FGV Annual Report 2015

62 Felda Global Ventures Holdings Berhad Annual Integrated Report 2015 Fertiliser spurs performances The new NPK Plant in Kuantan is expected to start operations in June, putting the Cluster on track to rake in higher sales volume in the years to come. Revenue rose 20.9% to RM717.14 million with sales of 731,993 MT. However, profit before tax fell 83.4% to RM5.7 million due to foreign exchange losses. But moving forward, the fertiliser division is anticipated to become an important contributor to the Cluster. In 2016, we plan to begin exporting to overseas markets such as Indonesia. The Growth Path Our R&D and Agri-Services Cluster plays a vital role in raising the Group competitiveness and helping to put our Company on the global map. This is why the Group is driven to become a globally recognised agri-services provider and leading research institution for oil palm, rubber and sugar by 2020. Already the Cluster has proceeded with advisory and technical support for the Group’s on-going and future plantation projects. This means placing emphasis on soil investigation, land feasibility studies, product development and Good Agricultural Practices to name a few. Business Operations Review Research & Development (R&D) and Agri-Services External environment The R&D and Agri-Services Cluster experienced two major weather conditions which impacted the business during the year under review. Firstly, the El Nino phenomenon resulted in both lower FFB production and a deferment of purchases of seeds and seedlings from our major customers. Secondly, the weakening of the Ringgit (RM) against the US Dollar (USD), drove costs higher on imported raw materials for fertilisers. New Operations Lead Sales Growth The R&D and Agri-Services Cluster saw growth in topline revenues in 2015 due to the whole FPM operation which produced 731,993 MT by the end of the year. As a consequence of higher production and sales, Cluster revenue grew to RM512 million compared to RM418 million in 2014. Profit before tax declined to RM37 million from RM87 million the year before. The margin compression is for the most part a result of the steep decline of the RM against the USD. This means higher costs because raw materials for fertiliser are denominated in USD. FPM also has RM218 million in short-term borrowings, which added to the Cluster’s total finance costs.