Rationalisation to continue in FY19

“The manpower rationalisation will continue in FY19 as the company plans to embark on digitising its businesses. As part of the costrationalisation plan, the group will also likely reduce its number of mills to improve utilisation factor as well as continuous improvement in its estates management to reduce cost of production,” it added.

Allin, MIDF Researchopined: “We view this as a positive development moving forward for FGV if these plans were to materialise.” FY18 has been a challenging year for FGV as the company underwent a complete overhaul of its leadership team amid a period of political uncertainties and unfavourable palm oil environment, the research team remarked.

“Global supply glut has also caused the CPO price to plunge significantly and impacted all the palm oil companies including FGV,” it added.

“However, as one of the major palm oil players, we observed that the FGV’s average selling price of CPO was higher as compared to some of its peers, indicating the higher bargaining power for FGV and most of its CPO are produced in Malaysia which typically command a higher premium to Indonesian palm oil by about eight to 10 per cent.

“We view this as a plus point for FGV to continue its strong footing in the palm oil industry. Moving forward, we will see further consolidation and cost rationalisation in FY19, as well as better estates management which will contribute to its bottom line,” it said.

Overall, MIDF Research pegged a ‘neutral’ rating on the stock.