KUALA LUMPUR: While maintaining a profit in the first quarter of the year, FGV Holdings Bhd expects the coming months to remain challenging amid squeezed margins in the plantation sector and increased production cost in the sugar sector.
It noted also the risk of adverse weather conditions that could impact palm oil production, such as the El Nino weather pattern towards the end of year.
Group CEO Datuk Nazrul Mansor however said the group will capitalise on the momentum seen during the first three months of 2023 and push through to meet the expectations of stakeholders.
Over the coming year, Nazrul said the group anticipates improved fresh fruit bunch (FFB) production this year with additional migrant workers that will positively impact its operational performance.
He added that the palm age profile of the group has improved with an average age of 12.77 years, with 39% of its plantation areas classified as prime areas.
"Those factors will position us well for enhanced productivity and growth in the industry," he said in a statement.
In the quarter ended March 31, 2023, FGV recorded a net profit of RM12.09mil for an earnings per share of 0.33 sen, a sharp plunge from the net profit of RM369.24mil recorded in the same quarter in 2022.
The group reported a 21.5% y-o-y decline in revenue to RM4.59bil, down from RM5.85bil in the comparative quarter.
According to the group, profit in the plantation sector dove 89% to RM61.89mil from RM517.87mil in the year-ago quarter due to the lower average crude palm oil (CPO) price realised of RM3,988 per tonne (MT) compared to RM5,058 MT recorded in the same quarter last year.
This was despite the group's CPO sales volume increasing 31% year-on-year.
The sector’s result was further compounded by lower margin achieved from the downstream, fertiliser and rubber businesses and a lower share of results from joint ventures of RM7.35mil reported in current quarter.
It said the decrease in profit was partially cushioned by the lower fair value charge on land lease agreement of RM32.16mil compared to RM159.14mil in the corresponding quarter of 2022.
Operationally, FFB yield increased to 3.04MT per hectare in 1QFY23 from 3.02MT per hectare in 1QFY22.
The oil extraction rate achieved in the current quarter was 19.81%, down from 20.28% registered in corresponding quarter of the previous year.
In the sugar sector, the group reported a higher loss of RM31.73mil compared to RM30.78mil in the same quarter of 2022, owing mainly to high input costs such as natural gas, the weakening of the ringgit and lower sales volume.
The group's logistics and others sector posted a higher profit of RM37.64mil, up from RM21.92mil in 1QFY22, due to the higher handling rate and increase in tonnage carried.