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FGV's Strategic Transformation Plan For 2019 And Beyond

FGV Holdings Bhd aims to implement a strategic business transformation plan for 2019 and beyond.

Chairman and interim CEO Datuk Wira Azhar Abdul Hamid said: “This is the first time that the FGV has compiled a comprehensive transformation plan, which emphasised on good corporate governance compared with its non-compliance culture previously”.

Azhar: FGV will need to go into downstream activities by making sure that we fully utilise the byproducts from our existing operations to create value for the group.

The loss-making diversified plantation group would also finalise the composition of its top management team soon.

“Our new chief financial officer will be coming in by January followed by a new CEO, probably in February,” he said.

“This will further drive the group’s transformation plan,” he added.

Moving forward, he said FGV planned to be a profitable and return-on-investment-centric entity.

“However, this will not be an easy task for the group,” he pointed out.

This is due to the discouraging crude palm oil (CPO) price, which is expected to trade at an average of RM2,250 per tonne over the next one to two years.

Therefore, FGV would have to “look at how much profit we could generate internally from the group,” he added.

This will include effective cost-cutting measures, which are closely related to inefficiency issues, unnecessary expenditures as well as downsizing the number of its 19,000 employees.

The group would also continue to look at improving the efficiency and productivity of its estates and mills nationwide, Azhar explained.

Given the uncertainties of CPO prices, he noted that FGV would embark on the journey “of becoming a minimal CPO seller”.

“This means FGV will need to go into further downstream activities by making sure that we fully utilise the byproducts from our existing operations to create value for the group. One example is the palm kernel cakes (PKCs), which FGV produced about 380,000 tonnes per year.

“We sell the PKCs to some multinational and local companies. They will process the PKCs into animal feed,” said Azhar.

He believed that it was timely for FGV to consider producing animal feed given its abundant supply of the raw material.

Another potential business for FGV is in palm-based specialty oleochemicals.

Azhar noted that FGV is already involved in the basic oleochemicals.

“However, to be a successful oleochemical player, FGV must be able to produce speciality oleochemicals, which are highly-priced with higher profit margins.

“This could be the sustainable route which FGV should take,” he added. He envisaged that the oleochemicals business held big potential provided that it was backed by strong research and development initiatives.

On FGV ongoing forensic investigations on its past investments, Azhar said FGV had taken two cases to court, namely the Asian Plantation Ltd (APL) acquisition and the purchase of Troika condominiums near the KLCC Twin Towers.

“We have four more cases. Obviously, I cannot give more details. Furthermore, I do not want to jeopardise the cases,” he added.

Azhar said he looked forward to return to his official post as FGV non-executive chairman.

“I have agreed to assume the post of FGV interim CEO based on the recommendation by the board, but not on a permanent basis,” he said.

Azhar would take charge of the APL operations and settle some impending issues arising from the acquisition. “APL will be my special project and I will be spending most of my time in Sabah next year as the APL oil palm estates are mostly there,” he added.


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