FGV Annual Report 2017

ANNUAL INTEGRATED REPORT 2017 UNDERSTANDING OUR BUSINESS CONTEXT 45 OUTLOOK AND PROSPECTS Market Outlook for 2018 We foresee longstanding issues like worker shortages, rising operational costs and anti-palm oil campaigns in the EU to continue into 2018, as meaningful resolutions are still not forthcoming. The average price of CPO should come within the range of RM2,400-RM2,600 per MT in 2018, which would still offer some healthy margins against our industry’s average production cost of RM1,200-RM1,500 per MT of CPO. This price outlook is supported by expectations of stronger crude oil pricing, the US Federal Reserve raising interest rates, and the US Dollar’s appreciation against emerging- market currencies. Severe drought conditions in Argentina in recent quarters has impacted soybean production, resulting in an estimated drop to 40 million MT, which have a knock-on effect to serve as a positive catalyst for CPO prices. The average price of CPO should come within the range of RM2,400-RM2,600 per MT in 2018, which would still offer some healthy margins against our industry’s average production cost of RM1,200-RM1,500 per MT of CPO. OUR PERFORMANCE BY SECTOR: PLANTATION Management Discussion & Analysis Our mills processed 15.10 million MT of FFB in 2017. We envisage CPO prices to observe sustained pressure as FFB production greatly recovers, especially seen in the last quarter of 2017. CPO stocks improved to more than 2.72 million MT in 2017 and are likely to grow to over 2.82 million MT in 2018.