STEERING INTEGRITY AND ACCOUNTABILITY SEC 6 142 PRINCIPLE C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS FINANCIAL AND OPERATIONAL PERFORMANCE Issues impacting value generation Our response to these issues • Volatility of Crude Palm Oil Prices • Decrease in FFB production • Uncertainties in weather patterns • Global demand and supply dynamics of edible oils Amidst the challenges faced by the Group, there has been a concerted effort to boost operational efficiency. • Despite a decrease in production, the Oil Extraction Rate (OER) has seen improvement from the better crop quality received and enhanced mill performance through the OER improvement programme. • Mechanisation has been enhanced through the Mechanical Assisted Infield Collection (MAIC) using power barrows, aiding in the evacuation of Fresh Fruit Bunch (FFB) in approximately 20,000 Ha of hilly terrace areas. • Identification of around 13,000 Ha of underproductive areas affected by worker shortages in previous years, with limited accessibility for harvesting and successfully rehabilitated 7,487 Ha to boost productivity in these areas. • Continuous monitoring of crop harvesting and mill efficiency, along with the optimisation of planting materials tailored to site suitability. • Additionally, efforts to enhance FFB quality and delivery, while minimising losses from pest and disease damage, remain ongoing. • Sustainability awareness programmes have been conducted with FGV’s FFB suppliers, including dealers and smallholders, to ensure compliance with the Group Sustainability Policy, RSPO principles, and FFB quality requirements. HIGHER OPERATING COSTS Issues impacting value generation Our response to these issues • Rising operation costs due to escalating energy, raw materials prices, labour costs, and foreign exchange rates In addressing these challenges, we have implemented a range of measures aimed at safeguarding FGV’s interests. • The implementation of hedging strategies to mitigate risks associated with fluctuations in raw material prices such as sugar and fertiliser. • Actively exploring opportunities to diversify FGV’s product portfolio by entering value-added segments such as premium oil and premium sugar. During the year, through our subsidiary, MSM, we had launched Premium Gula Super with over 25,000 MT volume sold. This strategic move aims to counterbalance the impact of higher production costs and enhance overall profitability. • To bolster our operational efficiency, we are focused on reducing costs through optimising resource utilisation, streamlining supply chain processes, and embracing mechanisation and digitalisation to improve productivity across the board. • Recognising the challenges posed by the surge in global raw sugar prices, we have initiated discussions with the government to review the ceiling price, given the controlled nature of sugar markets. • On the procurement front, we have proactively engaged in negotiations with suppliers to secure favourable pricing agreements, establish long-term contracts, and leverage bulk purchase discounts. Additionally, we are diversifying our supplier base to enhance flexibility and mitigate risks associated with disruptions caused by currency fluctuations or geopolitical events.
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