It recorded a profit before interest and tax (PBIT) of RM23 million for its second quarter ended June 30, 2019, down 54% from a PBIT of RM50 million registered in the previous corresponding quarter.
“The financial performance was affected mainly by losses in the sugar sector and a 19% decline in CPO price realised for the period under review of RM1,955 per metric tonne, compared with the average CPO price of RM2,419 per metric tonne for the second quarter last year”, said group chief executive officer Haris Fadzilah.
Speaking at a press conference to announce FGV’s second quarterly results, Haris said despite the steep 19% drop in CPO price, FGV’s revenue slipped by a marginal 5% to RM3.28 billion, compared with the previous corresponding quarter’s RM3.44 billion.
However, he said the overall performance was affected by a number of factors, chief among which were softer CPO prices and the poor showing in the sugar business.
“This is the main reason why we are reviewing FGV’s sugar business, because we believe the current structure is suboptimal and does not consider policy shifts or industry trends,” Haris added.
Among the steps, he said, was a possible collaboration or joint venture with a local or foreign company in the sugar business.
Moving forward, he said, FGV would continue on its operational transformation so that it would 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,” said Haris, adding “We expect CPO prices to be within RM2,000 to RM2,200 with better export outlook and demand for biodiesel.
“There are several reasons for this, including the escalating US-China trade war, higher demand with the new biodiesel B30 and B10 mandates in Indonesia and Malaysia respectively, as well as the upcoming festive seasons,” Haris said, cautioning however that the anticipated imposition of import taxes by India might impact prices in the future
“Considering unfavourable CPO prices, FGV has revised its replanting area for financial year 2019 to11,000 hectares, but remains on track to normalise palm age profile by 2026,” he added.
As part of its initiative to reduce the impact of CPO price fluctuations on financial performance, FGV is closely monitoring its 59 key strategic initiatives group-wide, including potential collaborations, diversification plans, structural changes and improvements and cost saving measures.
He said: “Of the 59 key strategic initiatives, FGV has completed 31% of its targeted milestones, and 32% are on track, whilst the remaining 36% are either in early stages of implementation or yet to begin.”