FGV has no more room for er­ror

The Star Malaysia - StarBiz - - News - JAGDEV SINGH SIDHU starbiz@thes­tar.com.my

THE re­sump­tion of du­ties by Datuk Zakaria Ar­shad as pres­i­dent and chief ex­ec­u­tive of Felda Global Ven­tures Hold­ings Bhd (FGV) next week brings to an end one of the most dra­matic board­room tus­sles in re­cent times.

Nor­mally, a pro­fes­sional man­ager is at the los­ing end of any board­room fight.

But in the case of FGV, it is the board that has changed while the man­age­ment has re­mained in­tact.

The fast chang­ing dy­nam­ics within FGV saw Tan Sri Mohd Isa Ab­dul Sa­mad re­placed as chair­man of the plan­ta­tions gi­ant within weeks. Sub­se­quently, sev­eral di­rec­tors also re­signed from the board.

Zakaria will re­turn and find two new di­rec­tors at the board led by new chair­man Datuk Wira Azhar Ab­dul Hamid who also an­nounced that the re­turn of Zakaria did not mean it’s busi­ness as usual.

He said there was a need for a new man- age­ment struc­ture to strengthen the or­gan­i­sa­tion and to ex­e­cute the strate­gic plans of the board.

Azhar hinted at fur­ther board changes that would be made in due course to un­leash the po­ten­tial of the sprawl­ing plan­ta­tions group.

“Be­ing one of the big­gest oil palm plan­ta­tion com­pa­nies, FGV must as­pire to be the in­dus­try leader in terms of pro­duc­tiv­ity and fi­nan­cial re­turns. So, any fac­tors hin­der­ing us from achiev­ing th­ese ob­jec­tives must be ad­dressed im­me­di­ately,” he said in a state­ment on Mon­day.

News of Zakaria’s re­turn sent the stock up from RM1.72 to RM1.83, the high­est price since June 19.

The spurt in the share price is prob­a­bly down to in­vestors hop­ing that the past prob­lems on how the group was man­aged would im­prove with the on­go­ing shake-up.

In­vestors might have a rea­son to be a lit­tle more op­ti­mistic on the fu­ture of FGV, given how the com­pany had per­formed since it was listed in 2012.

Since its list­ing, FGV burned through its cash pile of more than RM5­bil that has dropped to RM1.87bil as of March 31 this year. Be­tween Jan­uary 2013 and 2016, when Mohd Isa was the chair­man and Datuk Mohd Emir Ma­vani Ab­dul­lah was the pres­i­dent and CEO, FGV made seven ac­qui­si­tions.

The pur­chases has not trans­lated to FGV see­ing a jump in prof­itabil­ity.

In FGV’s first year as a listed com­pany, it made a profit of RM805.8mil. In its last fi­nan­cial year, it posted a profit of RM29.6mil.

Zakaria too knows that it is im­per­a­tive that FGV im­proves on its fi­nan­cial per­for­mance.

Poor fi­nan­cial re­sults in the past have been can­non fod­der for crit­i­cism against the group.

On this score, Zakaria’s ex­e­cu­tion of the plans laid out in its 2020 Strate­gic Plan to re­vive the per­for­mance of FGV will be cru­cial in win­ning over de­trac­tors that have dis­counted the plan­ta­tion gi­ant in favour of other bet­ter-run com­pa­nies on the stock ex­change.

While the up­lift in the stock price must be pleas­ing to share­hold­ers of FGV, the ur­gency to im­prove its fi­nan­cial stand­ing will be im­por­tant be­cause FGV has got some stiff com­pe­ti­tion com­ing up.

Sime Darby Plan­ta­tions is slated to be listed as a pure plan­ta­tion play by end of the year and has dan­gled the car­rot of a 50% pay­out of its net profit as div­i­dend to share­hold­ers.

The size of Sime Darby Plan­ta­tions eas­ily makes it com­pa­ra­ble to FGV as an­other large plan­ta­tion com­pany.

It will likely be an in­dex stock on the FBM KLCI and will fun­nel in a lot of big money into the counter, money that other plan­ta­tions com­pa­nies such as FGV will be fight­ing for.

With Azhar a for­mer ex­ec­u­tive vice-pres­i­dent of Sime Darby’s plan­ta­tions busi­ness, he will know first hand the strengths and weak­nesses of the com­pany.

His knowl­edge, and that of the new man­age­ment of FGV, will be im­por­tant in draw­ing up plans that can not dis­pel the poor per­cep­tion of by in­vestors of FGV but in­sti­tute an im­por­tant turn­around that must im­prove the lan­guish­ing fi­nan­cial per­for­mance of the group.

Now there is no more room for er­ror.

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