Upcoming financial results, deforestation charge weigh on FGV
INVESTORS’ concerns on Felda Global Ventures Holdings Bhd’s (FGV) upcoming quarterly results could be one of the reasons for its weakening share price. Also, the plantation giant has been slapped with a deforestation charge at its PT Temila Agro Abadi (PT TAA) plantation unit in West Kalimantan, which the group has strongly refuted.
Shares of FGV had fallen more than 6.1% in the last five trading days. Its shares fell to RM1.84 yesterday, down 1.1%. It is currently trading at 442.7 times trailing 12-month earnings per share and 40 times its estimates for the coming year.
FGV has also postponed the announcement of its first quarter 2017 financial results scheduled for May 24. It will now be announced on May 31.
Yesterday, FGV said an independent assessment on its oil palm plantation in West Kalimantan, Indonesia showed it had not committed deforestation as fire and logging had destroyed the forest earlier.
The plantation group said the assessor was hired by its unit Felda Global Ventures Kalimantan Sdn Bhd (FGVK) to verify the allegations and reporting by Chain Reaction Research (CRR) and its partner, Aidenvironment, that FGV risked supply chain exclusion over repeat offences.
The articles alleged that FGV had cleared peat forest, contrary to its policies and industry standards, on its PT TAA plantation in West Kalimantan.
According to a report by CRR on its website, it said in 2015, in Landak District, FGV’s subsidiary PT Citra Niaga Perkasa, cleared a 240 hectares (ha) high conservation value forest on deep peat land greater than three meters. FGV previously bought PT Citra Niaga Perkasa in 2012 for US$10.6mil.
More recently, on April 12, 2017, CRRpartner Aidenvironment commissioned a drone fly-over video of FGV’s neighbouring subsidiary PT TAA’s concession.
Then on April 18, 2017 CRR published a research note showing deforestation from the drone video allegedly demonstrating deforestation activities by FGV’s subsidiary PT TAA.
FGV disagrees with CRR claims.
“PT TAA’s natural forest has been completely destroyed by massive forest fires in the 1980’s and in 1997, and also by continuous logging operations by logging companies and by the local communities, before the acquisition of PT TAA’s land by FGV.
“FGV has complied with Roundtable on Sustainable Palm Oil (RSPO) New Planting Procedure (NPP) 2010 and procured all necessary approvals from the relevant authorities in Indonesia in respect of the development of PT TAA’s land which commenced in late 2014,” FGV said in a filing with Bursa Malaysia.
FGV also said the assessor’s observations and measurements showed the buffer zone area on the east side of PT TAA’s concession had not been damaged by land clearing.
There was also no encroachment in the identified high conservation value (HCV) areas.
It also pointed there were no repeated offences related to peat forest clearance by PT TAA or PT Citra Niaga Perkasa (PT CNP).
“The clearance in 2015 of 191.8 ha of HCV area in PT CNP was made at the instructions of the local community to the contractor without PT CNP’s knowledge and approval.
“The incident has been reported by FGV to the RSPO in 2016 and a satisfactory solution has been agreed upon.
“No other offences have taken place since then. Therefore, FGV denies that it is a serious repeat offender of RSPO Principles and Criteria,” it said.
As for an April 19, 2017 report by Valuewalk entitled “FGV risks revenue by violating board’s policies,” FGV said the “No deforestation peat and exploitation” (NDPE) policies of FGV’s customers prescribe strict requirements regarding plantings on peat soil.
“By establishing the group sustainability policy in August 2016, FGV has displayed its commitment to the customers’ NDPE and shall ensure that all its future land acquisitions are in compliance with its customers’ NDPE policies,” it said.