Historic high CPO price a boon for FGV

FGV Holdings Bhd expects the Ukraine-Russia conflict to bring a net positive impact towards the palm oil sector and the group as the crude palm oil (CPO) prices reached historic highs.

FGV group CEO Mohd Nazrul Izam Mansor said increasing uncertainties which rise from any major conflicts normally entails a spike in commodity prices.

“At the same time, FGV has a minimum direct export to that part of the world, to Ukraine as well as Russia.

“The range we are looking at for the CPO price forecast is between RM4,000 to RM5,000 per tonne for 2022,” he told reporters after the group’s financial year 2021 results briefing.

Like other commodities, CPO prices jumped past RM7,000 a tonne for the first-time following Russia’s invasion of Ukraine.

CPO futures contracts for April 2022 rose RM533 to RM6,786 a tonne, whereas the benchmark May 2022 contracts went up RM476 to close at RM6,458.

Commenting on that, Mohd Nazrul said FGV does sell forward and the company’s policy entails FGV to sell up to six months forward.

“I’m glad to also mention that we will manage to sell at least at price level until August 2022,” he added.

FGV’s net profit for the financial year ended Dec 31, 2021 (FY21), soared to RM1.17 billion from RM146.16 million a year ago, while revenue jumped by 39% to RM19.58 billion from RM14.08 billion previously.

The group announces a final dividend payment of eight sen per share, translating to a total dividend payout of RM291.85 million.

For the fourth quarter ended Dec 31, 2021 (4Q21), FGV’s net profit jumped to RM465.09 million from RM131.06 million in 4Q20, underpinned by significant improvement in the plantation sector on the back of higher palm oil prices.

Quarterly’s revenue surged 54.25% to RM6.18 billion from RM4.01 billion mainly due to higher contributions from its plantation and logistics segments.

Earnings per share rose to 12.75 sen from 3.59 sen, the group’s filing to Bursa Malaysia showed.

FGV’s plantation sector, the group’s business mainstay, which makes up the biggest chunk of its business portfolios, recorded a stronger performance in 4Q21 with a total operating profit before land lease agreement and impairment of RM716 million on the back of RM5.41 billion revenues.

The group’s sugar sector under its 51% owned publiclisted subsidiary, MSM Malaysia Holdings Bhd, however, posted an operating loss of RM6 million in 4Q21 compared to operating profit of RM72 million in 4Q20 despite registering a higher revenue of RM642 million, a 2% increase from RM630 million a year earlier.

On prospect, Mohd Nazrul said while uncertainties surrounding labour supply continue to persist, he expects the situation will recover in 3Q22 while its plantation sector will keep focusing on harvesting, crop recovery and replanting efforts to ensure the profitability of the group in the long run.

“Along with this, our sugar sector will optimise its local presence through an aggressive sales strategy, regional export penetration and value-added business activities to improve sales volume.

“Similarly, our logistics sector will also continue to explore opportunities for market expansion and diversification while heightening its operational effectiveness,” he added.

Shares in FGV closed nine sen or 4.62% higher at RM2.04, valuing the plantation group at RM7.44 billion yesterday.

— by NUR HANANI AZMAN