Billion ringgit loss for FGV
Friday, 1 Mar 20197:29 AM MYT
Better outlook: Haris (left) and FGV CFO Datuk Mohd Hairul Abdul Hamid after the media briefing to announce the group’s fourth quarter results for FY2018
KUALA LUMPUR: FGV Holdings Bhd, which lost more than RM1bil last year due to large impairments, does not expect a repeat of big charges to bog down its earnings for the current financial year ending Dec 31, 2019.
“I hope that come the completion of the first quarter this year, we will be free from some of the legacy issues that have been hounding us.
“The big ones (impairments) are over, I do not think there will be impairments of this size anymore; this (impairments in FY18) is indeed one of the significant events in our history,” group chief executive officer, Datuk Haris Fadzilah Hassan said at a press conference to announce the company’s 2018 financial results yesterday.
“A lot of investments that have been put in post our initial public offering have not delivered the kind of expected returns.
“So we have taken stock of our position. I do not foresee such incidences of this scale in the future,” he added.
FGV reported a net loss of RM1.08bil in its FY18 against a net profit of RM130.93mil in FY17 largely due to impairments and provisions amounting to RM1.04bil.
According to Haris, most of the impairments last year were recognised from three companies, namely Asian Plantations Ltd (APL), FGV Green Energy Sdn Bhd and Cambridge Nanosystems Ltd.
“If you add the impairments of these three companies, it is more than RM700mil. I think we have recognised a lot of impairments so that from the first quarter of this year, more will be reflected from our turnaround activities,” Haris said.
“In the past five weeks that I have been here, I have started to see results coming in from the turnaround effort. We have been cleaning up our house, looking at some of the areas we can do better so that we can put FGV on a better platform to reflect the potential and the work that is being done,” he added.
Revenue in its FY18 dropped to RM13.47bil from RM16.92bil in the previous year of FY17. For the fourth quarter, FGV reported a net loss of RM208.80mil from a net profit of RM50.44mil in the same quarter a year ago.
Revenue for the quarter also fell by 24% to RM3.234bil from RM4.255bil in the same quarter a year ago.
“Without impairments and provisions, FGV recorded a pre tax profit of RM101mil compared with the previous corresponding quarter’s ofRM253mil. Quarterly revenuedeclined in tandem with crude palm oil (CPO) prices,” the company said in its press release.
FGV said that its performance for the fourth quarter had been affected by CPO prices which averaged at RM2,053 per tonne, which is 24.6% lower than the average CPO price of RM2,723 per tonne in the same quarter of FY17.
In his presentation, Haris said the company is already starting to see early signs of success of its turnaround effort.
“We are today at the very beginning of a very long haul effort. The team has done a lot and there is still a lot more that has to be done. The last few months in 2018 were basically spent on reviewing, auditing, revisiting, revising and also planning. Real implementation of some part of the turnaround programme started in November and December.
“Results and progress are indeed starting to come in,” Haris said.
“Out in the plantation field for example, process improvements are being tracked and tweaked on a daily basis. We are using information technology much more effectively now and within the next few weeks we will have data gathering and algorithmic systems that will help us plan and execute better,” he added.
He said that mill utilisation rates are also closely monitored with high priority and attention being paid to its cost per tonne CPO.
“As you know, this business is all about cost and productivity. This is where we are focusing a lot of our time on. We are also reviewing our overall procurement expenditure,” he said.
He noted that there are some bottlenecks being faced in the administrative sense due to processes that were entrenched within the organisation but that the turnaround team is looking and reviewing all of these things.
“This is to ensure that business will be expedited. I am making sure that one of my goals is to dismantle some of these blockages to ensure we can work together effectively and productively,” Haris said.
Haris is not on the board of FGV, to which he said: “This is because the constitution has changed since probably last year: now the CEO is no longer appointed by the government.
“He or she is not a government appointee but appointed by the board and if the board is not happy with CEO’s performance, they will fire the CEO. So he or she cannot go to the Ministry of Finance to ask for protection anymore as it is now the board’s prerogative.”
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