

The sources also said FGV was expected to pick the potential global partner by mid-February, in time to list on Bursa Malaysia before the middle of the year, with April being the earliest date.

Sabri reiterated that FGV never had any intention to be secretive about the listing but was merely being careful so as to not give out too much information which would disrupt the process.

“We need to follow the Securities Commission's rules and regulations,” he said, adding that FGV was putting out as much information as possible as long as it was in line with the commission's procedures.

He said from the start of the listing plan, FGV was determined to constructively engage with all parties.

“We will continue to provide the settlers and other stakeholders with the necessary information. The ultimate goal of the listing is to benefit the settlers and KPF,” he added.

FGV owns about 80 active companies undertaking diverse activities. It has operations in the United States, Canada, China, Australia and the Middle East.

FGV independent director Datuk Mohd Rafik Shah Mohamad believes that the listing and tie-up with a global partner would help the company adapt to global operating standards.

“A listed company also comes under public scrutiny, which is good for FGV as it will be pushed to perform better than at present. It will also enhance the company's corporate governance,” he said. - Bernama

Providing a glimpse into future plans, Sabri, who had served as chief executive officer of Golden Hope Plantations Bhd, believes that FGV has a lot of potential, especially the very concept that the company was built on and prospered.

“We can create nucleus estates, whereby the land is owned by settlers but FGV manages them, buys the crops and processes them, similar to what is being done in Malaysia.

“We can also promote the concept to other developing countries,” he said, adding that there were plans to promote it within Asean as well as in the African region.

Sabri believes that such a concept would work well in Africa and help with poverty alleviation, similar to what has taken place in Malaysia with the Felda settlements.

“This plan will also be worked out with the global strategic partner,” he said. - Bernama

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3

Did you find this article insightful?


Across the site