Azhar: ‘Eventually FGV will need to raise funds’

EXCERPTS from the interview with FGV chairman Datuk Wira Azhar Abdul Hamid.

What will be your immediate focus for FGV?

I don’t really have a starting point because I am doing everything at the same time.

Eventually, FGV will need to raise funds via sukuk or some refinancing, etc. We will find alternative ways to sort out all the problems. Right now, our total cash pile is about RM1.5bil, but we will need to start building our reserves again. Every year, FGV will need RM300mil-RM400mil as working capital for replanting and giving RM250mil to Felda under the LLA, among other things. The group’s overheads are fat, so we will need to trim that down as well. But roughly, there is not much free cashflow left and we have been eating into our reserves.

What are some of the glaring basic issues which have been overlooked by the previous management?

What I came in (September 2017), it was baffling that the past management did not spend any money on the workers’ housing and were also short of 10,000 workers. How do you get a shortage of workers? It’s like saying I have not bought any groceries for my family for a month. That would have shaken your household right?

Despite this dire situation, life still goes on comfortably at FGV like nothing is happening when you are short of 10,000 workers. And people kept on asking why was FGV not performing.

The labour shortage is a big issue for us and needs to be resolved quickly.

On the ground level, the indiscipline and non-compliance culture is so strong where some FGV workers don’t seem to care about productivity, complying with the proper standard operating procedures and a lot of other things that they really need to focus on.

There is also a major “bagworms” problem in Perak, which is affecting yields in the oil palm estates. Estate holdings under Felda, FGV and United Plantations are suffering but nothing is being done.

So, I have asked the Primary Industries Minister Teresa Kok’s assistance to help establish a crisis initiative among oil palm planters to come together and solve this major problem. Is it true that the Felda LLA factor is said to be a drag on FGV’s results over the years?

There is a perception that FGV’s results are unique due to the LLA and that it shouldn’t be compared to its peers in the industry.

To me that is all rubbish. Anything that you can generate from the results can be normalised. If you have a unique payment, that can also be normalised. If you want to accumulate the hectarage that comes under the LLA, how long will that take you? So, what is so unique about FGV in this context?

How would you describe FGV’s commitment under the LLA with Felda?

As far as FGV is concerned, we have been dilligently paying to Felda as per term under the LLA agreement. There has been an ongoing misconception among settlers that FGV has taken the settlers’ land (for its IPO exercise). I want to be clear on this matter that the settlers were never shortchanged. It was the transfer of Felda’s land to FGV under the LLA which paved the way for FGV’s listing in 2012 and not the settlers’ land. Koperasi Permodalan Felda (KPF) took their equitable portion (of FGV shares) from the sale of FGV Holdings Sdn Bhd to FGV. KPF now owns around a 6% stake in FGV. But the problem I have now is that I have to put cash into enhancing the quality of FGV estates, including those under the LLA. In theory, Felda has given FGV a shocking state of (old palm age profile) land, with FGV having to spend about RM300mil per year to enhance it. At the end of the 99-year lease, Felda, in turn, will be getting back a high-quality piece of estate land. So, what will FGV get in return out of this?

How long do you think it will take before FGV is able to see the light at the end of the tunnel after the series of forensic audits and internal investigations on the past investments and business transactions?

I think it will not be that difficult. Just look at the problems created by the past management. A lot of it already has gone down the drain. For the Asian Plantation Land (APL) acquisition, we will not be able to dispose it or else we’ll be selling at a huge discount. Maybe, we can find other alternatives for the other half of the APL Land. For now, we don’t see the need to impair it, as the APL Land is sitting within the whole portfolio of our plantation business. So, FGV is still doing okay as far as the impairment is concerned.