FGV Annual Report 2016

FELDA GLOBAL VENTURES HOLDINGS BERHAD 50 CLUSTER PERFORMANCE: RUBBER In 2016, the Cluster achieved total revenue of RM705 million. However, as a result of the weak price of Natural Rubber (NR) and shortage of raw materials to be processed, the Cluster posted a Loss Before Zakat and Taxation (LBZT) of RM51.45 million. FGV's rubber operations span four (4) countries—Malaysia, Thailand, Indonesia and Cambodia—with total production capacity of 185,800 MT. FGV's rubber holdings in Malaysia presently comprise approximately 12,000 Ha of rubber plantations, six (6) mid-stream rubber-processing facilities and a specialised processing facility for green rubber production. OPERATIONAL REVIEW The Cluster continues to be affected by the scarcity of raw rubber. This is mainly due to conversion of cultivars from rubber to oil palm by local planters. For 2016, due to the shortage of raw material locally, our processing facilities were running below their capacity with only a 52% utilisation factor. In order to minimise the deficit, FGV Rubber Sdn Bhd (FGVR) imported 18,400 MT of raw rubber for its facilities. In line with the Group's rationalisation programme, the Rubber Cluster rationalised two (2) of its processing facilities – Kilang Getah Jengka 21 and Kilang Getah Pasak – contributing to possible savings on fixed costs of approximately RM2.5 million annually. The Cluster's goal is to strategically optimise our production capacity by focusing on key production areas while paring down our under- performing assets. Our rubber processing plant at Felda Pasir Besar, Gemas, Negeri Sembilan. MANAGEMENT DISCUSSION & ANALYSIS