Business

FGV recorded better revenue and profit in Q2

Zaidi Azmi
Written by Zaidi Azmi

KUALA LUMPUR – August 25, 2015: Amidst the bearish crude palm oil (CPO) market, Felda Global Venture Holdings Berhad (FGV) managed to record a better performance in the second quarter (2Q15) of this year compared to the first, with RM4.2 billion of revenue and RM103 million in profit after tax and tithe.

In the first quarter, FGV had RM2.7 billion in revenue and RM30 million in profit.

It’s group president and chief executive officer Datuk Mohd. Emir Mavani Abdullah in a statement today attributed the significant growth of FGV’s performance to higher CPO trading volume, good sugar cluster performance and fair value charged in land lease agreement (LLA).

The second quarter also saw higher CPO margin as oil extraction rate (OER) percentage grew marginally by 0.06 per cent compared to the preceding quarter due to higher volume of fresh fruit bunches processed in the second quarter.

However, Emir cautioned that the group needs to remain resilient in the second half of this year and to also actively offset volatile CPO prices through revenue enhancement, cost-optimisation and better operational excellence.

“These are challenging times for the industry but the group remains focused in implementing our transformation plans, especially on strict measures to reduce capital expenditure and optimise costs, while focusing to increase operational efficiencies,” he said.

Emir said this in view of FGV performance year on year, during which its revenue declined by seven per cent to RM6.9 billion while net profit fell 69 per cent to RM145 million.

He attributed this mainly due to lower average CPO prices and higher CPO production costs of RM1,468 per metric ton compared to RM1, 449 in 2014.

“The decline in revenue and net profit is expected as we continued to be negatively impacted by tough market conditions and business environments. Average CPO prices have reduced by 15 per cent from RM2,648 per metric ton to RM2,251 per metric ton in 2015.”

Emir emphasised that FGV’s on-going transformation efforts have shown positive results in several areas such as the Plantation Best Management Practices (BMP), Procurement Excellence’ and Trading, Marketing and Logistic Cluster (TML).

In terms of BMP, FGV has seen an overall 6 per cent improvement in FFB yield from 4.46 metric ton/hectare in 2Q14 to 4.73 metric ton/hectare in 2Q15.

Over the past few months, the earliest results from BMP for selected estates had shown an average increase of 26 per cent, with some estates showing up to 70 per cent increase in yield.

FGV is also actively moving towards procurement excellence by collating demand, rationalising vendor base, reducing spend data complexity, digitising procurement systems, breaking the subsidiary silos and moving towards integrated approach.

The group has generated average savings of 25 per cent through re-negotiating of key contracts.

Under the TML cluster, the Felda Global Venture Trading (FGVT), a subsidiary of FGV, has grown into a key revenue generator and has improved consistently from the start of its operations last February, with 36 per cent of revenues contributed by this segment.

FGVT has managed to strengthen its foothold in the Indian subcontinent, Philippines and China.

The subsidiary is well on track to realise its target of RM6.5 billion, with 50 per cent of this realised within 6 months of operations.

“As a group, we will ensure that our combined efforts are able to future proof the business and FGV remains committed to deliver value to our shareholders,” said Emir.

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Zaidi Azmi

Zaidi Azmi

If Zaidi Azmi isn’t busy finding his way in the city, this 26-year-old northern kampung boy can be found struggling to make sense of the Malaysian political scene. Zaidi can be reached at zaidiazmi91@gmail.com.