BULLISH MOOD: FGV aims to deliver better results despite trying market conditions and weaker prices
FELDA Global Ventures Holdings Bhd (FGV)’s operating profit more than doubled to RM438.15 million in the second quarter ended June 2014, but the group is bracing for a more difficult second half due to lower crude palm oil (CPO) prices.
Its net profit for the quarter under review fell 53 per cent to RM151.86 million from RM322.71 million a year ago, but revenue climbed 36.5 per cent to RM4.083 billion from RM2.9 billion previously.
In a statement yesterday, FGV, which is among the world’s top three CPO producers, said in the first six months, revenue rose 37.6 per cent to RM7.8 billion, with operating profits increasing by 68.2 per cent to RM798.5 million as a result of higher CPO prices and the consolidation of Felda Holdings Bhd into FGV.
FGV president and chief executive officer Mohd Emir Mavani Abdullah said the market conditions and pricing of CPO are a challenge for the whole industry but added that FGV is rising to the challenge.
“In the palm upstream cluster, all ongoing sustainable initiatives, including best management practices and cost-efficiency initiatives, are continually analysed and reviewed to deliver better results.”
On the company’s second quarter results, he said almost all plantation companies faced challenges, such as lower profits, due to weak soyabean demand in the United States, which in turn dragged down CPO prices.
FGV’s profit in the first six months fell 21 per cent to RM422.7 million from RM535.11 million in the same period last year, in a large part due to changes related to fair value charges of FGV’s land lease agreement.
The agreement showed a fair value charge of RM217.7 million in the first six months of 2014 from a gain of RM176.5 million a year earlier.
The non-recurring fair value gain incurred last year was the result of a re-measurement of the land lease agreement cash flow assumptions, which included assumptions on discount rate, CPO price and average estate yield per hectare.
“The second quarter has been a significant one for FGV and we are in the midst of restructuring and realigning our businesses through our transformation plan, of which we are focusing on improving every aspect of our operations.”
He said FGV is putting in place the foundations to become one of the world’s top 10 agribusiness firms by 2020, adding that its transformation plan will have a positive effect on all parts of its operational value chain, from the ongoing integration of Felda Holdings Bhd to downstream operations and production of consumer products.
FGV directors have also recommended an interim dividend of six sen per share amounting to RM218.8 million to be paid out by the end of next month. This is in line with the company’s policy of paying at least 50 per cent of its net profit as dividend after minority interest.