Felda confident it’ll be back in the black by financial year 2022 with new business model

18 Oct 2020 / 21:38 H.

KUALA LUMPUR: Beleaguered Federal Land Development Authority (Felda), which has been hit by massive losses in billions and liquidation of several subsidiary companies, is confident of returning to the black by the financial year 2022 through the implementation of a new business model.

Chairman Datuk Seri Idris Jusoh said following the presentation of a white paper on Felda in parliament on April 10, 2019, a task force led by Tan Sri Abdul Wahid Omar was formed to look into ways to enhance its (the white paper) inadequacy to address various issues besetting the agency.

“The task force had also proposed financial restructuring, how management system can be improved, which include digitalisation of the financial system, changing the mindset of settlers, gearing them to achieve high income, as well as cost-cutting exercise,” he told Bernama.

On the new business model, Idris said Felda believed the right business model for the agency moving forward is to have a complete supply chain from farms, mills to downstream.

“Before FGV Holdings Bhd was listed on Bursa Malaysia, we already have our own mills, whereby Felda during that time registered profit amounting over RM1 billion, of which in 2011 it posted about RM1.85 billion in profit.

“However, after the listing of FGV Holdings Bhd in June 2012, Felda’s earnings obviously declined as the returns from FGV investment did not commensurate with what was expected from them,” he said.

Under the Land Lease Agreement (LLA) between Felda and FGV, Felda should receive a payment of RM248 million per year and profit share of 15% for lease of its commercial land for a course of 99 years.

To achieve the goal of returning Felda to profitability, Idris said the agency clearly intends to take back 350,000ha of Felda-owned land leased to FGV under the LLA.

He said the wish had been discussed with the government and Felda was still awaiting the answer.

“When the LLA was entered into, there were conditions stating that Felda can take back the land at any time by giving them (FGV) 18 months’ land acquisition notice, Idris said.

On the compensation to be paid to FGV with the termination of the LLA, Idris said it had not been discussed in detail, but what was clear Felda’s priority at this time was to take back the leased land and create a complete supply chain.

As an alternative to debt restructuring, Idris said Felda intends to issue sukuk and this will be discussed with the government as the guarantor and the amount to be issued will be announced later.

He said the new Felda model also touched on reducing the repayment period of the replanting loans for settlers from eight to four years.

This measure has been implemented to reduce the debt burden of the settlers and make them more sustainable and competitive, he added.

Idris said Felda also intends to encourage settlers to engage in cash crop cultivation on their farms to diversify their income streams, which will indirectly increase their income.

As for Felda’s financial restructuring, he said Felda is also looking at liquidating its non-core assets locally and abroad, particularly hotels, which has been put on hold due the current low price and will continue the exercise once the price is right.

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