FGV Annual Integrated Report 2019

56 FGV HOLDINGS BERHAD DOWNSTREAM INTRODUCTION Under our Downstream segment, we operate eight refineries, of which we own four and four are operated via joint ventures. The combined refining capacity of all refineries is approximately 3.9 million MT per year. In 2019, we refined around 37.2% of our own CPO compared to 26.2% in 2018, to produce oils and fats for industrial usage and domestic consumption. We are present not only in the domestic market, but also in the regional and global markets. BUSINESS PERFORMANCE 362,773 MT 78,668 MT 130,123 MT OILS AND FATS The Downstream Division registered a good set of results in 2019 in the oils and fats segment, with sales volume rising by approximately 11.3% year- on-year. For example, FMCG exports grew by 74%. Growth in our FMCG bulk sales volume continued to show an upward trend, growing at a faster pace of 18% year-on-year, while the repacking segment was still under pressure from increased competition. PALM KERNEL BUSINESS The amount of crude palm kernel oil (CPKO) and palm kernel expeller (PKE) produced depends on processed palm kernel (PK). Therefore, the higher production of CPKO and PKE in 2019 corresponded with the higher amount of processed PK. Year Processed PK CPKO PKE 2018 700,720 MT 323,133 MT 358,818 MT 2019 777,614 MT 358,375 MT 394,428 MT PKE is an important source of protein, energy and fibre, especially for ruminant animals like dairy cows. The fat content makes PKE an energy feed and PKE also contains approximately 16% fibre. Cattle with fibre deficiency can easily develop metabolic or digestive problems. Therefore, intake of about 17% dry crude fibre is enough to prevent the adverse effects of a deficiency in lactating cows. Our PKE also contains high amounts of vitamins and amino acids. Moreover, the high phosphorus to calcium ratio makes it a good choice to feed dairy cows. These two elements are critical nutrients in animal feed for bones and teeth development, as well as for transferring energy to the cells in the body. PKE also contains essential elements such as magnesium, copper, zinc and iron. PALM METHYL ESTER TheGroup also registered a significant increase of 44% in the sales volume of PME, reaching 78,668 MT in 2019 compared to 54,490 MT in 2018. The increase was largely due to the implementation of the B10 biodiesel mandate for the transport sector in February 2019 and the B7 biodiesel mandate for the industrial sector in July 2019, which increased nationwide consumption of biodiesel. FATTY ACID SALES VOLUME Fatty acid volumes in 2019 were 5.7% higher than in the previous year as a result of the portfolio optimisation efforts of our USA subsidiary, Twin Rivers Technologies, Inc. The company is striving to push more vegetable-based products with higher margins over tallow-based products. In addition, increased demand for coconut-based products from one of its largest customers has helped grow the company’s overall fatty acid volumes. MANAGEMENT DISCUSSION & ANALYSIS STATEMENTS AND ANALYSIS