FGV Annual Report 2015

53 WHO WE ARE & WHAT WE DO OUR STRATEGIC INTENT & PERFORMANCE HOWWE ARE GOVERNED CREATING SUSTAINABLE VALUE OUR NUMBERS ADDITIONAL INFORMATION DETAILS OF THE ANNUAL GENERAL MEETING ADDRESSING OUR RISKS & OPPORTUNITIES Felda Global Ventures Holdings Berhad Annual Integrated Report 2015 Business Operations Review Trading, Marketing and Logistics (TML) This is the first full year of reporting for our Trading, Marketing and Logistics (TML) Cluster, which was set up at the beginning of 2015 under the Group’s new streamlined structure. The TML Cluster manages the largest external revenue business for FGV. We are a leading MTO logistics player in Malaysia and operate the largest edible oil storage and handling facilities in the world, handling up to 40% of Malaysia’s total palm oil exports. In 2015, the Cluster experienced the most challenging market conditions with weakening CPO price and volatile foreign exchange rate. CPO prices have a direct impact on external trade and the consequent revenues this segment captures. The impact of floods, dry weather and a more noticeable El Nino in 2015 has already begun to present itself, and this could possibly become more prominent in the short to medium term. Consequently, 2016 might see productivity shocks shave some supply off the market and drive up CPO prices. The Ringgit declined dramatically against the US Dollar, and this resulted in foreign exchange volatility for the Cluster. Commendable Revenues In 2015, our TML Cluster’s revenue rose to RM6.56 billion from RM0.72million in the year prior, mainly due to the new trading sub-cluster. FGV Trading is now the primary contributor to the sub-cluster, and became a vital revenue generator for the Group. In its first year of operations, FGV Trading made up some RM6.69 billion of TML’s top line revenue. But narrow margins following lower CPO prices, market oversupply and forex losses in the Trading sub-cluster brought about a RM194 million loss before tax for FGV Trading. Sub-cluster Felda Transport experienced lower throughput in general due to the lower volumes of CPO produced within the Group. Cargo and oil tanker throughput was 6% lower in 2015 at 5.16 million MT. Our reliance on volume makes us sensitive to the volatility of the CPO market, our palm oil production, and negative refinery margin. TML incurred a loss before tax of RM93 million for the financial year ended 2015. Changes for the Future Structural changes were made within the Cluster to optimise on potential synergies within the integrated entity. A new Trading sub-cluster, FGV Trading, was created to centralise and integrate all the Group’s trading activities under one umbrella, playing an oversight role to control the flow of assets within the Group. This allows for more efficient and synergistic use of resources across the Group, and subsequently, cost optimisation. During the year under review, we expanded operations at Felda Transport to ready ourselves to handle higher volumes in the years to come. In addition, Felda Transport ventured into supply chain warehousing by acquiring and developing a 10-acre plot of land in Tg. Langsat, Johor into a 10,000 sq metre warehouse. The outlook for supply chain warehousing is bright, with positive demand for storage getting stronger especially from clients in the Oil & Gas, Commodities, and Infrastructure industries amongst other. Besides that, Felda Transport is bolstering its MTO business by focusing in high value deals such as Infrastructure, Defense and Aviation sectors. Trading & Marketing Storage & Handling Transport & Logistics