KUALA LUMPUR (Feb 14): FGV Holdings Bhd is diversifying into the business of dairy farming and fresh milk processing, as it moves towards becoming an integrated agrifood company.
The group is spending RM10 million to acquire new shares amounting to 60% equity interest in the enlarged share capital of RedAgri Farm Sdn Bhd, which owns the Bright Cow brand of dairy products.
The move will enable FGV to create more value from its existing resources and to tap into synergies within the palm-based circular economy, said FGV in a statement today.
“Dairy farming is one of the identified pillars of our integrated farming business,” said its group chief executive officer Datuk Haris Fadzilah Hassan, adding that other key components are animal nutrition, paddy and cash crops like MD2 pineapples and Cavendish bananas.
RedAgri currently processes 4,000 litres of fresh milk a day, which will be increased to 20,000 litres a day by 2022. Most of this increased production capacity is already committed to industrial and commercial customers, FGV said.
FGV also said it will encourage and support its smallholders and farmers in the B40 segment to venture into the integrated agrifood sector.
“For the dairy business, this will have the twin impact of increasing the supply of milk for FGV’s processing facilities and also, offering a lucrative income source for farmers,” Haris Fadzilah said.
Meanwhile, FGV updated that it has ramped up the production of its palm-based animal feed operations, with sales showing a marked 113% increase to 21,600 metric tonnes (MT), against sales of 10,200 MT in the previous year.
January 2020 sales have come in 369% higher than January 2019, with 3,600 MT of feed sold in the domestic market, it added. “Once capacities are rammed up to 150,000 MT per annum, in the next five years, we are looking at additional revenues of about RM120 million from this business,” Haris Fadzilah said.
According to FGV, about 60% to 70% of the cost of livestock rearing in Malaysia is from feed, most of which is imported.
Additionally, to fully realise the value of its 15,000 hectares of intercropping land available during oil palm replanting each year, FGV sad it has established an MD2 pineapple seed garden in Johor, with plans to scale up for both the local and domestic markets.
The group has also established contract farming agreements for the supply of Cavendish bananas, besides other cash crops, which are being tested for demand and viability.
In addition to palm kernel expeller, the biomass produced from pineapple and banana production can potentially be processed for animal feed production, it said.
FGV shares inched up one sen or 0.75% to settle at RM1.34 today, valuing the group at RM4.89 billion.