FGV Annual Integrated Report 2019

32 FGV HOLDINGS BERHAD FINANCIAL CAPITAL MANAGEMENT DISCUSSION & ANALYSIS The Group’s Financial Capital is closely linked to all other Capitals, providing the ability for the other Capitals to grow, which is intended to also add value to Financial Capital over time. FGV takes a prudent approach to the use of its Financial Capital, ensuring that the Group’s business operations can be sustained over the long term. In 2019, we continued to optimise our assets and liabilities, while enhancing capital efficiency through our transformation programme that focused on operational excellence. SDG: OVERVIEW Strategic Thrust: Material Matter: We align our Financial Capital with: EP KEY FINANCIAL DRIVERS Cost Optimisation • The Group has taken decisive steps to reduce costs wherever possible. In 2019, we optimised employee benefits and undertook a retrenchment exercise. The benefits of these initiatives to the Group’s finances will only be seen in 2020. • In addition to this, the Group has been addressing its procurement spend and has instituted a key performance indicator for the whole organisation that is centred around cost management. Transformation Programme • Our transformation programme is mainly centred around operational excellence, and in this context, the Group delivered good results in 2019. Higher production volumes from our estates in terms of FFB and mills in terms of OER, coupled with operational efficiencies, led to CPO ex-mill cost dropping by 17% to RM1,503 per MT. Balance Sheet Management • The Group continues to manage its balance sheet strategically and prudently. Capital expenditure remains at prudent levels and Management regularly monitors receivables to ensure our working capital is effectively managed and utilised. • The Group’s centralised treasury management constantly tracks cash flow movement. • In addition, the Group continues to undertake divestments of its non-core and non-performing businesses. In 2019, the Group divested FGV China Oils Ltd., a subsidiary, for RM97 million and Paragon Yield Sdn. Bhd. for RM29 million. STATEMENTS AND ANALYSIS