KUALA LUMPUR (Aug 28): FGV Holdings Bhd recorded a net loss of RM12.9 million for the second quarter ended June 30, 2023 (2QFY2023), versus a net profit of RM374.02 million a year ago, due to lower crude palm oil (CPO) prices and the impairment loss of its Indonesian plantation assets.

This is the plantation giant’s first quarterly net loss since 1QFY2021, when it posted a RM35.42 million net loss.

FGV said the plantation sector’s profit dropped 97.8% to RM13.76 million from RM620.82 million, as average selling CPO price decreased to RM4,000 per tonne from RM5,254 in 2QFY2022. In addition, CPO sales volume fell 17% and production costs ex-mill rose 37%.

The plantation sector’s earnings were further eroded by lower margin achieved in the downstream business. FGV recognised impairment loss of property, plant and equipment totalling RM48.68 million, including impairment of Indonesian plantation assets worth RM47.29 million.

Fresh fruit bunches (FFB) production fell to 780,000 tonnes from 960,000 tonnes, while yield decreased to 2.91 tonnes per hectare from 3.5 tonnes per hectare.

The oil extraction rate, meanwhile, improved to 20.84% from 20.63%, said FGV in a filing with Bursa Malaysia.

On the back of the lower CPO prices, FGV’s quarterly revenue declined 39.48% to RM4.49 billion from RM7.43 billion in 2QFY2022.

The lower quarterly results also pushed FGV into the red for the first half of FY2023 with a net loss of RM805,000, compared with a net profit of RM743.26 million in the same period last year. Half-year revenue fell 31.57% to RM9.09 billion from RM13.28 billion.

In a statement, FGV said it expects CPO prices to remain stable in the near future, ranging between RM3,800 and RM4,000 per tonne, primarily due to the adjustment of Indonesia’s CPO export quotas.

Although labour shortages have improved recently, the group said it is training new harvesters to improve the group’s productivity while remaining cautious about the potential impact of El Nino weather on the upcoming peak season.

“Despite the foreseen challenges in the second half of FY2023, our primary focus is to enhance efficiency through effective operations management to leverage our inherent strengths," said FGV chief executive officer Datuk Nazrul Mansor.

"Key strategic initiatives are being implemented to mitigate these challenges and enhance productivity. We anticipate continued improvement for the rest of the year amidst challenges.”

FGV said it invested approximately RM196 million for its environment, social, and governance (ESG) initiatives in the first half of FY2023, including ongoing engagement initiatives with independent auditing firm Elevate Ltd and the US Customs and Border Protection to address the suspension of the Withhold Release Order.

In addition, the group completed the second phase of reimbursing recruitment fees in June, in alignment with international labour standards.

A total of RM22 million has been disbursed to about 20,000 workers who had previously borne fees to agents or other third parties in their countries of origin during their employment, said FGV.

Further extension to comply with public spread requirement

Separately, FGV said it has sought approval from the Securities Commission Malaysia's Shariah Advisory Committee for its proposed bonus issue of 364.8 million new Islamic redeemable preference shares (RPS-i).

FGV’s board had approved the corporate exercise in late June, as part of the rectification plan for the group to comply with its public spread requirement.

As of Aug 22, FGV’s public shareholding spread was at 13.09%, falling short of the minimum requirement of 25%.

“As the corporate proposal is subject to the approvals from the relevant regulatory authorities and the shareholders of FGV, the corporate proposal is expected to take up approximately five months to be completed from the date it was approved by the board, barring unforeseen circumstances,” said FGV.

In view of the above, FGV said it submitted an application to Bursa on Aug 16, to apply for a further extension of time of nine months until June 2, 2024, to comply with the public spread requirement.

FGV's share price finished up two sen or 1.43% to RM1.42 on Monday (Aug 28). This gives the group a market capitalisation of RM5.18 billion.