FGV registers fourth straight quarterly loss

29 May 2019 / 14:30 H.

PETALING JAYA: FGV Holdings Bhd reported another net loss of RM3.37 million for the first quarter ended March 31, 2019 (Q1 19) compared with a net profit of RM1.13 million in the same quarter a year ago, dragged down by lower crude palm oil (CPO) prices and provision of separation scheme of RM27.36 million mainly in the logistics and support businesses sector.

Revenue for the quarter was down 9.1% to RM3.3 billion from RM3.6 billion.

FGV said for the period under review, CPO prices averaged RM1,986 per metric tonne (MT), which was 20% lower than the average CPO price realised of RM2,472 MT for Q1 18.

“Despite the sharp drop in prices, revenue did not decline in tandem, mainly because of improved operational performance and lower costs,” it noted.

The plantation sector recorded a profit before zakat and tax (PBZT) of RM40 million, more than doubled the RM19 million recorded in the previous corresponding quarter, underpinned by a 6% increase in fresh fruit bunch (FFB) production to 1.05 million MT, from 991,000 MT in Q1 18.

FFB yield increased to 4.38 MT/ha, 11% higher than the previous corresponding period’s 3.96 MT/ha. CPO oil extraction rate (OER) improved to 0.76% from 19.75%, resulting in 14% growth in total CPO production to 762,000 MT from 70,000 MT previously.

FGV said the downstream sector exceeded internal sales targets, primarily due to the implementation of the B10 biodiesel mandate which came into effect in February 2019. Meanwhile, the palm kernel processing business recorded a higher margin.

However, the sugar sector recorded a loss of RM3 million for the quarter in review, compared with a profit of RM22 million in the previous corresponding quarter, primarily due to an 11% and 15% decrease in the average selling price for MSM Malaysia Holdings Bhd’s domestic and industry sectors.

The logistics and support businesses sector recorded a loss of RM17 million, a sharp decline from a profit of RM24 million in the previous corresponding quarter, due to provisions for the mutual separation scheme (MSS) and impairments on overdue balances in line with MFRS 9 requirements.

FGV group CEO Datuk Haris Fadzilah Hassan said several structural changes and improvements have been made to centralise procurement functions, and 50% from targeted cost savings of RM150 million have been identified through cost-control and rationalisation exercises.

FGV has also introduced and formalised its Special Voluntary Disclosure Initiative, Supplier Code of Conduct and Supplier Delinquency Guidelines for more effective, efficient and transparent procurement processes.

“This financial year has started with clear signs that FGV is on track to turnaround its operations. While we continue to monitor all our initiatives, FGV is also exploring strategic initiatives to reduce the dependence on palm oil and the impact of CPO prices. I am confident that we will be able to achieve the targets set for FY2019,” Haris added.

At the noon break, FGV’s share price gained 4 sen or 3.5% to RM1.19 with 3.81 million shares changing hands.

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