FGV profit down 65% in Q2 on sugar business

PETALING JAYA: Felda Global Ventures Holdings Bhd (FGV) posted a 65% drop in second quarter profit from a year ago as its sugar business dragged down group profit on higher raw material prices and a weaker ringgit.

Profit fell to RM25.9mil from RM73.7mil while revenue rose to RM4.22bil from RM4.14bil in the second quarter ended June 30, 2017 compared with the same period in 2016.

Earnings per share for the quarter was 0.7 sen a share compared with 2 sen a share previously.

In a filing with Bursa Malaysia, FGV said group fresh fruit bunches (FFB) production for the second quarter improved compared to that of the first quarter but production was flat in the first half 2017 against the same period last year, partly due to weak performance of firstyear crop and labour shortages.

It said labour issues had been partly mitigated through greater government support and better engagement with the supplying countries and it was proactively implementing the use of mechani- sation in its estates to manage labour shortages.

It expects the price of crude palm oil (CPO) to be sustainable for its current financial year and its financial performance to be satisfactory.

In reviewing its performance for the first half, FGV said its plantation sector registered a profit of RM148.01mil for the financial period ended June 30, 2017 compared to a RM9.69mil loss in the previous year.

This is mainly due to better margin achieved from higher average CPO price realised of RM2,916 per tonne compared with RM2,446 per tonne realised in 2016 and lower CPO production cost per tonne.

CPO production increased by 12% to 1.28 million tonnes in 2017 but FFB production decreased marginally from 1.86 million tonnes in 2016 to 1.85 million tonnes in 2017. Oil extraction rate achieved was lower at 19.79% compared to 20.47% in the previous year.

But it was its sugar business that pulled profits down as the segment recorded a loss of RM41.6mil compared with a profit of RM99.15mil last year. This is mainly attributable to higher raw sugar material cost and weakening ringgit despite improved selling price and higher domestic sales volume.

FGV said apart from higher raw sugar costs, its profit was dragged down by an impairment of receivables of RM47.62mil and provision for litigation loss of RM32.84mil recognised by its plantation sector in the preceding quarter.

The land lease agreement fair value charges also increased by 18% to RM121mil compared with the first half of 2016.

FGV’s logistics and other sectors improved from a loss of RM5.96mil in the previous year to a profit of RM5.44mil.

This is mainly attributable to higher throughput and tonnage carried by the group’s transport operation in tandem with the increase in CPO production volume but was affected by lower contribution from its other sector segment due to reduction in the projects handled compared to previous year.

FGV said it is on track to achieve its replanting target this year of 14,000 ha, of which around 10,000 ha has been cleared. Of that amount, 1,478 ha has been fully planted in the first half of 2017.

“The group has reduced administrative expenses by 5% to RM439mil compared to the same period last year,” it said.

FGV said it expected FFB production for the second half of the year to improve further due to increased productivity resulting from higher output of crops and consolidated efforts to overcome the shortage of plantation workers.

“We will continue with our efforts to consolidate by-products business such as palm kernel shell, sludge oil, biomass and biogas. The group is expecting an additional revenue of more than RM60mil per annum from the export and local markets.

“FGV will remain focused on improving its core business performance, exercise prudent financial and cost management, enhance corporate governance and strategic divestment of non-core businesses in its effort to maximise shareholder value, in line with the group’s strategic plan 2020 target,” it said.