FGV Annual Report 2017

ANNUAL INTEGRATED REPORT 2017 CREATING VALUE 11 Sources: The Economist, Ganling, MIDF, LMC International, Godrej, The Edge Markets GLOBAL ECONOMIC ACTIVITY Global economic activity continues to gain traction. The growth momentum has improved from 3.2% in 2016 to 3.7% in 2017 and further projected to hit 3.6% in 2018, supported by a benign global financial environment and advanced economic recovery. Major advanced economies like the US, the EU and Japan demonstrate broad-based growth pickup, whilst China and other parts of emerging Asia remain strong. Nevertheless, growth is still sub-par in various countries whilst inflation remains below target in the majority of the developed world, with commodity exporters (particularly fuel) under pressure due to the continued decline in their foreign earnings. In the short-term, recovery would be underpinned by strong consumer and business confidence amid benign financial conditions. However, medium-term risks to growth are tilted to the downside by potential hazards such as a quicker and more extensive tightening of financial conditions, growing protectionism that could intensify capital outflow pressures on emerging markets, as well as geopolitical tensions and extreme weather events, amongst others. Palm Oil Sector Global palm oil production is expected to rise by 5% to 68.70 million MT in 2018 while consumption is expected to increase by 3%. Although factors like La Nina and soybean demand from China may hinder the growth outlook, higher consumption from India, Indonesia, Pakistan and MENA is expected to mitigate the effect. INDUSTRY OUTLOOK IN 2018 Global Palm Oil Production vs. Consumption & CPO Price 2018 Global Palm Oil Consumption (by Geography) 2,700 RM2,600-RM2,700 India The EU Malaysia Global Palm Oil Consumption 2018 (65.3 million MT) RM2,400-RM2,600 2015 2016 2017 2018 2019 72 2,600 Price (RM/MT) Production & Consumption (million MT) 70 2,500 68 2,400 66 2,300 64 2,200 62 2,100 60 2,000 58 56 54 52 62.0 60.4 59.0 62.4 65.2 63.8 68.7 65.4 69.4 67.6 Production Consumption Price OUR MARKET LANDSCAPE 9.7 million MT 7.1 million MT Indonesia China 9.8 million MT 5.2 million MT 2.9 million MT Pakistan 2.8 million MT Others 27.8 million MT