FGV’s first half net earnings below expectations

PETALING JAYA: Felda Global Ventures Holdings Bhd’s (FGV) net profit in the first half to June 30 was below CIMB Research and Bloomberg consensus expectations at 6% of full-year forecasts, mainly due to losses at its sugar division.

“FGV’s results were below expectations as H1’17 core net profit of RM7mil accounted for just 6% of our full-year forecast and 5% of Bloomberg consensus.

“This was mainly due to losses at its sugar division on the back of badly-timed purchas- es of raw sugar in second quarter and lower-than-expected fresh fruit bunches (FFB) output,” CIMB said.

The research house added that the sugar losses, coupled with impairments, more than offset better estate earnings.

FGV’s net profit fell to RM25.9mil in the second quarter ended June 30 from RM73.7mil a year ago.

Its revenue rose to RM4.22bil from RM4.14bil in the same period last year.

CIMB said FGV’s plantation earnings more than doubled year-on-year to RM172mil in the second quarter due to higher average crude palm oil (CPO) selling prices of RM2,796 and a 1% decline in its average cost of production to RM1,649 per tonne.

Its sugar division, however, posted a second consecutive quarterly loss of RM18mil due to higher raw sugar costs.

This, coupled with higher fair value changes in land lease agreement, led the company to report a 29% year-on-year decline in second quarter pretax profit.

“FGV reported a 3.1%/0.5% year-on-year drop in FFB output in the second quarter respectively, which was below Malaysia’s FFB output growth of 15% in H1’17 and FGV’s previous target to deliver 15% improvement in FFB output in 2017,” CIMB said, adding that FGV had indicated that this was due to labour shortage issues at its estates in second quarter.

In view of weaker FFB output in the second quarter, FGV has reduced its FFB output target by 4% to 4.3 million tonnes in FY17.