FGV Annual Report 2020

FGV’s Plantation Business is dominated by upstream operations that are the biggest contributors of the Group’s revenue. The year 2020 was a challenging one for our upstream operations that experienced lower oil palm fruit yields, labour shortages and the brief suspension of operations due to Movement Control Order restrictions. In addition, the division has delayed its replanting and manuring activities. Our upstream operations manage a total land bank of 439,275 ha (including LLA land) in Malaysia and Indonesia that produces approximately three million MT of CPO annually. In Malaysia, we have 197 estates located in Selangor, Perak, Pahang, Negeri Sembilan, Johor, Terengganu, Kelantan, Sabah and Sarawak. In Indonesia, we have five (5) estates located in Central and West Kalimantan. FGV also owns 68 mills across Malaysia, processing over 14 million MT of FFB annually. The mills obtain one-third of its FFB from FGV owned estates on LLA land and the remaining two-thirds are sourced from FELDA settlers and independent smallholders. In year 2020, the Upstream Division continued its replanting programme at a minimal scale due to disruptions of estate activities caused by the COVID-19 pandemic. This division is acutely aware that maintaining the target rate of replanting is vital to ensure that the age profile stays in the prime range. The replanting activities will continue until the Group achieves a normalised average age profile of 12 years by 2026. Whilst maintaining the size of mechanised area, the Upstream Division took back 28,500 ha that were contracted out before. With this implementation, the Group will benefit from better FFB collection and reduced dependency on manual harvesters and labour to achieve a higher man-land ratio. UPSTREAM OPERATIONAL highlights Revenue from our Upstream and Trading Division rose 13% to RM7.91 billion (2019: RM7 billion) and PBZT rose to RM279 million (2019: LBZT RM136 million). The more than 100% growth in profit was due to improvements in CPO margins that occurred in tandem with strong CPO price movements. However, the financial performance was partly negated by the 4% lower FFB production and 7% lower CPO processed. Our Downstream division, in the meantime, recorded a PBZT of RM157 million due to the higher CPKO/RBDPKO profit margins and strong contributions from our oleochemical business that included gains from the divestment of FGV-CNS that delivered RM32 million. However, the overall positive performance was offset by the lower profit contributions from our joint venture subsidiaries and associate companies. Revenue from the R&D division declined sharply to RM281 million (2019: RM555 million) to record an LBZT of RM34 million (2019: PBZT RM21 million). This result was mainly due to lower seed sales and decreased demand from customers who were affected by the MCO restrictions. There was also a decline in the fertiliser sales volume because there were fewer tenders during the year because of the overall economic slowdown during the COVID-19 pandemic. Upstream & Trading Downstream R&D Revenue (RM mil) P/(L)BZT (RM mil) 7,001 -136 7,917 279 FY2019 FY2019 FY2020 FY2020 Revenue (RM mil) P/(L)BZT (RM mil) 3,332 106 3,375 157 FY2019 FY2019 FY2020 FY2020 Revenue (RM mil) P/(L)BZT (RM mil) 555 21 281 -34 FY2019 FY2019 FY2020 FY2020 65 Who We Are How We Operate How We Are Governed Additional Information Sustainability Matters Statement & Discussion By Our Leaders