FGV Annual Integrated Report 2019

36 FGV HOLDINGS BERHAD SEGMENT ANALYSIS Revenue In RM ’ 000 2019 2018 YoY Plantation Sector 10,861,832 10,737,522 1% Sugar Sector 2,007,011 2,201,856 -9% Logistics Division 198,054 203,218 -3% Others Division 155,755 267,794 -42% P/(L)BZT In RM ’ 000 2019 2018 YoY Plantation Sector (8,847) (988,535) 99% Sugar Sector (316,129) 58,710 <100% Logistics Division 87,492 73,143 20% Others Division (57,281) (5,507) <100% Plantation Sector The Plantation Sector reported a lower loss of RM8.85 million for the financial year ended 31 December 2019 compared to RM988.53 million reported in the previous year. The huge losses incurred in the previous year were mainly attributable to the recognition of impairment losses amounting to RM921 million. In 2019, the sector took an impairment of RM27 million. Without impairments, the sector reported a profit of RM18.15 million in 2019 compared to RM67.53 million in losses in 2018, resulting from improved CPO margin due to lower CPO cost ex-mill and improvements in the Downstream Division on the back of higher margin and sales volume registered in kernel crushing as well as the Rubber Division. In addition, a better share of results from our joint ventures in 2019 helped to improve the sector’s performance. Operationally, FFB production rose by 5.6% to 4.45 million MT compared to 4.21 million MT with a yield of 18.44 MT per hectare. OER achieved was higher at 20.61% from 20.49% registered in the previous year. The sector’s results were impacted by the lower average CPO price realised of RM2,021 per MT against RM2,282 per MT in the previous year. Sugar Sector The Sugar Sector registered a loss of RM316.13million in 2019 compared to RM58.71 million profit in the previous financial year, mainly attributable to lower margins due to excess stocks of refined sugar in the domestic market. This was a result of issuance of approved permits (AP) for sugar imports leading to increased competition and subsequently, lowered average selling prices. Thin margins were also recorded in the export market as the industry recorded a global surplus. The sector incurred high raw sugar cost due to previously signed raw sugar contracts based on higher prices. Operational cost increased due to high interest on borrowings that were utilised for the construction of the Johor refinery and higher depreciation once commercialisation commenced. The refinery’s utilisation rate was also low, in line with the reduction in production volume for the year due to excess supply in the market and lower exports. In addition, the sector incurred provisions of RM147 million on its assets as part of our business strategy to enhance operational excellence. MANAGEMENT DISCUSSION & ANALYSIS STATEMENTS AND ANALYSIS For more information on Sugar Sector performance, please refer to MSM Malaysia Holdings Berhad ’ s Annual Report available on its website at www.msmsugar.com