FGV Annual Report 2018

32 REMAINED FOCUSED ON VALUE CREATION FGV HOLDINGS BERHAD The Plantation Sector registered a LBZT of RM959.56 million from a profit of RM520.69 million in 2017 as the Sector was significantly impacted by the impairment losses in the goodwill that arose from the acquisition of APL. The Sector’s results were also weighed down by the lower average CPO price realised of RM2,282 per MT, compared with RM2,792 per MT in the previous year. This was further compounded by declining margins in the kernel crushing and refining business as well as lower volume and margins in the Research and Development (R&D) business. Our Fresh Fruit Bunches (FFB) production weakened marginally to 4.21 million MT (2017: 4.26 million MT) with a FFB yield of 16.89 MT per Ha (2017: 16.94 MT per Ha) following the hectarage normalisation exercise undertaken during the year. Notwithstanding the above, we achieved a higher Oil Extraction Rate (OER) at 20.49% (2017: 19.83%) due to various measures undertaken in our estates and mills following our Transformation Plan which we introduced at the end of the third quarter of 2018 (3Q2018). The Sugar Sector recorded lower revenue of RM2.20 billion from RM2.66 billion in 2017 due to the lower average sugar price of around RM2,200 to RM2,400 per MT (2017: RM2,600 per MT) as a result of the increased numbers of unregulated sugar and over-supply of refined sugar in the market. Despite the challenging environment, the Sector achieved a turnaround to profitability, registering a Profit Before Zakat and Tax (PBZT) of RM58.67 million from a loss of RM1.88 million in 2017. The Sector’s overall operation cost has improved by prioritising expenditures and conducting open tenders to secure competitive pricing that allowed the Sector to procure a lower average sugar cost of RM1,669 per MT (2017: RM2,131 per MT) for the year. PLANTATION SECTOR SUGAR SECTOR MANAGEMENT DISCUSSION & ANALYSIS FINANCIAL CAPITAL RM2.20 billion Revenue in FY2018 RM58.67 million PBZT in FY2018 The right-sizing initiatives will contribute to cost savings in the future. Additionally, the Group completed the disposal of our associate company, Taiko Clay Chemicals Sdn. Bhd. for a cash consideration of RM145 million. We aim to better manage our Financial Capital in a way that creates value by optimising our assets and are committed to our Transformation Plan to return to profitability in 2019. The following sections discuss the financial performance of our Plantation, Sugar, and Logistics & Support Businesses Sectors. RM959.56 million LBZT in FY2018 Revenue in FY2018 RM10.23 billion For further details on our estates and mills performances, please refer to Natural Capital and Manufactured Capital in this MD&A. For further details on our Sugar Sector’s operational performance, please refer to Manufactured Capital in this MD&A.