FGV Annual Report 2016

ANNUAL INTEGRATED REPORT 2016 143 GROUP CHIEF FINANCIAL OFFICER'S STATEMENT Enhancing our Procurement Process Work has commenced on our business consolidation system, with the budget and planning module already implemented. By having everything online, we hope to achieve greater savings for all companies within the group. We have also implemented a Master Data Governance policy, which standardises the coding of all materials used in the group. This coding system, which adheres to the United Nations Standard Products and Services Code, enables better cost comparisons and enhances our budgeting and procurement processes. RESTRUCTURING OUR DEBT In 2016, we finalised the process of restructuring RM500.0 million worth of conventional debt that we had inherited through the acquisition of Asian Plantations Ltd (APL) in 2014. Through this process, we restructured the debt into a Shariah-compliant loan which comes with a lower cost of financing. We will be looking at other opportunities to do the same in 2017 to further reduce our financing costs. OUR PRIORITIES IN 2017-2020 We are exploring several initiatives over the next few years to further strengthen our balance sheet and to optimise our treasury operations. • The Group will prioritise the centralisation of treasury services thereby encouraging greater utilisation of Group Treasury by our subsidiaries and associate companies. In effect, this move turns our treasury into an in-house bank which will help us better manage cash in the long-term. • Group Finance will support the strategic intents of SP20 by enhancing supporting elements such as restructuring debt, searching for optimal deposit and lending rates and to ensure our funds are placed as effectively as possible. • As part of the Group's overall commitment towards greater governance, we will look to establish Risk Management Committees in all our JV to enhance oversight. We will also work on standardising systems and policies in our JVs and associate companies to allow for better benchmarking and comparisons. Moving forward, we will continue to centrally monitor the Group's cashflow and working capital requirements to ensure that our overall financial standing remains robust. 2017 OUTLOOK We expect 2017 to be a better year for FGV. Our initiatives to optimise the use of our existing assets and the disposal of assets from our rationalisation programme will transform us into a leaner organisation going into 2017. We also expect better production numbers as the impact of El Nino should diminish by the end of the first quarter of 2017 to give us better plantation volumes. We are cautiously optimistic that CPOprices will stabilise in 2017 thereby easing pressure on our Group's profit margins. While we do not expect to see immediate production yields from our replanting programme in 2017, the aggressive replanting exercise will contribute positively to our P&L by 2020. The Group also expects to see a continued reduction in our administrative costs as we continue to implement our strategic initiatives. Ahmad Tifli Dato' Haji Mohd Talha Group Chief Financial Officer Moving forward, we will continue to centrally monitor the Group's cashflow and working capital requirements to ensure that our overall financial standing remains robust. FINANCIAL REPORT