FGV Annual Report 2018

33 REMAINED FOCUSED ON VALUE CREATION 01 02 05 03 07 06 04 08 09 ANNUAL INTEGRATED REPORT 2018 MANAGEMENT DISCUSSION & ANALYSIS FINANCIAL CAPITAL LOGISTICS & SUPPORT BUSINESSES SECTOR The Logistics & Support Businesses (LSB) Sector registered a lower PBZT of RM44.39 million from RM68.37 million in 2017, mainly due to the absence of a one-off gain from disposal of investment amounting to RM73.13 million recognised in the previous year and lower bulking throughput of 7.01 million MT (2017: 7.56 million MT), attributed to a high stock position and customers extending their rental period of the storage tanks. RM1.03 billion Revenue in FY2018 RM44.39 million PBZT in FY2018 Challenges Moving Forward Higher CPO production cost High dependency on imported raw materials Foreign exchange fluctuations on MYR against USD Monitor production cost by tightening the procurement process involving capital and operating expenditure especially on mills and estates. In early 2019, we introduced the revised procurement policy to be applied throughout the Group. Monitor constantly global prices for raw materials and obtain industry feedback for a favourable pricing on back-to-back basis for domestic sales or forward buying. Actively monitor the foreign exchange market to capture the downward trend of MYR/ USD, hence gradually averaging down the cost of buying USD to ease in the Group’s hedging strategies. RISK ENVIRONMENT AND MOVING FORWARD PLAN For further details on LSB Sector’s operational performance, please refer to Manufactured Capital in this MD&A. Non-performing investments and impairments Implement stringent investment policy for future mergers and acquisitions. CPO price fluctuations Reduce production cost by monitoring closely the estate and mill costs. We introduced several operational efficiency measures including structured block harvesting, stringent estates monitoring and intensifying FFB sourcing.