Plantation group FGV Holdings Bhd, which saw its net loss widened to RM142.35 mil for the first quarter ended March 31, 2020 (1QFY20) from RM3.37 mil a year ago, expects a better second half on the back of firmer crude palm oil (CPO) prices and higher fresh fruit bunch (FFB) production.
Its performance in 1QFY20 was hit by reduced FFB production and lower margins for palm oil and sugar.
Its quarterly revenue for 1QFY20 fell 15.05% to RM2.78 bil from RM3.28 bil a year ago as bad weather conditions impacted FGV’s estates and those of smallholders and third party suppliers, which account for 70% of the group’s CPO production.
The company said the impact of poor weather conditions was far greater within FGV’s remaining areas of very old palm trees (more than 25 years).
“While the first half of 2020 has presented the group with several challenges, we expect the situation to improve in the second half with both FFB production and overall performance picking up again,” FGV group CEO Datuk Haris Fadzilah Hassan said in a media briefing today.
The company has projected CPO prices to be in the range of RM2,200 to RM2,400 for this year.
He pinned the company’s hopes on the restoration of trade with India, which was one of the largest importers of CPO in the world, and the easing of the movement control order (MCO).
FGV has already secured sales for June and July delivery in India. Additionally, it recently signed an agreement with a company based in India to further strengthen its participation in the food products market there.
According to Haris, FGV will continue to aggressively offload its non-performing and non-strategic assets and investments that were made in the past to optimise its capital structure and strengthen its overall balance sheet position.
While divestment initiatives continue to be in progress, FGV is concurrently diversifying its revenue stream by maximising the potential of existing landbank.
The company expected its integrated farming business to be able to generate an Ebitda (earnings before interest, taxes, depreciation and amortisation) margin of 15% by 2023.
Its new dairy business has picked up speed, registering consolidated revenues of RM610,000 in the first two months since the acquisition of RedAgri Farm Sdn Bhd in February.
It currently has four product categories which are fresh milk, yogurt, cheese and kefir. FGV expects to hit the market in September with new fresh milk-based products.
Its processing facilities in Linggi, Negeri Sembilan, which was currently being upgraded, will be able to produce 10 million litres of fresh milk products annually. FGV aims to produce some 400,000 litres of fresh milk in FY20.
As at April 30, a total of 13,534 MT of animal feed have been sold in the local market, generating revenues of RM6.98 mil. Four new animal feed products are expected to be produced by the end of 2020, which will enhance the group’s range of products in the sector. – May 28, 2020
