KUALA LUMPUR: FGV Holdings Bhd sank into the red with net losses of RM23.23mil in the second quarter ended June 30, 2018 as crude palm oil (CPO) prices fell and fresh fruit bunchs (FFB) output declined.
This was a sharp contrast with the net profit of RM37.25mil a year ago for the world's largest CPO producer due to losses in the plantation sector.
FGV announced on Tuesday profit before zakat and tax (PBZT) fell by 98.7% to RM1.25mil from the RM102.44mil a year ago.
Revenue fell by 18.4% to RM3.43bil from RM4.21bil. Loss per share was 0.64 sen compared with earnings per share of 1.02 sen.
“Plantation sector recorded a loss of RM6.53mil, a steep decline from a profit of RM159.88mil in the previous corresponding quarter,” it said.
Average CPO price realised was RM2,419 per metric tonne, 13.5% lower than the RM2,796 in the previous quarter. However, CPO sales volume rose 14.18% to 480,738 tonnes from 421,045 tonnes a year ago.
FGV's FFB production was marginally lower at 993,505 tonnes compared to the previous 1.04 million tonnes.
CPO oil extraction rate (OER), however, improved to 20.61% from 19.77%. Ex-mill cost in 2Q of FY18 rose to RM1,884 per tonne, compared to RM1,649 in 2Q2017.
“The poor performance was attributable amongst others to lower productivity which missed targets, lower average CPO price realised, higher production costs and higher share of loss from joint ventures and associate companies.
“However, the board does acknowledge that further steps need to be taken by the management to enhance operational effectiveness and efficiencies, in order to produce sustained results under changing market conditions,” it said.
FGV also pointed out a comparison with FGV’s peers demonstrates this. “Furthermore, the company’s performance falls short of market expectations and the targets that were internally set by management,” it said.
Fair value charge in the Land Lease Agreement (LLA) with FELDA, of RM28.24mil is slightly higher than the RM23.06mil charged a year ago.
During the H1 FY18, FFB yields were 7.23 tonnes per hectare, and FGV's management was now forecasting full year yields of 17 tonnes per hectare. This falls below the initial internal target 17.5 tonnes and was also below the national industry average, it said.
However, it expects yields in 2019 to be above 20 tonnes per tone due to improvements in agricultural practices and aggressive replanting.
FGV said the sugar business under MSM Holdings Bhd registered a profit of RM27.9mil for the quarter, while the logistics & support businesses sector recorded profits of RM31.34mil.
“The targets set by management at the beginning of this financial year had taken into account unprecedented labour shortages and the age profile of FGV’s trees.
“Currently, out of a planted area of 342,420 ha, about a third, or 131,470 ha is 20 years old and above. A further 144,991 ha is categorised as young and immature,” it said.
According to FGV, for the first half, it posted net losses of RM21.89mil compared with net profit of RM38.96mil in the previous corresponding period. Its revenue fell by 17.4% to RM7.04bil from RM8.53bil.
This was a sharp contrast with the net profit of RM37.25mil a year ago for the world's largest CPO producer due to losses in the plantation sector.
FGV announced on Tuesday profit before zakat and tax (PBZT) fell by 98.7% to RM1.25mil from the RM102.44mil a year ago.
Revenue fell by 18.4% to RM3.43bil from RM4.21bil. Loss per share was 0.64 sen compared with earnings per share of 1.02 sen.
“Plantation sector recorded a loss of RM6.53mil, a steep decline from a profit of RM159.88mil in the previous corresponding quarter,” it said.
Average CPO price realised was RM2,419 per metric tonne, 13.5% lower than the RM2,796 in the previous quarter. However, CPO sales volume rose 14.18% to 480,738 tonnes from 421,045 tonnes a year ago.
FGV's FFB production was marginally lower at 993,505 tonnes compared to the previous 1.04 million tonnes.
CPO oil extraction rate (OER), however, improved to 20.61% from 19.77%. Ex-mill cost in 2Q of FY18 rose to RM1,884 per tonne, compared to RM1,649 in 2Q2017.
“The poor performance was attributable amongst others to lower productivity which missed targets, lower average CPO price realised, higher production costs and higher share of loss from joint ventures and associate companies.
“However, the board does acknowledge that further steps need to be taken by the management to enhance operational effectiveness and efficiencies, in order to produce sustained results under changing market conditions,” it said.
FGV also pointed out a comparison with FGV’s peers demonstrates this. “Furthermore, the company’s performance falls short of market expectations and the targets that were internally set by management,” it said.
Fair value charge in the Land Lease Agreement (LLA) with FELDA, of RM28.24mil is slightly higher than the RM23.06mil charged a year ago.
During the H1 FY18, FFB yields were 7.23 tonnes per hectare, and FGV's management was now forecasting full year yields of 17 tonnes per hectare. This falls below the initial internal target 17.5 tonnes and was also below the national industry average, it said.
However, it expects yields in 2019 to be above 20 tonnes per tone due to improvements in agricultural practices and aggressive replanting.
FGV said the sugar business under MSM Holdings Bhd registered a profit of RM27.9mil for the quarter, while the logistics & support businesses sector recorded profits of RM31.34mil.
“The targets set by management at the beginning of this financial year had taken into account unprecedented labour shortages and the age profile of FGV’s trees.
“Currently, out of a planted area of 342,420 ha, about a third, or 131,470 ha is 20 years old and above. A further 144,991 ha is categorised as young and immature,” it said.
According to FGV, for the first half, it posted net losses of RM21.89mil compared with net profit of RM38.96mil in the previous corresponding period. Its revenue fell by 17.4% to RM7.04bil from RM8.53bil.
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