DRIVING OUR STRATEGY SEC 4 28 OPERATING LANDSCAPE MANAGING MARKET CHALLENGES AND TRENDS As a net commodity exporter, Malaysia faces potential negative impacts on trade and commodity prices, services, and financial markets. Although commodity prices have moderated from the peaks of 2022, they remained high and continued to exert upward pressure on operational costs. Factors such as changing consumer preferences, global economic conditions, and regulatory shifts have also had an influence on commodity markets. Should demand for commodities such as palm oil falls, prices, and sales will likely decrease as well. If the supply of palm oil becomes limited leading to shortages, prices will likely rise, making production more expensive, and reducing output. In response to the global and Malaysian economic challenges presented in 2023, FGV implemented strategic measures to adapt and maintain its operational stability and growth. INDUSTRY MARKET TREND Commodity price volatility and market uncertainties increase production costs Efforts centred on stabilising costs by employing hedging strategies, optimising resource use, and streamlining operations. We also engaged with the government to review the ceiling price of sugar, negotiate better terms with suppliers, and diversify the supplier base to mitigate risks from market fluctuations and geopolitical disruptions. Pressure on compliance and sustainability matters We integrated Environmental, Social, and Governance (ESG) and sustainability into our operations, developed a Withhold Release Order (WRO) remediation plan, and promoted sustainability, human rights, and fair labour practices. Our efforts include enhancing smallholder capabilities, pursuing certifications, and implementing a climate action plan aimed at achieving GHG emissions target by 2030 and net zero by 2050, in compliance with Global Reporting Initiative (GRI) and Task Force on Climate-Related Financial Disclosures (TCFD) standards. Slower demand and shortage of supply To mitigate reliance on specific markets and stimulate demand, we embarked on market diversification, introduced and improved products based on customer preferences, enhanced marketing, and promotional efforts, sought collaborations for shared resources and synergies, and actively engaged with external parties to attract more suppliers to FGV.
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