FGV undertakes cost-cutting measures to boost efficiency

Felda Global Ventures Holdings Bhd (FGV) is undertaking improvement initiatives which includes further cuts in general administration costs in an effort to boost efficiency for the current financial year ending Dec 31, 2017.

Group President/Chief Executive Officer Datuk Zakaria Arshad said the exercise involved eight priorities including focusing on core business, strengthening financial position, assets rationalisation and mergers and acquisition.

He said FGV has approved a group-wide rationalisation exercise to address the excess capacity of its several core assets.

"The initiatives involves closing down four mills, two rubber processing plants and a palm oil refinery that would save about RM13.5 million in annual costs.

"The group, in 2016, made a provision for RM49.2 million to carry out these exercises," Zakaria told a press conference to announce FGV's fourth quarter results here Tuesday.

Zakaria said the rationalisation of assets would lead to a three per cent reduction, this year, in its 18,000-strong workforce through a mutual separation scheme.

"These mills and plants are no longer economical to maintain due to changes in FGV's landscape of palm oil and rubber plantations.

Consolidating smaller plants with bigger units were economically viable, it added.

"With that exercise, our palm oil mills would eventually increase average utilisation factor to 80 per cent," said Zakaria.

He also said palm plantation business was expected to fully recover from the El Nino impact with increased planted areas.

FGV was projected to produce more fresh fruit bunches (FFB), targeting a 15 per cent hike to 4.5 million metric tonnes for 2017.

This, was made with the anticipation that crude palm oil (CPO) prices would recover by the third quarter of 2017.

"By 2020, we target to achieve 5.3 million metric tonnes of FFB production annually, from our existing land bank, a 36 per cent increase from 2016," he added.

Moving forward, he anticipated CPO prices to average between RM2,600 and RM2,700 per tonne throughout 2017. -- Bernama