This article first appeared in The Edge Financial Daily on May 30, 2019

KUALA LUMPUR: FGV Holdings Bhd confirmed yesterday it is in negotiations with seven interested buyers over the sale of Trurich Resources Sdn Bhd, its 50:50 joint-venture company with pilgrims fund Lembaga Tabung Haji. However, it has indicated that the asset is likely to fetch a little over RM1 billion rather than a reported US$1 billion (RM4.2 billion).

“Yes, Trurich is definitely one of the assets that we are planning to divest and monetise,” group chief executive officer Datuk Haris Fadzilah Hassan told reporters when asked to confirm a news report last month on the purported sale.

“There are seven interested buyers at the moment and we are in talks with all of them,” he said, adding: “I think it (Trurich) is closer to a bit more than RM1 billion.”

Trurich owns and manages two palm oil estates covering 42,000ha in total in north and central Kalimantan, Indonesia.

Haris revealed that three of the seven buyers are interested to buy both estates, while the other four are keen on only one of them. “Preferably, we would like to sell it (Trurich) as a whole,” he said.

Haris said FGV is targeting for the sale to be completed by September.

Last month, Bloomberg reported that FGV and Tabung Haji were working with an adviser to gauge the potential interest in Trurich as both government-linked companies seek to improve their financial position. However, the report added that they may decide to keep the asset if they cannot get an attractive price for it.

Apart from Trurich, Haris said FGV is targeting another RM350 million from the divestment of non-core and non-performing assets under its three-year transformation programme. He said the group had finalised several divestments of non-core and non-performing assets amounting to some RM150 million in the first quarter (1Q).

Earlier this month, FGV announced it is liquidating two companies by end-2019, namely Felda Engineering Services Sdn Bhd and Felda Properties Sdn Bhd, neither of which are part of its core business.

Under the transformation programme, Haris said FGV will also be focusing more on developing its downstream businesses to reduce its exposure to crude palm oil (CPO) price fluctuations. FGV estimates CPO prices to trade within the range of RM1,900 to RM2,200 throughout 2Q.

“We are a big upstream player, producing about three million tonnes of crude palm oil every year and 60% of that is being exported. That itself poses a challenge because when prices are down like today, we are exposed to a lot of discounts.”

Currently, the upstream contributes 60% of its oil palm plantation revenue, and downstream 40%, but FGV is working towards equal contributions from both segments.

He described the trend of CPO prices as “abnormal”, as prices have been expected to rebound based on the cyclical nature of the commodity, but have yet to do so.

In 2Q, the downstream business is expected to launch four new products: Mass 2 blended oil, industrial margarine, premium blended oil and coconut milk.