KUALA LUMPUR: FGV Holdings Bhd chairman Datuk Wira Azhar Abdul Hamid says the worst is over for the plantation group and that it is on the "right path towards a new and far better future".
Azhar said FGV would be repositioned as a major player in the agriculture and food industries.
Stressing that palm oil would remain a mainstay of its business, he said the group would also deliberately and carefully redeploy appropriate resources into higher value and synergistic sectors to mitigate against the risk of crude palm oil (CPO) price fluctuations.
“As 2020 dawns with expectations of higher commodity prices in a persistently uncertain operating environment, I look back on an eventful 2019 for FGV with a combination of pride and frustration,” Azhar said in his third letter to FGV’s shareholders in nearly 12 months.
“I believe the worst is behind us and that FGV is definitely on the right path towards a new and far better future. There are still a couple of lingering challenges with our subsidiary, MSM Malaysia Holdings Bhd, but there are plans underway to address each and every one of them, sooner rather than later,” he added.
Azhar said while the recent upturn in CPO price provided a welcome respite to the sector as a whole, the board of directors intended to transform FGV into an organisation that was not wholly dependent on CPO price for its performance.
FGV, he added, would make sure that its strategic diversification benefitted all its stakeholders, especially the 112,635 smallholders.
“You may be aware that FGV buys two thirds of its fresh fruit bunches (FFB) from Felda scheme smallholders and independent smallholders. Thus, they are an integral part of our supply chain.
“We provide these farmers with that all-important link to international markets and we ensure that they are paid fair market rates in accordance with international prices.”
On culture change and human resource planning, Azhar said FGV had set a target to reduce manpower cost by 10 per cent annually for the next three years.
“At the beginning of (2019), our manpower cost was at RM1.2 billion per annum, of which 55 per cent was for fixed pay while the remaining 45 per cent was for variable pay (overtime allowances, medical, travel, entertainment etc).”
He added that as at September last year, it had reduced its manpower numbers by 8.5 per cent from 18,742 to 17,146.
On disposal of non-core assets and underperforming joint ventures, Azhar said a total of RM129 million of the targeted RM350 million had been divested as at November last year.
In terms of plugging procurement leaks, he said it had recorded procurement savings of between RM155 million and RM170 million during the period, way exceeded the targeted RM150 million.
FGV, he said, had targeted to achieve 50,000 tonnes of feed production and launch two new premium feed formulation for dairy cattle this year.
The group is also aiming to reach an annual revenue of around RM200 million to RM300 million for its renewable energy division as it further unlocks the value of waste it produces as part of its daily milling process.