FGV in talks to sell RM1bil plantation assets in Trurich

KUALA LUMPUR: FGV Holdings Bhd is in negotiations with seven potential buyers to sell its plantation assets worth RM1bil in Trurich Resources Sdn Bhd – its 50:50 joint-venture company with Lembaga Tabung Haji – by end-September.

Trurich owns two estates, totalling to 42,833ha, in Kalimantan, Indonesia.

FGV chief executive officer Datuk Haris Fadzilah Hassan said the group would sell the plantation estates as a package.

“Three out of the seven buyers are interested in both estates, while the remainder four are interested to buy only one estate.

“Preferably, we want to sell both as a whole,” he added.

Haris said the proceeds from the sale would be used in areas related to the group’s core assets while pointing out that Trurich has borrowings of RM700mil.

FGV is on track to achieve RM350mil proceeds from its divestment of non-core and non-performing assets over the next three years.

Earlier this month, FGV chairman Datuk Wira Azhar Abdul Hamid said that the group plans to liquidate and dispose of its 11 non-core subsidiaries over the next 18 months.

By end-2019, the divestments of three non-core assets with an estimated value of RM150mil are expected to be finalised.

“We hope to register some of the value of the disposal of non-core assets by second quarter or third quarter,” he said

FGV reported a net loss of RM3.37mil in the first quarter (Q1) ended March 31, 2019, compared with a net profit of RM1.12mil a year ago largely due to a sharp decline in crude palm oil (CPO) prices, and lower average selling price in the sugar sector.

On FGV’s strategy to return to profitability after four quarterly losses, Haris said the group would focus on the downstream sector, as CPO prices are low.

From the second quarter, FGV’s downstream business would launch four new products namely mass blended oil, industrial margarine, premium blended oil and coconut milk.

Moving forward, Haris said the company planned to strike a balance of the revenue contribution from both upstream and downstream to a 50:50 ratio by 2021 due to the “abnormal CPO price cycle”.

Currently, revenue contribution of the upstream and downstream sector to the company is 60:40, with the upstream sector contributing a majority of the revenue.

On the CPO prices, he expected it to trade between RM1,900 and RM2,200 per tonne in Q2 on US-China trade war, subdued demand from China, and competition from Indonesia.