November 28, 2018 / 7:05 AM / 10 months ago

UPDATE 2-Malaysia's FGV to refocus on downstream on "prudent" palm price outlook

* CPO price at 1,900-2,100 rgt/T levels in 2019 -chairman

* FGV’s CPO production to rise 10 pct in 2019 -chairman

* Q3 net loss at 850 mln rgt; second straight quarterly loss

* Loss due to lower average CPO prices, impairment charges, receivables (Updates with chairman comments, inputs from press conference)

By Liz Lee

KUALA LUMPUR, Nov 28 (Reuters) - The chairman and interim CEO of FGV Holdings Bhd, Malaysia’s largest palm oil producer, said on Wednesday the group should channel more attention towards downstream activities amid suppressed crude palm oil prices.

Azhar Abdul Hamid said at a results briefing - after the company announced a second straight quarterly loss - that the objective for FGV moving forward was to try to minimise its role as a seller of crude palm oil (CPO).

“I think FGV should start looking at adding value downstream, looking seriously at what we can do further (where) our downstream operations are concerned, and basically look at our overall integrated value addition,” he told reporters.

The comment came as the group forecast a “prudent” price outlook in a range of 1,900 ringgit to 2,100 ringgit ($450 to $500) per tonne for CPO next year.

Azhar said the downward trend for CPO prices - which have fallen by more 35 percent over the last two years - was expected to continue into the early part of 2019.

He said the current bloated CPO stockpiles were not likely to ease to the desired level over the next one year, keeping pressure on prices.

FGV posted a net loss of 849.3 million ringgit ($202.6 million) in the quarter ended Sept. 30, compared with a net profit of 41.5 million ringgit a year earlier. Revenue fell 22.8 percent to 3.19 billion ringgit.

The company said the average crude palm oil price realised during the quarter was 16.5 percent lower than a year earlier.

FGV also said it anticipates that 2018 will close on a negative note, although it provided no specifics.

FGV forecast CPO production for 2018 at 2.8 million tonnes and fresh fruit bunch production at 4.11 million tonnes.

Azhar said FGV’s CPO production would climb at least 10 percent next year due to efforts put into enhancing mill utilisation.


Azhar said FGV was working on a turnaround programme to restore the operational integrity of its plantations, and about a quarter of its estates have achieved or exceeded the yield targets set.

“We are starting to see the early signs of turnaround and the teams are working very hard to rectify the situation,” he said in a statement.

FGV is focusing on correcting the age profile of its trees, which it said was amongst the worst in the industry with 53 percent of them classified as “old”.

The group, globally the third-largest oil palm plantation operator, has also identified 11 non-core investments it plans to divest.

Impairments the group took during the quarter totalled 788 million ringgit ($187.9 million), about two-thirds from the 2014 acquisition of Asian Plantations Ltd, previously listed on London Stock Exchange’s Alternative Investments Market.

FGV said last Friday it was suing the former group president and CEO, former chairman and other former board directors and employees over the deal.

Azhar said there are ongoing internal investigations that will be revealed before end-year, but that the group will not have any other major impairments going forward.

He also said FGV’s CEO search would be finalised by the end of January next year.

FGV’s share price plunged 8.5 percent on Wednesday, touching a record low.

($1 = 4.1980 ringgit)

Reporting by Liz Lee; Editing by Richard Pullin and Tom Hogue

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