FGV on track to cross RM1b profit mark again

Felda Global Ventures Holdings Bhd (FGV) is on track to turn in another net profit of over RM1 billion, boosted by higher crude palm oil (CPO) price, its top executive suggests.
"Some analysts have estimated that we would post an after-tax profit of RM1.1 billion this year. Our target is to achieve (it) as close as possible," FGV chief executive officer Datuk Sabri Ahmad said after announcing its second-quarter results here yesterday.

FGV posted a net profit of RM1.01 billion on revenue of RM7.47 billion in the year ended December 31 2011.

In the first half of 2012, its net profit stood at RM443 million, while revenue rose 42 per cent to RM5.26 billion from RM3.7 billion a year ago.

Sabri is confident of stronger performance in the remaining two quarters of 2012 to better the RM220 million net profit recorded in the second quarter to June 30 and RM223 million in the first quarter.
For one, he expects CPO prices to hover around RM3,200 to RM3,300 per tonne in the second half.

FGV sold its CPO at an average price of RM3,100 per tonne in the first six months, amid challenging weather conditions and lower commodity prices compared to last year, he said.

Additionally, FGV expects to produce more fresh fruit bunch (FFB) in the second half than in the January-June period.

Plantation companies typically record higher extraction yield in the second half of a year, Sabri noted.

Explaining on the slight drop in net profit on a quarterly basis, he said this was due to a one-time expense of RM40 million related to FGV's listing two months ago.

On a year-on-year basis, he said the drop in net profit in the first six months of 2012 from some RM600 million in the same period a year ago was due to the increase in cost of sales, a RM140.5 million payment of land lease and a 15 per cent profit sharing with parent Felda.

"Last year, we managed plantation land on behalf of Felda. However, since 2012, FGV entered into a long-term lease and underwent full value integration of the plantation land," he said.

In the first six months, FGV incurred higher costs relating to replanting and manuring, reflecting higher volume and price of fertiliser used.

FGV expects its cost of sales to ease as it has paid for 70 per cent of its fertiliser requirement for this year.

Sabri said FGV is focusing on downstream activities to raise production and will buy more land to plant sugarcane, among others, using some of the RM4.5 billion raised from its listing.