KUALA LUMPUR: FGV Holdings Bhd reported net loss of RM3.37 million in the first quarter ended March 2019 compared with a net profit of RM1.12 million a year ago largely due to a sharp drop in palm oil and sugar prices.
Revenue for the period declined to RM3.3 billion, 9 per cent lower than RM3.6 billion earned in the previous corresponding quarter.
For the period under review, palm oil prices averaged at RM1,986 per tonne, 20 per cent lower than RM2,472 per tonne in the first quarter of 2018.
FGV’s group chief executive officer Datuk Haris Fadzilah Hassan acknowledged this fourth consecutive quarterly loss is broadly reflected in other plantation companies due to depressed palm oil prices but FGV's results were exacerbated by impairments.
Nevertheless, he said the plantation operations has been tightening procurement and implementing more efficient tasking processes for infield workers.
"These efforts are starting to bear fruit. Several other estate and milling transformation initiatives have started delivering results,” Haris said in a briefing here today.
Also present was FGV chief financial officer Datuk Mohd Hairul Abdul Hamid.
For the quarter, the plantation sector recorded a profit before zakat and tax of RM40 million, up from RM19 million in the previous corresponding quarter.
This was on the back of a 6 per cent increase in fresh fruit bunch production to 1.05 million tonnes, from 991,000 tonnes in the first quarter of 2018.
FGV's oil palm fruit bunch yield has improved to 4.38 tonnes/ha, 11 per cent more than 3.96 tonnes/ha, previously.
FGV's oil extraction rate showed improvement to 20.76 per cent from 19.75 per cent, and thus, total CPO production increased 14 per cent to 762,000 tonnes, compared to 670,000 tonnes previously.
Improved production volumes combined with enhanced operational effectiveness and efficiencies, resulted in lower ex-mill costs in first quarter of 2019 of RM1,378 per tonne, 20 per cent lower than RM1,728 in first quarter of 2018.
FGV's downstream business performed better for the period under review.
The downstream sector exceeded internal sales targets, thanks to Malaysia's B10 biodiesel mandate implementation from February 2019.
FGV's sugar business suffered RM3 million in losses for the quarter compared to RM22 million profits a year ago, dragged by higher refining cost of RM362 per tonne.
This was primarily due to an 11 per cent and 15 per cent fall in the average selling price for MSM Malaysia Holdings Bhd’s domestic and industry sectors.
The logistics business recorded a loss of RM17 million, a sharp decline from a profit of RM24 million previously, dragged by provisions for the Mutual Separation Scheme (MSS) and impairments.
As at March 2019, FGV's total borrowings amounted to RM5.64 billion, of which RM3.82 is of short term and RM1.82 is of long term.
While low palm oil prices will have a major impact on the FGV’s financial performance, Haris assured efforts to improve the group’s operations have shown positive outcomes by higher oil palm fruit production and lower palm oil production cost in the first quarter of 2019.
Haris assured his team has centralised procurement functions, and identified 50 per cent of RM150 million worth of cost savings initiatives.
"We have introduced and formalised its Special Voluntary Disclosure Initiative, Supplier Code of Conduct and Supplier Delinquency Guidelines for more effective, efficient and transparent procurement processes," he said.
Haris then pointed to good news of debt recovery amounting to RM48 million.
On outlook, Haris said he is cautiously optimistic that Malaysia's execution of B7 for the industrial sector in July 2019 would continue to drive palm oil demand and contribute positively to FGV's bottomline.
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Founder of i2Matrix. A market strategist, private trader and sought-after financial speaker and trainer in the Asian Region, Benny Lee has coached hundreds of professional and retails traders and investors in Malaysia, Singapore, Hong Kong, Thailand, Vietnam, Pakistan for more than 13 years. His passion in trading and chart analysis leads him to develop trading strategies that have helped him and many others to trade and invest successfully in the financial markets.
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