60 FGV HOLDINGS BERHAD ABOUT FGV MANAGEMENT DISCUSSION & ANALYSIS VALUE CREATION Increased mechanisation in our estates was introduced to improve harvesting productivity and provide an alternative solution to labour shortage. A good start was made during the year whereby we achieved MAIC across 30,391 Ha of our estates, surpassing our initial target of 25,500 Ha. To improve cost efficiencies and utilisation factor of our mills, a rationalisation plan was initiated in 2021 targeting two mills that were performing below capacity. The proposal was for the selected mills to fully process third-party crops by attracting suppliers through a dynamic pricing mechanism. This would enable better utilisation and boost by-products sales to improve profit margin. This is a radical change within our work process and proved to be challenging to implement due to the need for settlers’ buy-in. However, we managed to kickstart the initiative through management engagement and briefings with FELDA Management and the settlers. One rationalisation plan was implemented in July 2021, and another one is set to commence in 2022. In our continued drive to harness synergies, FGV regularly engage with the smallholder community to collaborate and address their concerns. We are committed to strengthening ties with all relevant parties as we strive for best in class agribusiness performance to deliver better value to our stakeholders. Mechanisation (Ha) 18,500 28,500 30,391 2019 2020 2021 Best practices & work methods - mill process control & material balance, OER enhancement, electronic reporting system, harvesting & crop evacuation, e-Harvesting Interval Record (e-HIR), Division of Labour, Division of Earnings Process improvement - Sort, Set in order, Sustain, Shine, Standardise (5S), Kaizen, Innovative Creative Circle (ICC), Lean six sigma, autonomous maintenance, Total Productive Maintenance (TPM) OE practices & methodologies - 5S, Lean six sigma, autonomous maintenance, TPM Behaviour Based Quality - Control Point & Critical Control Point (CP&CCP), Health, Safety and Environment programme, Sustainability & Welfare programme Operational Excellence Division Initiatives DOWNSTREAM Current Strengths • Market leader for cooking oil segment through flagship brand, Saji with 42% refined cooking oil market share making it the 7th most chosen FMCG brands in Malaysia based on Kantar’s Asia Brand Footprint 2021 • 41% market share in Malaysia’s margarine market through Seri Pelangi brand • Offering a myriad of product range categories for Household Kitchen essentials such as cooking oil, rice, coconut milk, creamer, margarine • Direct access to palm oil supply from Upstream • Operations strategically located across Malaysia and the United States (US) FGV’s Downstream Division is primarily involved in the refining and manufacturing of palm-based food products and oleochemical operations. The Division plays a critical role in providing leverage to the Group’s value chain to mitigate volatile commodity prices and capture higher margin for refined products. Pandemic disruptions across the supply chain spectrum were the key challenges faced by the Downstream Division during the year. Due to stricter Standard Operating Procedures (SOPs) and regulations, we experienced port closures, longer shipment period and other logistical delays. The increase in freight costs as a result of these challenges led to a drop in export demand. In addition, the impending recertification of RSPO status has restricted the sales of our lauric and biodiesel products. Group Business Review Plantation
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