FGV Annual Report 2020

6 % FY2020 RM14,076 mil FY2019 RM13,259 mil REVENUE >100 % FY2020 RM839 mil FY2019 RM297 mil operat ing PROF I T >100 % FY2020 RM346 mil FY2019 (RM339) mil P/ ( L )BZT >100 % FY2020 RM146 mil FY2019 (RM246) mil P/ ( L )ATAMI THE YEAR 2020 WAS AN EVENTFUL YEAR FOR FGV BECAUSE THE COVID-19 PANDEMIC DISRUPTED MANY OF FGV’S BUSINESS ACTIVITIES AND AFFECTED DOMESTIC AND GLOBAL DEMAND FOR THE GROUP’S PRODUCTS AND SERVICES. WHILE THE YEAR ENDED ON A POSITIVE NOTE DUE TO HIGHER CPO PRICES, MANAGEMENT HAD INSTITUTED STRICTER FINANCIAL DISCIPLINES ACROSS THE BOARD TO COMBAT THE CHALLENGES FACING FGV. The year marked a financial turnaround for the Group after two consecutive years of huge losses. This turnaround was achieved amid a challenging operating landscape marred by the COVID-19 pandemic. Other than the higher CPO prices, the Group’s transformation initiatives which include stricter financial disciplines had been undertaken to improve its financial health. FINANCIAL PERFORMANCE In FY2020, the Group recorded a 6.2% increase in revenue to RM14.08 billion from RM13.3 billion in 2019. This was attributed to higher average CPO prices realised at RM2,675 per MT and improved sales volume in the Sugar Business. Despite the increase in our CPO cost ex-mill and lower contributions from our Logistics & Others, the Group’s operating profit before impairment and LLA charge recorded a growth of more than 100% at RM839 million in FY2020. This was mainly attributed to higher palm product margins and better gross profit margins in the Sugar Business. In line with a strong operating profit before LLA charges and impairment recognised in FY2020, the Group posted a positive result with a Profit Before Zakat and Tax (PBZT) of RM346.1 million compared to a Loss Before Zakat and Tax (LBZT) of RM338.8 million in 2019. This was an increase of more than 100% from the previous year result and mainly attributed to lower LLA fair value charge, decrease in administrative expenses and finance cost by 10.1% and 11.6% respectively. In addition, better results from our joint venture business contributed to our bottom line performance. The Plantation Business contributed RM402.0 million in PBZT, Logistics & Others contributed RM50.5 million while Sugar Business reported lower loss of RM34.5 million. Before LLA and impairment Group Financial Review During the year, the Group executed several initiatives to improve operational performance, reduce costs and monetise non-core/non-performing assets. The Group secured RM68 million from the divestment of Kao Malaysia, FGV Cambridge Nanosystems Limited and disposal of land in Malaysia Cocoa Manufacturing Sdn. Bhd. The Group’s largest plantation subsidiary has embarked on implementing SAP Estate Management System as part of initiatives to have a single ERP system to support more robust and timely reporting. The migration is ongoing and expected to be completed in 2021. The Group has initiated conversion of manual processes of CAPEX utilisation requests and tracking into an electronic digitisation process flow. All budget utilisation requests, budget checking and approval processes will be carried out online. Across the Group, management implemented a group-wide costs savings initiative whereby approximately 10% savings in administrative expenses; which equals to RM87.2 million had been realised. This includes some reduction in salary and allowance for General Managers and above to mitigate COVID-19 impact. Efforts were also made to enhance financial controls by improving the Group’s Limit of Authorities. With enhanced financial controls, the Group is better governed and financially managed. It is worth noting that at the end of the financial year 2020, the Group cash reserves had climbed up to RM1.73 billion, an increase of 6.9% compared to the year before. 48 FGV HOLDINGS BERHAD Annual Integrated Report 2020