Cover Story: ‘FGV better off listed’

This article first appeared in The Edge Malaysia Weekly, on April 22, 2019 - April 28, 2019.

Photo by Suhaimi Yusuf

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FGV Holdings Bhd’s current office, Wisma FGV, in Jalan Raja Laut is a far cry from its old posh set-up at Menara FELDA in Platinum Park, Kuala Lumpur. “The decision to move here was purely commercial. Rental here is RM3.50 psf, the old one (Platinum Park) was RM7.70,” says recently appointed FGV Holdings CEO Datuk Haris Fadzilah Hassan matter-of-factly.

In an exclusive interview with The Edge, Haris shares his thoughts on the way forward for FGV and the gargantuan tasks ahead for him. Here are excerpts from the interview.

 

Your office … it’s very different from the old set-up.

It’s nothing to be shy about. It was an opportunity for us to be ourselves. At the old building, we couldn’t even put the FGV logo outside. There was no opportunity for us to exert our identity, although we are a public-listed organisation.

 

The perception is that you are trying to distance yourself from your parent (FELDA).

I won’t say distance. There is a confusion, even in the way you are saying it — after June 2012’s public listing, FELDA is only the single largest shareholder. They (FELDA) own 33.67% of FGV, but there are other shareholders with about 67% (in FGV). Even in accounting treatment they equity account based on the shareholding, if they were our parent they would take the whole profit … so they are our single largest shareholder.

 

What were your fears, your thoughts before you joined FGV?

Basically, FELDA was established to give land to the landless, so when you have an organisation that until recently had a social agenda, it is different. My (other) concern then, looking at this company, it has been listed for say seven years, if I were to join, I would be the fifth CEO.

 

There is a perception that people in FGV are more loyal to FELDA than to FGV.

I would not say it is untrue. It’s because of the long association. They have only been in FGV for seven years, and over the last few years there’s not much to be proud of, being with FGV.

 

How does it work for you, being a unit of FELDA, they talk about privatising FGV on and off.

If you ask me, personally, I prefer FGV being a public-listed entity because when you are publicly listed, then you are transparent, you are accountable. So, for me, there are advantages of being listed. Many of these stories, these discoveries in FGV are because we are a public-listed organisation. So, if we are taken private, whether it’s good in the long run is a question mark.

 

Is there any strain between FGV and FELDA?

On the outside, people say things like that, but internally, I do not feel there is a strain between FGV and FELDA. I think the relationship is fine.

 

Your first 100 days seems very eventful. The FELDA White Paper came out. So how has it been?

It was hectic. To be candid about it, it has also been very hard. It’s easy to lose focus when you have so many things to do at any one time.

We have to look at the upstream segment, as this is where the real money-making areas are. So for the last 100 days, we have been focusing more on the upstream, getting our basic practices right.

That is the other area I’ve been looking at in the first 100 days, sweating the assets. We have 68 mills but utilisation is about 65% to 67%, so we want to increase this. We have assets but we are not sweating them enough. Also, we are looking at opportunities to rationalise. Do we really need all these 68 mills because some of them are within the vicinity of others, which could be one of the reasons why the utilisation rate is low.

So we are looking at rationalising two mills a year, [and] we want to take out about six mills from the system. We are looking to close them and make them collection centres for FFB (fresh fruit bunches). Then we will be able to raise utilisation to 75%.

 

Some of the acquisitions that were made prior to your entry, for instance, Asian Plantations had issues. How are you dealing with them?

In fact, my first week in FGV, the first place I visited was Asian Plantations. I went there because of the big impairment. This investment was made in 2014. Last year’s impairment, (a little more than RM1 billion) was mostly because of Asian Plantations. It’s about 26,000ha, the total area if I’m not mistaken, but only 8,000ha are planted, and out of that 8,000ha only 5,000ha are productive. There are terrain difficulties and all those things.

 

Do you have a problem with — integrity in FGV?

Why we’re in this position is because of integrity issues before. For the first quarter of 2019, we have to return to the black, to the positive. That has been our battle cry. That is why this first quarter is very important. There is nothing more morale-boosting than to be in a company that performs.

 

Datuk, are there issues with integrity in the estates, as in the past, we heard of pilferage, or managers not meeting KPIs or standards, is that true, and if it is, how do you change that?

We are talking about such a huge area, so to be there all the time is a bit difficult, which is why we are looking at processes. How do we put processes in place to manage some of these things? In the past, we heard the same thing.

 

They have just been put into place?

They have been further strengthened in the last two to three years. So back to your question, we heard about them, but now we have a different process, we are of the view that you cannot have the same process and expect different results. So we are changing the processes.

From procurement, we are expecting RM150 million savings by tightening some of these processes. Also, by combining, rather than having each estate going and buying their own needs, we can do more volume purchases to get better deals.

We are also targeting RM350 million from the sale of non-core businesses, which is happening ... for example, Cambridge Nanotech. We also have the property business, the engineering business, so RM350 million within three years, we are expected to get.

 

Where do you hope to see FGV in five years?

My hope is that, and I’m quite confident of this, FGV will be one of the leading plantation companies or agribusiness companies in Malaysia.

Sorry for saying this, but every new CEO says the same thing … at every interview, we hear the same thing.

This is why I say I don’t only have you guys being cynical about it. The 19,000 people (staff of FGV) also have the same feeling.

It’s a natural reaction, but as a leader I have to believe tomorrow will be better than today, and I have to work towards it. But what I say is from a point of facts. I look at the amount of land that we have, looking at the people, mathematically we can be there, it is possible. It’s whether I can harness the power of these 19,000 people, to come along with me on this transformational journey, whether they are willing to give me a chance, to work with me, to trust me, to lead them to this path. Whether we fail or succeed depends on these 19,000 people.

 

You said you want to balance the downstream, what do you mean by that? FGV already has some downstream products right? Saji oil and all that, so what more are you doing?

There are two areas, one is where we are targeting the B2C (business to consumer). Saji is more of a FMCG (fast moving consumer goods). There is a big market supplying to businesses — supplying ingredients, supplying to Unilever, supplying to Nestle, to QSR — so that part of the business, we need to beef up.

We can also go further downstream in terms of oleo chemicals or go into areas such as quality oils. These are things that we don’t have because our focus has always been on commodities.

The other thing we are doing is looking at some of the joint ventures that we have. In some, FGV has taken a role of just supplying raw materials, so I’m thinking why just raw materials? Why not product development? Why not branding?

 

Are you still on track for Roundtable on Sustainable Palm Oil (RSPO) certification?

Yes, we are still on track. Our commitment is still there [and] according to our timeline, we are on track. We have 33 RSPO-certified mills, out of our 68. We are still proceeding with the programme to certify … no issue there.

 

Is there still an expectation to provide for the FELDA settlers ... the socioeconomic aspect — how do you address that?

We maintain very clear lines, and as a public-listed entity, we have our corporate social responsibility (CSR) activities. So we will occasionally get requests for CSR, for some donations, so we look on the basis of whether we can afford it.

Our priority for CSR has always been to places near where we operate. We give priority to communities within our work ecosystem, but the amount is not mandated or regulated by a certain percentage. It depends. Like this year, I can always say we are not making money yet. Those that we can, we do.

 

Your share price, what do you think is a fair value for FGV?

The fair value should be at least NTA (net tangible asset) per share. NTA per share assumes that if this company closes down, if you strip it, that’s what you will get. Our NTA does not vary much from other companies, but they are trading in multiples of their NTA. The minimum should be the NTA level.

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