This article first appeared in The Edge Malaysia Weekly, on March 21 - 27, 2016.

AT every press conference that Felda Global Ventures Holdings Bhd (FGV) president and CEO Datuk Mohd Emir Mavani Abdullah attends, an inevitable question comes up — will he go or will he stay?

Emir was hand-picked to run FGV shortly after it was listed on Bursa Malaysia in 2012 to raise RM4.5 billion. His two-year contract expired in July 2015 and the man is said to be in the unenviable position of being employed on a month-to-month basis now.

On March 11, it was reported that Datuk Zakaria Arshad, an executive who rose through the ranks of the government-linked company and now heads FGV’s downstream business, will replace Emir at the helm of the world’s largest oil palm plantation operator and producer of crude palm oil (CPO).

However, this was denied by FGV.

Three days later, FGV announced on Bursa that it “will deliberate on the appointment or change of FGV CEO and will make the requisite announcement immediately upon the receipt of the nomination letter from the relevant authority”. A source tells The Edge that Emir is likely to be relieved of his duties as CEO on April 1 but will assist with the handover for a month.

Investors barely batted an eyelid at the latest development. FGV’s share price and trading volume remained flat following the news. Such reaction is an indication of how investors have come to terms with the flurry of activities often associated with the company. Without the benefit of details of the possible appointment, analysts polled by The Edge view the development as “neutral”.

Not much is known about Zakaria but his background in the palm oil business contrasts starkly with Emir’s. According to FGV’s annual report, Emir made his career in various advisory roles in economic and development fields and the FGV appointment was said to be his earliest involvement with plantations. Meanwhile, Zakaria’s livelihood has been closely linked to plantations — starting as an administration and marketing officer for Felda Rubber Industries Sdn Bhd in 1984 and rising to become the company’s senior general manager (commercial) years later. He held the position of CEO at some of FGV’s subsidiaries, including Delima Oil Products Sdn Bhd and Felda Vegetable Oil Products Sdn Bhd before heading FGV’s downstream cluster in 2014.

Some quarters say Zakaria’s experience will be valuable, both to regain the market’s confidence and, more importantly, to regain trust in the management from within FGV’s ranks.

“There is a concern that management is losing support within the company — the executives and the settlers on the ground. Planters are fairly conservative people. So, there has been strong opposition from the inside to some of the acquisitions FGV has made under Emir,” says a fund manager.

“Someone new can come in and round up support again. Zakaria is closer to the ground because of his experience within the group and he knows the issues in the business,” he continues.

However, many who track FGV’s developments say Zakaria’s relationship with stakeholders means he is less likely to introduce much-needed operational changes, such as reducing operational costs, improving efficiencies and putting an end to the habit of buying expensive assets prevalent under the Emir era.

Based on FGV’s Global Strategic Blueprint (GSB), the company wants to be among the world’s top 10 diversified integrated agri-businesses by 2020. Under the GSB, FGV plans to have 60% prime palm land by 2020 through a two-pronged approach — aggressive replanting of 15,000ha of palm land annually and acquisition of brownfield assets. The GSB was not developed by Emir but his time in FGV has been characterised by limited success in the pursuit of GSB targets.

Under Emir, FGV used the RM4.5 billion war chest built from its initial public offering for a series of acquisitions. During this time, the company’s share price plunged so low that it was removed from the list of Bursa’s index stocks. Early buys such as the RM1.2 billion takeover of Pontian United Plantations Bhd and RM2.2 billion it paid for a 51% stake in Felda Holdings Bhd in 2013 were considered “decent but not great” by analysts. However, subsequent purchases have been more questionable despite an environment of low CPO prices.

FGV paid RM628 million for London-listed Asian Plantations Ltd (APL) in 2014. APL was highly geared at 2.9 times, its estates were loss-making and there was no track record of its fresh fruit bunch (FFB) yields. But FGV’s offer price of £2.20 per share was at a 5.4% premium to the weighted average price of APL. Then, in 2015, FGV forked out RM655 million for four companies and land in Sabah from Golden Land Bhd. The deal was considered fair but the state has been affected by drought.

Worryingly, there is no end in sight to FGV’s acquisition spree. Some believe that neither Emir nor Zakaria will stop talks over the controversial purchase of a 37% stake in Rajawali Group’s PT Eagle High Plantations Tbk for a proposed price of US$680 billion, though the deal has been delayed due to public opposition to its price. The Edge reported that FGV is now out of the deal as Felda Investment Corp Sdn Bhd, a unit of the Federal Land Development Authority, will be taking the stake instead. FGV has also just received approval from the Ministry of Finance to acquire Chinese edible oils producer Zhong Ling Nutril-Oil Holdings Ltd for RM796.25 million.

Most of these acquisitions are made on the assumption that they will eventually improve the company’s earnings and production. So far, that has not been the case.

In FY2015 ended Dec 31, FGV missed its replanting target, having only replanted 10,000ha. It registered a net profit of RM325.49 million in FY2015, a fall of 64% from a year ago. Revenue for the year was RM15.26 billion. But it saw its first core loss since listing of RM172 million due to losses in the trading division, high plantation costs, lower CPO average sale price and decline in FFB output.

With El Niño brewing, FGV’s prospects are not improving. It aims to do better in FY2016 by replanting 16,350ha but expects FFB production to fall by another 6%. Analysts are concerned that FGV, which saw its cash pile dwindle in FY2015 to RM2 billion from RM3.56 billion the year before, will eventually face cash flow pressure due to its spending habits.

“Shareholders want change, but not necessarily in the CEO. They want FGV yields to improve, operations to be more efficient, costs to be lowered, no more expensive acquisitions and better earnings,” says a fund manager.

Investors’ wants are obvious. But whether or not a change at the top will make them a reality is less so.

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