FGV Annual Report 2016

FELDA GLOBAL VENTURES HOLDINGS BERHAD 44 CLUSTER PERFORMANCE: TRADING & MARKETING, LOGISTICS AND OTHERS (TMLO) OPERATIONAL REVIEW We achieved a slightly lower Storage & Handling throughput in 2016, although the impact of the lower total volume handled was offset by a higher volume of premium products handled, thus shielding our Storage & Handling revenue from any sharp decline. Revenue from Transport & Logistics activities declined due to lower volume of liquid products carried and dry cargoes handled, mainly attributable to lower CPO production by the Group. Hence, profitability also was affected following lower revenue and impact from fluctuating fuel cost. Revenue generated from the other Non-Core business decreased slightly as a result of the general economic slowdown. Restructuring for Greater Efficiency In May 2016, the other Non-Core business segments in the Group - IT, Engineering, Properties and Travel - were assigned to the Cluster. The Cluster was then divided into two (2) sub-clusters comprising the Core Business (Trading & Marketing, Transport & Logistics and Storage & Handling segments) and the Non-Core (others) business. The restructuring of the businesses within the TMLO Cluster is aimed at streamlining the operations and enabling greater oversight of their performance. This is in line with the Group's strategic goals to grow its adjacent field businesses, especially the external business, by sweating our assets. FJB's terminal located in Pasir Gudang, Johor. Our Transport & Logistics segment is presently one of the leading multi-modal transport operator (MTO) in Malaysia while our Storage & Handling segment operates the world's largest edible oil storage and handling facilities with main base in Pasir Gudang, Johor. The storage facilities are also responsible for managing about 40% of Malaysia's total palm oil exports. The Cluster performance was however affected by the Trading unit, which suffered losses due to trading positioning. The Cluster reduced its losses by 53.1% to RM15.21 million losses in 2016. CHALLENGING 2016 FOR TMLO The Cluster’s performance was also affected by lower contribution from IT services as significant project such as implementation onGood and Services Tax (GST) has been completed last year and lower handling throughput by Group’s bulking operation in tandem with lower CPO production volumes. The Transport segment carried volume declined to 4.39 millionMT in FY 2016 from 5.16 million MT in the previous period. Local economic activity, a direct catalyst of business opportunities for the Sector, was also slower resulting from lesser government spending following a global weakening economic climate. Meanwhile, the performance of our Trading & Marketing arm was stunned by the unpredictable market conditions including commodity price fluctuations as well as volatile foreign exchange movements. However, even with the lower volume available in 2016, our Trading & Marketing arm managed to become the biggest exporter of palm oil to Pakistan and succeeded to in trading other oils such as Coconut Oil (CNO). MANAGEMENT DISCUSSION & ANALYSIS