This article first appeared in The Edge Financial Daily, on May 25, 2016.

KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) slipped into the red in its first financial quarter ended March 31, 2016 (1QFY16), with a net loss of RM65.54 million, compared to a net profit of RM3.58 million a year ago, primarily on lower crude palm oil (CPO) production in its palm upstream segment.

Its quarterly revenue, however, was up 38.6% year-on-year to RM3.76 billion from RM2.71 billion.

The world’s largest CPO producer said the palm upstream segment saw its loss widen to RM100.55 million in 1QFY16 from a loss of RM1.57 million, on the back of weaker CPO production, which was adversely affected by the severely dry conditions from the El Niño phenomenon.

CPO production declined by 14% to 484,000 tonnes in 1QFY16 in tandem with lower fresh fruit bunch production of 781,000 tonnes in 1QFY16 from 930,000 tonnes recorded in 1QFY15.

Average CPO price realised was RM2,303 per tonne in 1QFY16 compared with RM2,279 per tonne in 1QFY15, while the oil extraction rate achieved was at 20.56%, slightly higher compared with the 20.5% achieved in 1QFY15.

The increase in the fair value charge to RM89.72 million in 1QFY16 compared with RM73.51 million in 1QFY15 has also contributed to the decrease in the result from this segment, the group said.

The group’s palm downstream segment, on the other hand, saw a profit of RM1.8 million in 1QFY16 compared to a loss of RM21.69 million in 1QFY15, due to higher sales volume in the US fatty acid business, and higher margin achieved for refined, bleached and deodorised palm kernel oil and crude palm kernel oil from kernel crushing activities.

The result was, however, partly affected by negative margin from China’s bulk palm oil trading, the group said.

The group’s sugar segment, meanwhile, reported a 27.8% decline in profit to RM66.5 million from RM92.14 million, on higher raw sugar costs.

On prospects, FGV said the El Niño phenomenon is expected to result in an overall reduction in the group’s plantation yield for the current year compared with 2015.

However, it said CPO prices, expected to be higher this year due to declining palm oil supplies arising from the same El Niño phenomenon, will help offset declines in production.

Coupled with administrative rationalisation exercises, FGV expects its performance for FY16 to be in line with the industry’s.