KUALA LUMPUR: Despite a challenging business environment due to the Covid-19 pandemic, FGV Holdings Bhd has staged a significant turnaround in its second-quarter (Q2) results for the financial year ending Dec 31,2020 (FY20), thanks to the higher crude palm oil (CPO) prices and its ongoing cost-cutting measures.
The world’s largest CPO producer posted a net profit of RM20.55mil in Q2 compared with a net loss of RM52.19mil a year earlier.
The group’s revenue was slightly higher at RM3.29bil for the period ended June 30,2020 from RM3.28bil in the previous year. Its earnings per share improved to 0.6 sen compared with a loss per share of 1.4 sen previously.
According to FGV group CEO Datuk Haris Fadzilah Hassan, the group is mindful that the nascent signs of recovery may not be sustainable due to the global market volatility.
“The operating environment still remains uncertain and volatile for the second half (H2) of this year, ” he told reporters at a media briefing here yesterday.
Hence, FGV is committed to pursuing its strategy of diversifying its revenue stream by maximising the potential of its existing landbank and strengthening its foot print in consumer products.
Haris pointed out that the CPO prices will likely trade moderately lower at RM2,400-RM2,600 per tonne in H2 this year compared with RM2,700-RM2,800 per tonne currently.
“The current high CPO price is not sustainable unlike the strong performance in the Q2-Q3 period, given the restocking activities from China and India after the lifting of the movement control order (MCO), ” he added.
On the nationwide shortage of foreign workers, Haris noted that FGV had been spared from the foreign worker constraint as “we have been focusing on this area since last year”.
As at Q2, FGV’s foreign labour workforce stood at 96% of its total requirement.
“During the MCO period, we managed to request for the extension of the work permits for many of our foreign workers as they could not return to their home countries due to the closed borders.
“But with the lifting of the MCO, we know that there will be movement (by the foreign workers) to go back to their countries soon.
“Therefore, we have also been focusing on mechanisation at our estates to reduce the dependency on foreign labour, ” explained Haris.
To date, some 150,000ha of FGV’s total landbank has been earmarked for mechanisation to reduce the group’s dependency on foreign labour.
The group has set aside 30,000ha annually for mechanisation over the next three years.
“We are looking at a RM80mil capex for mechanisation in the next three years, ” Haris said, adding that the mechanisation initiatives will likely see a reduction of about 10% in its existing 32,000 total foreign workforce.
The mechanisation effort is also expected to bring the group’s labour-to-land ratio to 1:9ha in the foreseeable future from the current 1:10ha.
Through the Malaysian Palm Oil Association, he noted that the participation of locals in the estates is also being encouraged by the government to further reduce dependency on foreign workers.
FGV annually produces about three million tonnes of CPO.
Haris recalled that in 2019, FGV deeply felt the brunt of the low CPO prices, which averaged below RM2,000 per tonne. “We realised that FGV must increase the added value in CPO by converting the commodity into consumer products - moving from non-branded into branded consumer products.
“FGV is already involved in the fast-moving consumer goods (FMCG) business, with our Saji cooking oil brand being the number one cooking oil while our Sugar Prai brand has a 51% market share in the country.”
Meanwhile, when asked on FGV’s recent presentation to the task force set up by the government to gauge the sustainability of Felda, Haris noted that “the task force is expected to give its recommendation on Felda’s sustainability to the Cabinet within the next one month”.
FGV in its presentation to the task force highlighted its operations as well as its 99-year land lease agreement with Felda.
“We have made known (to the task force) our capital-intensive commitment. FGV, for example, has to fork out RM300mil for replanting 10,000ha-15,000ha annually, RM250mil-RM300mil for mechanisation, about RM270mil for housing and also RM500mil for salaries.
“In total, we estimate about a RM1.5bil capex annually, ” added Haris.
Shares in FGV closed unchanged at RM1.19 yesterday.
Did you find this article insightful?
100% readers found this article insightful