FGV Annual Report 2020

Group Business Review Research & Development Our R&D Division plays a critical role in product development as well as market penetration and revenue generation. It is credited for the commercialisation of premiumoil palmplantingmaterials and fertilisers that have become important revenue streams for the division. Besides palm products, it is now intensifying research and development to build up the Plantation Business’s Integrated Farming ventures. This includes optimising the capacity of clonal production of strategic crops such as pineapple MD2, banana and other cash crops planned by the Group. In 2020, we established a MD2 pineapple seed garden in Johor that marks FGV’s entry into commercial scale pineapple farming with sales to domestic and export markets. We are also conducting research and development on Cavendish bananas and other cash crops to affirm their viability as significant contributors to Group revenue. In addition, we are conducting research on biomass produced from pineapple and banana production, to assess their potential to be processed for animal feed products. Our subsidiary FGV Agri Services Sdn. Bhd. (FGVAS) made inroads into the Indian oil palm seed market and plans to enter the African market as well. We have already exported premium planting materials and seeds to Thailand, Indonesia, Papua New Guinea and Philippines. During the year, the R&D Division’s prime products, namely, Yangambi ML161 seeds and seedlings, experienced declining sales of 16.76% to 15.00 million seeds and 31.92% to 2.63 million seedlings, respectively. In both instances, the decrease in sales volume was due to weak demand from nursery operators and the industry’s replanting programmes’ deferment due to the COVID-19 pandemic. The volume of Yangambi exports to India, Indonesia and Thailand were also affected by the lockdowns in these countries. Sales volume for oil palm seedlings, on the other hand, rose 38.37% to 2.64 million MT because customers preferred seedlings to seeds to address labour shortages in nurseries during the COVID-19 pandemic. There was a surge in the sale of ramet that is more than doubled by 57.20% to 0.350 million ramet, with 91% of sales being made to FGV Plantations Malaysia. Rat bait sales grew more modestly at 7.71%, on the back of tenders awarded by plantation companies such as Tradewinds, IOI and TH Plantations. In the fertiliser segment, we registered fertiliser sales of 420,000 MT in 2020, which is lower than achievement of 610,000 MT in 2019. The decrease in fertiliser sales was due to COVID-19 pandemic situation and MCO imposed by the Government which has interrupted production and delivery of fertiliser to customers. The pandemic situation also causing planters to postpone their fertiliser application and reduced purchase of fertiliser. 18.08 0.22 15.00 0.35 FY2019 FY2019 FY2020 FY2020 1.91 2.638 FY2019 FY2020 0.27 0.285 FY2019 FY2020 0.61 0.42 FY2019 FY2020 Yangambi Seed Sales Volume (mil Units) Ramets (mil Units) Seedlings Sales Volume (mil Units) Rat Bait (mil Boxes) Fertiliser Sales Volume (mil MT) 70 FGV HOLDINGS BERHAD Annual Integrated Report 2020