FGV down on Q2 losses

Shares un­der pres­sure fol­low­ing ‘ad­verse find­ings’ by in­ves­ti­ga­tor

The Star Malaysia - StarBiz - - News - Div­i­dend (sen) Rev­enue (RM mil) Pre-tax profit (RM mil) Net profit (RM mil) EPS (sen) Div­i­dend (sen) Rev­enue (RM mil) Pre-tax profit (RM mil) Net profit (RM mil) EPS (sen) Div­i­dend (sen) Rev­enue (RM mil) Pre-tax profit (RM mil) Net profit (RM mil) EPS (se

PETALING JAYA: Shares in FGV Hold­ings Bhd dropped more than 6% af­ter post­ing losses of RM23.23mil in the sec­ond quar­ter ended June 30, 2018.

FGV’s shares were was also un­der pres­sure fol­low­ing the man­age­ment’s state­ment of “ad­verse find­ings” by foren­sic in­ves­ti­ga­tor, which is cur­rently look­ing into six trans­ac­tions and in­vest­ments of the com­pany’s past man­age­ment.

Shares in FGV closed 10 sen yes­ter­day to RM1.55.

FGV said its plan­ta­tion sec­tor recorded a loss of RM6.53mil in the sec­ond quar­ter of 2018, which was a steep de­cline from a profit of RM159.88mil in the pre­vi­ous cor­re­spond­ing quar­ter.

FGV also said the lower av­er­age crude palm oil (CPO) price of RM2,419 per tonne, 13.5% lower than the RM2,796 per tonne recorded in the pre­vi­ous cor­re­spond­ing quar­ter, con­trib­uted to the losses.

Ac­cord­ing to CIMB Re­search, FGV’s first-half re­sults were below its tar­get and con­sen­sus net profit.

“The group’s core net loss for first-half 2018 of RM87mil was below our full-year profit fore­cast of RM172mil and Bloomberg’s con­sen­sus of RM141mil,” it said in a re­port.

The re­search house pointed out that the poor set of re­sults were due to weaker-than-ex­pected fresh fruit bunches yields and palm prod­uct prices, lower-than-ex­pected sugar con­tri­bu­tions, higher CPO pro­duc­tion costs as well as losses at its joint ven­tures of RM28mil.

None­the­less, CIMB said it is posi- tive on steps taken to iden­tify and im­prove FGV’s ex­ist­ing prac­tices.

“But this is off­set by con­cerns that the im­prove­ments will take time and this could lead to write-offs in the near term,” it said.

As such, CIMB had slashed its fi­nan­cial year 2018 (FY18) to FY20 fore­cast on FGV’s earn­ing per share to re­flect lower palm oil and sugar earn­ings.

On Tues­day, FGV ac­knowl­edged that the man­age­ment needed to take steps to en­hance op­er­a­tional ef­fi­cien­cies and fell short of tar­gets that were set by them­selves in­ter­nally.

“A com­par­i­son with FGV’s peers demon­strates this. Fur­ther­more, the com­pany’s per­for­mance falls short of mar­ket ex­pec­ta­tions and the tar­gets that were in­ter­nally set by man­age­ment,” said FGV in the notes ac­com­pa­ny­ing its re­sults.

It said the in­ter­nal in­ves­ti­ga­tions are ex­am­in­ing open credit lines, poor pur­chas­ing trad­ing prac­tices and palm oil sales, di­rect awards of pro­cure­ment con­tracts that breach best prac­tices, and the short­age of work­ers from mid-2016 to mid-2018 that re­sulted in fi­nan­cial losses over the pe­riod.

It said the in­ves­ti­ga­tion had re­vealed “ad­verse find­ings”, without ex­plain­ing what they were, and that it had sought le­gal ad­vice on pos­si­ble re­course.

FGV also said the in­ves­ti­ga­tions that have been com­pleted in­cluded on the ac­qui­si­tion of Asia Plan­ta­tions Ltd, in­vest­ment in FGV Cam­bridge Nanosys­tems Ltd and the ac­qui­si­tion of Troika con­do­mini­ums. Petron Malaysia Refin­ing & Mar­ket­ing Sarawak Oil Palms Jaya Ti­asa Hold­ings Ta Ann Hold­ings Pa­cific & Ori­ent Hap Seng Con­sol­i­dated

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