PETALING JAYA: FGV Holdings Bhd’s net loss widened to RM52.2 million in the second quarter (Q2) ended June 30, 2019 from RM23.43 million in the same quarter last year, attributed to lower crude palm oil (CPO) price realised as well as losses incurred in the sugar sector.
However, the group’s revenue for the period only shrank 4.6% to RM3.28 billion from RM3.44 billion, thanks to the early impacts of its transformation plan which has resulted in a 15% increase in fresh fruit bunch (FFB) production to 1.15 million metric tonnes (mt) and a 19% improvement in FFB yield to 4.76 mt/ha.
For the first six months of the year, FGV also reported higher net loss of RM55.57 million against RM22.31 million in the same period of the previous year.
Its revenue came in at RM6.56 billion, a 6.9% drop from RM7.04 billion previously.
FGV told Bursa Malaysia that for the first half of the year, the plantation sector reported a loss of RM14.28 million compared with RM26.75 million in the same period a year ago due to depressed CPO price realised of RM1,972 per mt for the quarter, a decline of 19% from RM2,447 per mt reported previously.
In addition, the sector was affected by a higher fair value land lease agreement charge of RM165.28 million against RM106.91 million previously.
FGV said that the plantation’s loss was partially offset by the net reversal of impairment of RM56 million due to settlement received from customers.
On the other hand, its sugar business incurred a loss of RM56.03 million versus RM49.91 million profit registered in the previous period on the back of lower average selling price and decrease in sales volume.
Meanwhile, the group’s logistics and others sector recorded a lower profit of RM26.27 million compared with RM38.25 million previously, due to higher throughput and increase in handling rate in the period.
“I am pleased to report that FGV’s operational performance has improved significantly, with higher yields and much lower operating costs. However, overall performance was affected by a number of factors, among which are softer CPO prices and the poor showing in the sugar business,” group CEO Datuk Haris Fadzilah Hassan said in a press release.
He noted that the group is reviewing its sugar business due to the poor results, as it believes that the current structure is suboptimal and does not consider policy shifts or industry trends.
Moving forward, FGV will continue on its operational transformation and expects to achieve all targets set by the board of directors at the start of this financial year.
“We expect CPO prices to pick up towards the end of the year and next year’s average selling price should be higher than this year’s. There are several reasons for this, including the escalating US–China trade war, higher demand with the new B30 and B10 mandates in Indonesia and Malaysia respectively, as well as the upcoming festive seasons,” said Haris Fadzilah.
Considering unfavourable CPO prices, FGV has revised its replanting area for FY2019 to 11,000 ha, but remains on track to normalise palm age profile by 2026.
