Felda Global Ventures to trim workforce by 3%

KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV), whose net profit fell 84% in the financial year ended Dec 31, 2016 (FY16), expects to reduce its workforce by 3% this year.
Group president and CEO Datuk Zakaria Arshad said the workforce reduction is part of its rationalisation exercise which involves the closure of four palm oil mills, two rubber processing plants and one palm oil refinery that will generate annual cost-savings of RM13.5 million.
“Our workforce now is 18,000 excluding foreign workers, and the mutual separation scheme (MSS) will affect about 3%. The MSS cost is RM12 million,” he told reporters at a briefing yesterday.
Zakaria said the mills and plants are no longer economical to maintain due to changes in the landscape of FGV’s palm oil and rubber plantations, as the group consolidates smaller plants into bigger units for better economies of scale.
The exercise is expected to increase the average utilisation factor of FGV’s palm oil mills to 80%. The group made a provision of RM49.2 million last year for this exercise.
In the fourth quarter ended Dec 31, 2016 (Q4 FY16), FGV’s net profit fell 21% to RM111 million from RM140 million a year ago while revenue rose 25% to RM5.2 billion from RM4.1 billion a year ago.
For FY16, net profit fell 84% to RM30 million from RM189 million a year ago while revenue rose 11% to RM17.3 billion from RM15.6 billion a year ago.
Zakaria expects crude palm oil (CPO) prices to range from RM2,600 to RM3,000 a tonne in the next few months until the second quarter of 2017, with an average of RM2,600 to RM2,700 for the whole year.
“This year, we expect the palm plantation business to recover fully from the impact of El Nino and an increase in planted areas coming into maturity from the replanting exercise. We estimate an additional 600,000 MT (metric tons) of FFB (fresh fruit bunches) production this year, leading to a total volume of 4.5 million MT FFB,” he said.
FGV expects to achieve 5.3 million MT FFB production annually from existing landbank by 2020, representing a 36% increase from 2016’s achievement.
On the losses at Felda Iffco Gida, Turkey, group CFO Ahmad Tifli Mohd Talha said the net impact on FGV’s book is RM20 million, following a write-back of RM37 million in Q4 FY16.
“The losses can be tracked back to prior years, not all of it happened in 2016 so in the financial accounts for Q4 FY16, there was actually a write-back of RM37 million. Originally, we put in RM57 million and we wrote back RM37 million. So the net impact on our book is only RM20 million. On top of that, there is an insurance claim which is not yet in the book. We expect to get about 75% of the actual loss,” he said, adding that the insurance claim is subject to audit.
“The insurance cover is at the subsidiary of the associate company … total loss reported is RM140 million; total loss at the subsidiary of the associate,” he said.
On dividends, Zakaria said the board will decide this month upon completion of a full audit of its results. FGV did not declare a dividend for Q4 FY16.