FGV Annual Report 2013

For the year under review, the losses incurred by the downstream cluster further declined to RM42.6 million mainly due to lower margins achieved for refined, bleached and deodorised palm kernel oil and loss in the soybean and canola crushing operation in Canada. The Group’s local vegetable oil refineries recorded an improved performance over the previous year by producing an operating margin of RM87 per tonne, though it still suffered a net negative margin of RM25 per tonne, a higher sales volume of 1.39 million tonnes was achieved by capitalising on low CPO prices to boost exports. The fatty acid business recorded a lower profit of RM44.6 million mainly because of a seasonal decline in sales volume and year-end inventory reductions. The Group’s integrated soybean and canola crushing and refining operations in Canada recorded a loss of RM101.89 million due mainly to lower tolling fees from Bunge ETGO, a joint-venture between the Group’s TRT-ETGO and Bunge Limited. Our Canadian operations were also adversely impacted by deep freeze conditions in North America in the month of December 2013, which resulted in the cancellation of a delivery contract. With the termination of our joint venture with Bunge ETGO effective 1 September 2013, TRT-ETGO has derived revenue from the commercial operations of the business instead of tolling fees. During the year, the Group continued to enhance its downstream capabilities and presence as a strategicmove to enhance the value of its upstreamproducts. We are constantly on the look-out for value-added deals that will support the future growth of the Group. Thus, on 9 October 2013, the Group acquired the assets of Mission Biotechnologies Sdn Bhd, which include a 100,000 tonnes per annum biodiesel refinery in Kuantan, Pahang. In another joint-venture undertaking, this time with Lipid Venture Sdn Bhd, a plant will be established in Kuantan to produce tocotrienol (Vitamin E) from refined bleached palm oil. This venture is targeted to commence operations towards the end of 2015. The Group has also teamed up with the United Kingdom-based Cambridge Nanosystems Limited (CNL) to pioneer and produce High Grade Carbon Nanotubes (CNT) and Graphene from by-products of crude palm oil and other hydrocarbons. CNT and Graphene have potential usage for the next generation communication cables for use in the aviation, oil and gas, electricity and nuclear power industries, among others. This collaboration marks a significant step in the Group’s on-going efforts to diversify into non-food and high value products. The Group has also plans to carve out a larger presence in Cambodia, not only in the upstream but also the downstream sector of the plantation industry. We have opened an operations office in Phnom Penh, following an agreement signed with a local partner to market a range of 50 quality products produced by our subsidiary company, Delima Oil Products Sdn Bhd (DOP). Our goal is to secure 30 percent of the Cambodian market within the next three years. DOP is already a household name in Malaysia and its products are widely distributed in Myanmar, Cambodia, Philippines, Laos and Vietnam. Its marketing strategy is to focus on developing products with higher margins and during the year, it has expanded its product offerings with the launch of a new range of non-food items such as bath soaps and shower creams. CEO’s Review Ulasan Ketua Pegawai Eksekutif Downstream Hiliran Felda Global Ventures Holdings Berhad 32