34 FGV HOLDINGS BERHAD ABOUT FGV MANAGEMENT DISCUSSION & ANALYSIS VALUE CREATION Strong Brands in Consumer-Led Industries Continue to Grow Pricing power by branded consumer goods in consumer products, communication services and information technology industries had increased during the period of global slowdown. More than 75% of S&P 500 companies4 with brand power have beaten the years’ projections despite higher input costs. Increasing Investments and Returns from ESG Businesses A clamour for sustainable solutions is sweeping the world. Industries are increasingly impacted by the Government regulations and environmental policies toward good Environmental, Social and Governance (ESG) practices. As one of the biggest palm oil producer in the world, Malaysia has committed to achieve a carbon-neutral economy target by 2050. Heightening our sustainability commitments assure business continuity and opens up opportunities in green technology and high value sectors. Technology and Innovation are Changing the Playing Field Digital and technology strengths as well as innovation are game changers in this new era of business. Businesses need to adopt technology advancements to move up the value chain and achieve higher income per capita targets as identified by the 12th Malaysia Plan (12MP). Surging Demand for Renewables The global demand for clean energy has been increasing as Government and organisations support more green energy projects. In the renewables market, Indonesia has pushed the implementation of B40 biodiesel to 2022, while in Malaysia, implementation of the B20 biofuel plan is targeted by the end of 2022 for the transport sector5. Malaysia’s energy policy is also specifically encouraging the palm oil industry to achieve zero waste and convert palm oil residue to biomass. Lasting Impact of COVID-19 Norms The new normal has catalysed the acceptance of e-commerce and rising demand for sanitisers, detergents and soaps due to better hygiene awareness and Government-mandated protocols. These are key lifestyle trends for businesses to leverage upon. Operating Landscape WORLD OUTLOOK 2021 has been a year of unprecedented challenges globally. The world is still on pandemic mode with uncertainties in economic and social fronts. Extreme weather conditions have hit a number of regions with clear adverse effects on crop production. Generally, demand for agricultural commodities has been trending high but challenged by supply chain disruptions, strict decarbonisation policies and trade protectionism. Price inflation is significant across the agribusiness value chain and in the general economy. The global economy is gradually recovering from the effects of the COVID-19 pandemic. The World Gross Domestic Product (GDP) growth rebounded to 5.9% in 2021 from a contraction of 3.1% in 2020. The growth is expected to steady out at 4.9% in 20223 reflecting COVID-19 flare-ups and uncertainties on emergence of new variants, challenges in policy making, rising inflations and concerns on climate change. Malaysia’s GDP is expected to keep growing in 2022, boosted by an effective vaccination programme and recovery-oriented budget that addresses measures to drive economic recovery, enhance national resilience, catalyse nationwide reforms and improve public service delivery. Supply chain disruptions due to the pandemic have resulted in rising food, oil and coal prices globally. While prices are expected to stabilise as pandemic restrictions ease, there are expectations for a prolonged market inflation in 2022 and rising social discontent. Protectionism policies and world political events complicate global trade with expectations of volatility. Currently, these include the trade war between United States and China, the establishment of the three-way secur i ty pact between Australia, United States and United Kingdom in the Indo-Pacific region, and Russia’s invasion of Ukraine. MARKET TRENDS 1 2 4 5 3 3 Source: IMF World Economic Outlook (October 2021) 4 Source: FactSet 5 Source: Malaysia Palm Oil Board (MPOB)
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