FGV Annual Report 2016

FELDA GLOBAL VENTURES HOLDINGS BERHAD 26 In regards to our financial performance for 2016, results were affected by a combination of factors including lower CPO production, higher raw sugar costs, impairment losses and losses suffered by our jointly controlled entity. These factors collectively resulted in the Group's total Profit Before Zakat and Taxation (PBZT) moderating to RM263.07 million, which represents a year-on-year (YoY) decline of 42% from a PBZT of RM452.55 million. Nevertheless, revenue continued to grow during the same period, improving 11% to RM17.24 billion in 2016 from RM15.56 billion. Based on this performance, the Board has recommended the payment of a final dividend of 1 sen per share. The Group was able to improve its cost structure and reduce our indirect and administrative costs by RM131.37 million under a new cost initiative. Results were further supported by a lower fair value charge on our Land Lease Agreement (LLA), which totalled RM68.28 million in 2016 compared to RM224.86 million in 2015, and a change in accounting policy for bearer plants. Moving forward, we believe there are several silver linings in the short term. Among these is the recovery of CPO prices above the RM3,000 per MT mark towards the end of 2016. We are cautiously optimistic that CPO prices should stabilise in 2017. Existing production trends also suggest that the harvest will improve in 2017 and we will focus our efforts on maximising production to capitalise on this phenomenon. We remain wary of the volatility in the foreign exchange market as an unstable Ringgit will continue to affect costs in our business which depend on the import and export of goods, and on the purchase of raw materials from overseas. We have reviewed the situation and have put in place several key initiatives to mitigate the impact and will look to hedge our position in the coming months. CHAIRMAN'S STATEMENT Our new organisational structure was introduced in early 2017. The structure streamlined our previous organisational chart to three (3) Sectors, namely Plantation, LO and Sugar. Through this new structure, we look to realise synergies through operations under an integrated palm upstream, processing and downstream business segments. Spearheading the transformation of our Group is the recently appointed GP/CEO, Dato' Zakaria Arshad. Since taking up the post on 1 April 2016, Dato' Zakaria Arshad has already shown that he is not only a true settler's son, but also a canny transformative agent with the resolve to take decisive action. My Board Members and I look forward to a number of productive years ahead with him at the helm of the Group. Finally, I would like to extend my gratitude to my fellow Board Members for their counsel during the course of the year, and also to FGV employees without whom we could not have accomplished all that we have today. Special thanks to our other Stakeholders, especially our Shareholders and Felda communities, who have supported us through these challenging years. Thank you and we hope to continue having you on our side in the years to come. Tan Sri Haji Mohd Isa Dato' Haji Abdul Samad Chairman Our award-winning Yangambi seedlings have 43% market share nationwide.