FGV HOLDINGS BERHAD | ANNUAL INTEGRATED REPORT 2023 23 GROUP CHIEF EXECUTIVE OFFICER’S REVIEW MEASURED APPROACH TO DRIVING PERFORMANCE In 2023, market volatility and fluctuating CPO prices presented significant challenges to the financial performance of our main plantation business. These put pressure on the margin for palm products as the realised average CPO prices decreased to RM3,901 from RM4,832 recorded in 2022. This challenge was further amplified by rising production and operational costs, particularly in the Plantation and Sugar Divisions, fuelled by increasing prices for raw materials such as fertiliser and sugar, higher energy and labour costs, as well as fluctuating foreign exchange rates. Our FFB yield was also impacted by a decline in the average bunch weight, due to lower fertiliser application over several years amid labour shortages and the Movement Control Order (MCO) during the pandemic. This was exacerbated by an extended dry spell, particularly in the peninsular area during the first half of 2023. During the review period, we observed a decrease in crops received from external parties. This decline can be attributed to FGV’s rigorous adherence to sustainability standards for external parties, resulting in a lower volume of FFB received. As external crops constitute over 70% of our total FFB supplies, this reduction led to an overall 11% decrease in FFB processed, impacting our margins within the Plantation Division. Despite the market challenges, we maintained a profitable performance for 2023. Our revenue was registered at RM19,359 million against RM25,562 million in 2022. Profit After Taxation and Minority Interest (PATAMI) for 2023 was recorded at RM102 million, compared to RM1,329 million in 2022. BP25 KEY STRATEGIC INITIATIVES FUELLING PROGRESS Against the challenging operating landscape, we stayed on course in implementing our BP25, a comprehensive strategy aimed at achieving our business objectives. The three-years BP25 combines organic and inorganic growth measures and focuses on KSIs under its four Strategic Thrusts of Operational Improvement, Product and Market Penetration, New Growth Areas, and Financial and Capability Building. These KSIs were instrumental in our 2023 achievements and helped to steer FGV’s future direction. We addressed division-specific challenges by merging KSIs with Key Operational Initiatives (KOIs), ensuring alignment and efficiency throughout our operations. This connects long-term strategic goals with daily activities for cohesive execution and optimised resource allocation. Our commitment to Good Agricultural Practices (GAP) was reinforced with enhancements to estate and mill practices. We identified approximately 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. We also undertook several initiatives to improve the FFB yield which included standardisation of the tasking system, implementation of 1 Cutter, 2 Carrier (C1R2) harvesting method, and increasing our footprint to maximise our presence in the field. Additionally, our oil extraction rate (OER) improved to 20.68% from 20.35% recorded in 2022 as a result of better crop quality received and improved mill performance from our OER programme. To increase mechanisation, we continued the Mechanical Assisted Infield Collection (MAIC) using power barrows for FFB evacuation across approximately 20,000 Ha of hilly terrain. Initiated in 2022, this five-year programme has successfully covered around 24,309 Ha out of the targeted 104,244 Ha. During the year, we completed the felling of 16,547 Ha and planted 19,862 Ha, with a fertiliser application of 275,570 MT, covering 90% of our annual manuring programme. At the end of the year, our labour shortage stood at 16% due to a temporary halt in recruitment activities. This pause was aimed at enhancing recruitment processes to align with the highest sustainability standards. Notably, we have observed a decline in abscondments and repatriations, which has significantly contributed to achieving sufficient labour strength in Peninsular Malaysia. Various initiatives were also undertaken including the construction of housing, facility upgrades, and ensuring essential utilities for our migrant workers. We have also collaborated with FFB suppliers, dealers and smallholders to conduct sustainability awareness programmes and promote traceability. Operational Improvement REVENUE RM19,359 million PATAMI RM102 million TOTAL ASSETS RM17,283 million
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