FGV embarks on turnaround plan as it 'cleans house'

KUALA LUMPUR: FGV Holdings Bhd, which is still not done cleaning house, announced today that it will embark on a turnaround plan to be overseen by two independent directors and a transformation officer in an effort to bring the embattled agri-commodities giant back on its feet and improve its finances.
In a press conference, FGV chairman Datuk Wira Azhar Abdul Hamid said several members of the board and management, past and present, are being investigated as part of its probe into transaction and investment decisions and business practices.
FGV president and CEO Datuk Zakaria Arshad was absent from the press conference, which saw the presence of three independent directors. Azhar said Zakaria was in Turkey to attend a board meeting.
Declining to elaborate on the investigations into individuals in the group, Azhar said they are waiting for FGV's lawyers to finalise their opinion and advise them on the next step, which could be civil action. This involves lawyers from the UK and its investments abroad.
The three independent directors at the press conference with Azhar were Datuk Mohd Anwar Yahaya, Datuk Dr Salmiah Ahmad and Dr Mohammed Nazeeb P. Alithambi. They were appointed to the FGV board in the last quarter of 2017.
Salmiah and Mohammed Nazeeb, together with Azhar, are part of a special board committee set up to enhance the performance of FGV's plantation division and other initiatives. The Transformation Office will be headed by Syed Mahdhar Syed Hussain, who was previously MRT Corp standards and compliance director.
On Aug 28, the board announced that it had in January 2018 officially appointed forensic investigators to look into six transactions and/or investment decisions, of which four have been completed. The four investigations include the acquisition of Asia Plantations Ltd, investment in FGV Cambridge Nanosystems Ltd and the acquisition of the Troika condominiums. Investigations are to be completed by year-end.
Additionally, the board undertook internal investigations into open credit lines, poor purchasing trading practices and poor palm oil sales that resulted in bad debts of about RM100 million; direct awards of procurement contracts in breach of best practices; and the critical shortage of workers between May 2016 and April 2018 that resulted in financial losses of more than RM170 million over the period.
"A lot of the issues investigated have been provided for, so financially it is not an issue. Let's say I give you an example … some of the debts that have been written off, they are going to go straight to the bottom line," Azhar said when asked how the group will turn around amid the probes.
"The reason why we have been performing poorly over a period is because we have been providing for all these episodes. If we can reverse them the financial numbers will be better."
As part of enhancing its plantation segment, FGV will be aggressively replanting 15,000ha as some of the estates from Felda under a 99-year land lease agreement (LLA) came with mature palm. FGV pays a fixed amount of RM250 million, and 15% of annual profits from LLA-related land to Felda.
FGV swung into the red in the second quarter ended June 30, registering a net loss of RM23.23 million versus a net profit of RM37.26 million in the previous corresponding quarter, dragged down by lower crude palm oil prices and productivity, higher production cost as well as higher share of losses from joint ventures and associate companies.
Its revenue went down 18.4% to RM3.44 billion from RM4.21 billion.