BUILDING VALUE AT OUR CORE SEC 5 58 For the 2023 Annual Integrated Report, we will continue to incorporate the Downstream and Marketing & Trading business segments within the Plantation Division Review. Specifically, the ‘navigating challenges’ section will focus on these two business segments. Moving forward, in line with our ongoing efforts to streamline operations, these business segments will be merged into the new Oils and Fats Division. This consolidation aims to provide a clearer representation of our operational structure and improve reporting efficiency. OPERATIONAL PERFORMANCE Overview FGV’s Downstream segment specialises in refining and manufacturing palm-based food products, oleochemicals, and biodiesel. This segment serves as a critical component in enhancing value throughout the Group’s supply chain continuum. Our diverse product portfolio encompasses cooking oil, margarine, instant noodles, creamer, coconut milk, and rice. With refineries strategically located across Malaysia and Pakistan, and an oleochemical plant in the United States (US), we are committed to efficiently meeting market demands while upholding sustainable practices. In 2023, the Downstream segment faced various challenges, including compressed margins resulting from higher processing costs, removal of subsidies for cooking oil, and intense market competition. In response to these challenges, FGV has implemented proactive strategies, including the introduction of new product lines catered to meet market demands, enhancement in operational excellence, and improvement in efficiency and quality expectations. The oils and fats business experienced a marginal decrease of 2% in sales volume to 390,761 MT as compared to 401,000 MT in 2022, particularly from the bulk segment. This marginal reduction in sales was mainly attributed to CPO price volatility resulting in a periodic negative refining margin environment and intense price competition from competitors in the market. Moreover, current market inflation has led to changes in consumer buying patterns, with a marked shift towards smaller packaging options. However, export sales saw a significant 14% growth amid lower prices recorded in 2023. This improvement was driven by successful market expansion initiatives and quality consistency. Moving forward, we are committed to further enhancing our international presence in the export market, particularly in the processed-packed oil business, to meet the evolving market demands. In 2023, the biodiesel business witnessed a 9% increase in sales volume, reaching 83,776 MT, driven by increased sales orders from petroleum companies and improved production efficiency. Conversely, the oleochemical business saw a 6% decline in sales volume to 263 million Ibs from 282 million lbs recorded in the previous year. This reduction was attributed to increased product availability from Southeast Asian competitors in the US market, as logistical and supply chain challenges eased. Moreover, a general slowdown in market demand further influenced the decline in sales volume. From left • Scott Chatlin - CEO, Twin Rivers Technologies Holdings, Inc. (TRT) • Roziyatulshima Zamil - CEO, FGV Biotechnologies Sdn Bhd • Zulkifli Othman - Group Director, Oils & Fats Division • Mohd Azam Si Rajab - CEO, FGV Trading Sdn Bhd • Mohd Djunadi Samsuddin - CEO, FGV Refineries Sdn Bhd • Mahyuddin Bolong - CEO, FGV Kernel Product Sdn Bhd GROUP BUSINESS REVIEW DOWNSTREAM
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