FGV optimistic of emerging stronger in 2017

KUALA LUMPUR: Plantation firm, Felda Global Ventures Holdings Bhd (FGV), is optimistic of emerging leaner and stronger in 2017 backed by improved plantation sector’s performance and commodity prices after a challenging and tumultuous year that saw its share slipping.

“We are upbeat as the industry looks forward to better commodity market sentiments in light of lower palm oil inventory levels, improving export demand, moratorium on new plantings in Indonesia and recovery in crude palm oil (CPO) prices,” said group president/chief executive officer, Datuk Zakaria Arshad.

The strategy in 2017 shall revolve around three main thrusts – business rationalisation to make the organisation leaner; drive for operational excellence; and, selective external growth – all to be executed under uncompromising governance and transparency standards, he said in a statement here.

Zakaria said group-wide business rationalistion would make FGV leaner and more competitive in 2017 through restructuring, divesting or collaborating with another player for those assets and investments that have been dragging  profitability down.

“FGV is also reviewing its organisational structure and business model to achieve better reporting alignment and accountability, mitigation against commodity and currency volatility as well as closer oversight on associated businesses,” he said.

As for downstream, FGV shall intensify efforts to develop destination and consumers market either through organic expansion, marketing agents or strategic partnership with local players, he said.

He said FGV has also been operating under high administrative cost structure previously and 2016 recorded substantial reduction of this cost by more than RM100 million subjected to audit adjustments.

“Our lean administration cost is now a culture and management regiment in FGV, which is to be able to do more with less,” he said.

Zakaria said FGV’s 2017 to 2020 Strategic Plan, which it would embark soon, shall provide a well-defined roadmap and methodology to drive sustainable growth throughout the organisation.

He also said a holistic review of joint-venture terms with key strategic partners was being performed to fully realise the win-win partnership aspirations that shall translate into greater values for FGV.

“This review will ensure, among others, equitable power-sharing at operational and corporate levels, joint products and market development, roadmap on technology transfer as well as providing exposures to our human capital in global environment,” he said.

In addition, selection criteria for future strategic partners had also been tightened so that the win-win mechanisms were established and addressed upfront as the partnership agreement was sealed, he said.

He said the board had also approved several internal policies to ensure highest level of integrity, transparency and accountability be upheld by the employees throughout the group.

The relevant subjects include Gift, Entertainment and Hospitality Policy and Asset & Personal Interest Declaration Policy.

Both were designed to absolve directors and employees from any conflict of interest situation, said Zakaria.

On other development, he said, FGV looked forward to have at least 16 mill complexes Roundtable on Sustainable Palm Oil (RSPO) certified (in 2017) which would open markets that required sustainability standards.

As of December 28, 2016, RSPO had given FGV and Federal Land Development Authority (Felda) separate membership registration.

“We anticipate more premiums from sustainable palm oil especially crude palm kernel oil-related products that fetch better value at this point. We also plan to have another 22 mill complexes ready for audit in 2017’ he said.

In essence, Zakaria believed that the worst was behind him and he was ever ready to lead the team in bringing FGV to greater heights and deliver the expected shareholders return in’ 2017.

He said 2016 proved to be a tumultuous year that saw the share price climbed from its low RM1.33 to as high as RM2.50 before settling at RM1.55 end of the year.

The end of 2016 marked the ninth month of FGV under his leadership.

He said this occurred despite the comprehensive improvement efforts made as outlined in his transition plan which primarily involved strengthening core business, sweating existing assets and putting merger and acquisition on the backseat.

Among the key challenges encountered during his leadership tenure was severe and prolonged El Nino weather, which had negatively affected FGV estates yields with similar drop experienced by national yields bringing about higher CPO price.

On the Indonesia’s Eagle High Plantation (EHP), Zakaria said, market optimism developed over the first few months of his stewardship was affected by uncertainties over EHP acquisition plan since June 2015.

“Now that FGV has signed the Termination Agreement with Rajawali Group on Dec 23, 2016, the matter has been effectively concluded. The investment is now undertaken by FIC Properties Sdn Bhd, an entity under Felda,” he said.

As for the Felda Iffco Gida Sanayi, Turkey, he said, the financial losses were currently under forensic audit and FGV was awaiting the official report before taking any further action.

“We are also finalising the necessary paperwork to claim insurance coverage on such fraud that will substantially compensate the losses recorded earlier,” he said. — Bernama