Lost revenue due to labour shortage

  • Business
  • Tuesday, 18 Jul 2017

Acting chairman Tan Sri Sulaiman Mahbob(insetfilepic) said the group needed at least 7,000 additional workers to improve the collection of palm oil fruits at its plantations in Malaysia.

KUALA LUMPUR: The shortage of farm labour at Felda Global Ventures Holdings Bhd (FGV) is costing the oil palm planter millions of ringgit in lost revenue, contributing to its cash-flow problems.

Acting chairman Tan Sri Sulaiman Mahbob said the group needed at least 7,000 additional workers to improve the collection of palm oil fruits at its plantations in Malaysia.

“This is very critical and will be our top priority,” he told a press conference at FGV’s Hari Raya open house here yesterday.

Sulaiman estimated that the inadequate workforce at its oil palm plantations was costing the company around RM2mil in lost revenue a day.

“This has been eating up our cash flow. We can’t afford to delay this matter,” Sulaiman stressed.

FGV, which is among the third-largest oil palm plantation companies, has more than 440,000ha of plantation land under its stable located in Malaysia and Indonesia.

The company employs about 35,000 foreign workers.

“The shortage of foreign workers is being faced by the whole country, especially in labour-intensive industries such as manufacturing and plantation,” Sulaiman said.

The government, in February last year, had frozen the intake of foreign workers.

The situation has been made worse for many industries after the Immigration Department launched on July 1 a nationwide crackdown on illegal foreign workers.

This was a day after the government’s deadline for workers to register with the immigration authorities expired.

Aside from a shortage of foreign workers, Sulaiman pointed out that FGV’s declining revenue was also caused by the company’s poor palm tree age profile of more than 25 years old.

“When the company was listed, the age profile was not good because a large percentage of oil palm trees were above 25 years, and as such, the yield per hectare is low,” Sulaiman said.

He said the low yield and uncollected fruits are costing an estimated RM1bil in lost revenue a year.

“We want to intensify our replanting efforts and foresee that the age profile of our oil palm trees will see better productivity in five to six years,” he said.

Earlier, FGV said it spends more than RM200mil annually to replant at a rate of 15,000ha a year.

Despite this, around 37% of the landbank under its control still has an old age profile of 21 years or more presently.

FGV’s profits have been declining since the company went public in 2012.

As at Dec 31, 2016, FGV recorded a profit after tax and minority interests (Patami) of RM31.47mil, which was a far cry from the Patami of RM982.25mil in 2012.

Shares in FGV have been on a downtrend despite changes in the company’s top leadership to boost investor sentiment.

Its shares were last traded at RM1.58 a piece, down 25.8% from its peak of RM2.12 on April 27.

Sulaiman was appointed as the new acting chairman of FGV to replace Tan Sri Mohd Isa Abdul Samad last month, amid a standoff between the board and the management of the plantation outfit.

In early June, four FGV management officials, including chief executive officer (CEO) Datuk Zakaria Arshad and chief financial officer (CFO) Ahmad Tifli Mohd Talha, were asked to take a leave of absence by the board led by Mohd Isa, on alleged breach of procedure against them in Delima Oil Products Sdn Bhd, a subsidiary of FGV.

Meanwhile, Zakaria contended that he was being forced out of FGV because he had opposed the capital expenditure plans by the board into areas that were not core to the plantation business.

Sulaiman said yesterday that the investigation on the four officials is expected to be completed by Aug 14.

“We have four staff involved, they have been given questions to answer.

“They will be given the chance to defend themselves and provide evidence, and enough time to respond to the inquiry,” he said.

He said the plantation giant would set up a domestic inquiry panel comprising of three members to assist with the evaluation of the CEO and CFO’s replies to their show-cause letters.

“The investigation on our CEO is basically an internal exercise between employer and employee,” Sulaiman said.

“They can come back to the FGV group if they are found not guilty,” he added.

Moving forward, Sulaiman said the board and management will focus their efforts on enhancing corporate governance and improving the group’s financial performance.

FGV has been clouded by governance issues mainly because of an acquisition spree that started after it got listed.

When it was listed in 2012, it had a cash pile of more than RM5bil. This had since dropped to RM1.87bil as of March 31 this year.

Between January 2013 and 2016, FGV completed seven acquisitions. The president and CEO during this period was Datuk Mohd Emir Mavani Abdullah and the chairman, Mohd Isa.

Zakaria was appointed on April 1, 2016.

Last week, FGV’s board added two new directors and one alternating director, all of whom hold office with parent the Federal Land Development Authority (Felda).

Felda chairman Tan Sri Mohd Shahrir Abdul Samad has been pushing for board representatives since he took over the office from Mohd Isa early this year.

Following this, FGV’s board members increased to 12.

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Business , FGV , Felda , labour shortage , Sulaiman , Mahbob ,


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