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FGV returns to profit in Q3, sees higher palm output

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But palm oil price may drop in 2018 as output recovers

KUALA LUMPUR — Nov. 23, 2017: Felda Global Ventures Berhad, the world’s No. 3 palm plantation operator, returned to profitability in the third quarter on increased production and predicted a further rise in output next
year.

The company reported a net profit of RM38.8 million ($9.44 million) for the quarter ended September, compared with a loss of RM73.6 million a year earlier, it said today in a statement to the local stock exchange.

FGV said its quarterly production of palm fresh fruit bunches (FFB) grew 18 per cent year-on-year, with its plantation operations also boosted by robust palm oil prices.

“Based on the significant improvement in our FFB production for October, we expect FGV to perform better at the close of the financial year compared to 2016,” Chief Executive Datuk Zakaria Arshad said in the statement.

The profit came even as revenue dipped to 4.15 billion ringgit from 4.19 billion ringgit.

FGV was hit by a management crisis in June when Zakaria was forced to step aside during an investigation, initiated by the firm’s chairman at the time, into transactions at a subsidiary.

But the chairman later resigned and Zakaria, who denied any wrongdoing, was reinstated in mid-October following a four-month leave of absence.

‘Not serious La Nina’

FGV is targeting FFB production of 4.3 million tonnes by yearend, with 2018 output seen at 4.86 million tonnes, Zakaria told a news conference.

The company does not expect its production to be hurt by the La Nina weather event, which brings rains across Asia.

“We don’t expect a serious La Nina. Even if there is, it’s not as great an impact as El Nino. (And it is) usually for a
short period,” said Palaniappan Swaminathan, chief operating officer of plantation sector.

Rains across palm oil plantations could potentially disrupt harvest and reduce production, but boost fruit yields in the longer term.

A likely rise in output among producers could weigh on palm oil prices next year, said Zakaria.

He expects the price of crude palm oil, currently around RM2,600 per tonne, to trade between 2,500 and 2,700
ringgit for the first half of 2018.

Prices will drop next year as a lot of competition will come from soyoil, and also on recovery of output,” Zakaria said.

FGV’s shares rose as much as 2.8 per cent following the quarterly results, outperforming the broader market. — Reuters

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