FGV down on Q2 losses
Shares under pressure following ‘adverse findings’ by investigator
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