FGV Annual Report 2018

39 REMAINED FOCUSED ON VALUE CREATION 01 02 05 03 07 06 04 08 09 ANNUAL INTEGRATED REPORT 2018 processed was sourced from our own estates, while 46% and 24% were sourced from Federal Land Development Authority (FELDA) Settlers and third parties respectively, amounting to a sourcing ratio of 30:70. With this, we strive to ensure that our efforts to stay aligned to SDG 12: Responsible Consumption and Production remain consistent throughout the year. In tandem with the decline in FFB processed, our CPO production for 2018 dropped by 6% to 2.82 million MT compared to 2.99 million MT recorded in 2017. As a result, the average CPO production cost (ex-mill) stood at RM1,737 per MT, an increase of 8% from RM1,601 per MT in the previous year. The higher production cost was also attributed to the additional cost for our worker requirement of RM79.76 million (2017: RM50.82 million) as well as rehabilitation activities of RM83.35 million (2017: RM63.32 million) undertaken throughout the year. Our OER improved to 20.49% from 19.83% last year, due to higher oil-to-bunch ratio and better quality of FFB produced, while the Kernel Extraction Rate (KER) rose to 5.23% from 5.09% in 2017. The higher OER and KER achieved also exceeded the nationwide average of 19.95% and 4.97% respectively. OVERVIEW We leverage our fixed assets, namely Property, Plant and Equipment, to create value in a way which is safe, efficient, reliable and sustainable. During the year in review, we managed our Manufactured Capital to maximise output and mitigate our risks and weaknesses towards restoring the health of our business and generating value for our Stakeholders. MANAGING OUR MANUFACTURED CAPITAL AND ITS OUTCOMES Our Manufactured Capital consists of our mills that process FFB into CPO. This is refined further through our Downstream operation into palm oil-based products such as oils and fats, FMCG and oleochemical derivatives. Our flagship cooking oil brand, SAJI, commands almost a quarter of the domestic market. During the year under review, the number of mills we operated decreased to 68 from 69 mills reported in 2017, as we closed one mill, KS Lepar Utara 4, as part of our cost-rationalisation exercise. As at the end of the year, the total capacity of our mills amounted to 3,251 MT per hour. We processed 13.79 million MT of FFB during the year, a decline of 9% from 15.10 million MT in 2017 due to lower FFB production and external sourcing. 30% of the total FFB PLANTATION SECTOR We align our Manufactured Capital with Sustainable Development Goals (SDGs): FFB PROCESSED (MILLION MT) 5 10 15 20 2016 2017 2018 12.88 15.10 13.79 CPO PRODUCTION (MILLION MT) 1.5 2.5 2.0 1.0 0.5 3.0 2016 2017 2018 2.66 2.82 2.99 MANAGEMENT DISCUSSION & ANALYSIS MANUFACTURED CAPITAL