67 ANNUAL INTEGRATED REPORT 2021 ADDITIONAL INFORMATION HOW WE ARE GOVERNED REINFORCING SUSTAINABILITY 2022 STRATEGIES UPSTREAM Estates • 3R (Recruit, Retain, Repatriate) • Intensify crop recovery and implement GAP • Accelerate replanting • Gradual retake of contracted Mechanical Assisted Collection Transport • Maximise land utilisation through inter-cropping during replanting phase • Strictly adhere to fair labour practices and uphold human rights • Mechanical fertiliser application plan Mills • Target improved OER • Conversion to outside crop processing mills (100% third-party crop) • Mill cost optimisation • Strengthen and modernise mill process control MARKETING & TRADING • Expand and enhance our presence at destination market via collaboration and strategic partnership • Aggressive sales and trading strategy for both local and export to capture higher trading margin • Increased efficiency across FGV’s supply chain i.e. estate, mills, refineries, logistics and operations • Enhance working relationships and engagements with FFB suppliers such as smallholders, Government-Linked Companies (GLCs) and dealers to ensure steady supply of good quality FFB RUBBER • Secure good premium and high profit margin • Reduce processing costs and increase overall utilisation factor • Reduce diesel consumption • Improve and stabilise operation of Green Rubber (Production and Quality) • Collaborate with FGV Group of Companies to utilise Green Rubber and promote rubber usage • Appoint marketing agents in several countries and regions DOWNSTREAM • Expansion to export markets such as South East Asia, Asia and Middle East and North Africa • Production of Cocoa Butter Substitutes • New Product Development • Premium Refined Glycerin [Hazard Analysis Critical Control Point (HACCP) & Good Manufacturing Practice (GMP) certified] • Explore full vegetable based product platform • Cost Optimisation through loss elimination programme • Upgrade biodiesel plant capacity by 20% RESEARCH & DEVELOPMENT • R&D to support increasing oil yield per hectare across the Group • Reduction of inorganic fertiliser usage and cost via bio-fertiliser and soil enhancement • Reduction of overall labour in the field through mechanisation and digitalisation • Mill modernisation to increase efficiency • Support new income portfolio • Produce new products for alternative high value crops such as bamboo, pineapple, saccha inchi and artichoke • Increase revenue through agriproducts for food and non-food & fertiliser business OUTLOOK Moving further into 2022, average CPO price is expected to range between RM4,000/MT to RM4,500/MT. It is important to note however that the price has remained high in the first quarter of 2022. This is partly due to near-term tight supplies caused by labour shortage, and concerns over delayed palm oil export shipments from Indonesia’s new export policy. Higher palm price leads to a wider spread between palm oil and gas oil due to weaker crude oil prices. The palm oil premium over gas oil not only wipes out discretionary blending, but threatens biodiesel mandates as well. Based on the market situation at time of reporting, CPO price is expected to ease in the later quarters of 2022 with the anticipation of improved production and the resumption of recruitment of migrant workers. In the meanwhile, FGV’s Plantation Sector will keep focusing on improvement in harvesting, crop recovery and replanting efforts to stay fruitful in the long run. Demand for palm oil and palm oil products is expected to improve at better capacity than 2021, as successful vaccination roll-outs provide greater confidence in opening up borders and business sectors. However, we are mindful that importers may cap their purchasing, and that any restructuring of palm oil import and export tax will have an additional impact to inventory levels at producing countries.
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