FGV losses widen on lower FFB production, Covid-19 disruption


  • Corporate News
  • Thursday, 28 May 2020

Sales are expected to pick up in tandem with production in 2H, says FGV group CEO Datuk Haris Fadzilah Hassan

KUALA LUMPUR: Despite a dismal first quarter, FGV Holdings Bhd is looking forward to a better second half of 2020 with a pick up in both fresh fruit bunch (FFB) production and overall performance.

"With Indian trade restored, and the easing of Malaysia's movement control order, sales are expected to pick up in tandem with production, as the impacts of drought and fertiliser adjustments in 2019 wane in the second half of 2020," said FGV group CEO Datuk Haris Fadzilah Hassan.

In the first quarter ended March 31, the planter recorded a net loss of RM142.35mil as revenue declined 15% year-on-year (y-o-y) to RM2.78bil on the back of lower FFB production and slimmer margins.

The result compared to a net loss of RM3.37mil in the previous corresponding quarter.

According to FGV, FFB production was negatively impacted by dry weather conditions in 1Q2019 and 3Q2019, especially in Sabah where about a third of its estates are located.

FFB production was also affected by a reduced application of fertilisers in 2019, although the group said it expects production to normalise in the second half of this year.

Meanwhile, operations and sales were disrupted by the Covid-19 pandemic, which saw the closure of five Sabah mills in March and April in addition to other precautionary measures.

In other segments, the group's sugar business recorded a loss before zakat and tax of RM28mil in the quarter due to higher refining cost, depreciation and higher finance cost at the MSM Johor refinery.

The logistics sector posted a profit before zakat and tax of RM15mil, which was 28% less than in 1Q2019 due to a drop in tonnage carried and storage volume.

"Though the business environment has been disrupted and wil likely remain challenging for the rest of the year, FGV will continue to find solutions that are in line with our own commercial objectives as well as the national policy to offer the B40 group the opportunity to participate in our supply chain.

"We are in this business for the long haul and we view the disruption of global food sector supply chains as an opportunity to address national food security concerns and to potentially leverage on import substitution opportunities for essential food items," said Haris Fadzilah.

He added that FGV has already secured sales for June and July delivery in India as well as signed an agreement with a company there to further strengthen its participation in the food products market.

Elsewhere, the group has secured the certificate of free sales to meet export requirements to Myanmar and possibly enter the Japanese power plant market to cater for their focus on renewable energy.

In line with efforts to grow its internal capabilities, the group's dairy business reported revenue of RM610,000 in the first two months since the acquisition of RedAgri Farm Sdn Bhd in February 2020.

The segment currently has four product categories, namely fresh milk, yogurt, cheese and kefir, while new fresh milk products are expected to enter the market in September 2020.

The group added that it aims to produce about 400,000 litres of fresh milk in FY2020 with its processing facilities in Linggi, Negeri Sembilan, being upgraded to produce 10 million litres of fresh milk products annually.

In the group's animal feed segment, sales jumped 244% to generate revenue of RM6.98mil, while four new animal feed products are expected to be produced by the end of the year.
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FGV , plantation , CPO , FFB

   

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