This article first appeared in The Edge Financial Daily on August 29, 2019
KUALA LUMPUR: FGV Holdings Bhd’s net loss for the second quarter ended June 30, 2019 (2QFY19) widened to RM52.2 million, from RM23.43 million a year earlier, due mainly to lower average crude palm oil (CPO) price and losses incurred in the sugar sector. Quarterlyy revenue fell 4.6% to RM3.28 billion from RM3.44 billion previously, the group said in a filing yesterday.
For the six months ended June 30, FGV’s net loss rose to RM55.57 million from RM22.31 million in the same period last year, as revenue dropped 6.9% to RM6.56 billion from RM7.04 billion.
Besides softer CPO prices, FGV earnings for 2QFY19 were also hit by losses in the sugar business of the group’s 51%-owned subsidiary MSM Holdings Bhd. As such, the group is reviewing its position in the sugar business as it views the current structure as suboptimal and not adaptable to policy shifts or industry trends.
Speaking at a press briefing later, FGV group chief executive officer (CEO) Datuk Haris Fadzilah Hassan said the group is keen on selling part of its stake in MSM, but seeks a strategic partner that is adept at logistics, and one that can also help with raw sugar supplies and expansion of export markets.
“It is all about getting the best value. If you look at the sugar market now, it is a very weak, and as shareholders, we want to maximise the returns,” he said.
MSM controls 59% of the local sugar industry. “We want partners that can actually strengthen MSM with regards to [the supply of] raw sugar as it is a big component.
“They must also have logistics capabilities and, most importantly, have [access to other] markets,” Haris said. Thus far, interested parties in FGV’s subsidiary lack all three criteria, he added, “so we are still working to get the best fit.”
Moreover, after coming on stream this year, MSM’s Johor refinery increased its refining capacity to 2.2 million tonnes a year — about a third more than the domestic market demand of 1.5 million to 1.6 million tonnes.
Haris said the new capacity provides MSM with an opportunity to explore the export market.
On FGV’s transformation programme, Haris said there needs to be a stable relationship between the board and shareholders of the group for the programme to be effectively implemented. He was alluding to a shareholders’ meeting in June where the group’s major shareholders sprang a surprise when they voted against resolutions related to directors’ remuneration.
The Federal Land Development Authority, Koperasi Permodalan Felda Malaysia Bhd and the Armed Forces Fund Board voted against several resolutions, including one related to the payment of directors’ fees, prompting chairman Datuk Wira Azhar Abdul Hamid to observe that their actions were akin to agreeing for the directors to serve but not to be paid.
Another major shareholder, the Employees Provident Fund, later raised remuneration-related concerns in a letter, especially on Azhar’s remuneration. Last year, Azhar took home RM1.95 million — a third of the total RM5.74 million board remuneration proposed for the year.
Haris said FGV directors continued to work hard to revive the battered financials of the state-owned plantations group. “The board is very committed to drive the transformation and they have not shown any sign of slowing down with regard to this effort,” he said, adding that would be good for shareholders to recognise the effort.
“Officially, I think there have not been any meeting with regard to the directors’ remuneration. I think that this is a shareholders’ matter, they probably will have their own unofficial meeting which the management is not privy to.
“We hope that this [issue] can be resolved in an amicable and quick manner because we want some kind of stability [in the group],” he added.