FGV Annual Report 2017

FELDA GLOBAL VENTURES HOLDINGS BERHAD UNDERSTANDING OUR BUSINESS CONTEXT 44 OUR PERFORMANCE BY SECTOR: PLANTATION Management Discussion & Analysis STRATEGIES IN CREATING VALUE Upstream Downstream R&D • FFB production of 4.85 million MT and CPO of 3.05 million MT • Average CPO production cost (ex-mill) of RM1,562 per MT • Replanting target of 5-6% (~15,000 Ha) of FGV’s total mature area • Enhance mechanisation in the areas of harvesting and in-field collection • 28 complexes to be ready for RSPO certification • Build 527 blocks of new housing to accommodate workers • Increase PKS recovery rate to 1.20% • Rationalise two mills to improve utilisation factor • Increase number of key wholesalers (KWS) for cooking oil by 20% from the current base of 200 KWS nationwide • Focus on producing higher-margin products such as pet food, caproic and caprylic acids • Expand Palm Kernel Expeller pallet and Palm methyl Ester market • Obtain kosher certification through kosherised fractionation system in the US oleochemical plant • Developing higher yielding and quality oil palm seeds through strategic partnerships • Development of three new palm food based products for Downstream, which will be commercialised in 2018 UNDERSTANDING THE RISK ENVIRONMENT SECTOR CHALLENGES IN 2017 MITIGATION ACTIONS TAKEN Low FFB yield per hectare due to aging palm trees Felling of 13,753 Ha and replanted 10,675 Ha of oil palm to improve the age profile. Shortage of foreign guest workers for harvesting activities Aggressively recruited from countries such as Indonesia, Bangladesh and India. Competitive FFB sellers’ market Implemented measures to enhance our FFB purchasing mechanism to increase margins. Adverse weather conditions New methods and innovations were introduced to mitigate drought conditions. Higher cost of production Controlled increase in the cost of spare parts and maintenance through bulk purchasing and regular stock monitoring. Rescheduled PKE vessel arrivals to avoid extra warehouse space rental and reduce skin loss. Brand competition in the cooking oil market Relaunched SAJI, TIARA, and 3 Udang with new labelling. Undertook aggressive promotions via outdoor advertising and the media.