FGV Annual Report 2018

41 REMAINED FOCUSED ON VALUE CREATION 01 02 05 03 07 06 04 08 09 ANNUAL INTEGRATED REPORT 2018 MANAGEMENT DISCUSSION & ANALYSIS ‘ Other Brands ’ offered at lower prices, affecting the sales volume of existing national brands. Nonetheless, based on independent market research on the non-subsidised range conducted in 2018, our flagship brand, SAJI, continued to be the preferred brand for cooking oil. The decline in FMCG sales volume was also compensated by growth in our bulk sales volume which increased 7% year-on-year as we provided competitive pricing to local wholesalers. In the export market, we recorded lower export volume for FMCG of 38% in 2018 following the introduction of the Group’s strengthened credit policy, whereby a Letter of Credit or payment before shipment is required for all exports. This protects the Group from the likelihood of defaulted payments which would cause impairments in the future. During the year, we reduced our Stock-KeepingUnits (SKU) to 92 from 143 in 2017 following a rationalisation exercise undertaken for brand consolidation and to achieve economies of scale. The rationalised SKUs include SAJI Paste of Padprik and Nyonya varieties, variants of the Adela Cake Mix, Adela Margarine and Sunbear Hazelnut Spread. Our 92 SKUs now comprise of 49 Original Design Manufacturer (ODM) & industrial products and 43 Original Equipment Manufacturing (OEM) products. To increase production efficiency and reduce dependence on manual worker, we undertook the second phase of automation upgrading of our palm oil refineries in Pasir Gudang and commenced automation upgrading for the production of the Seri Pelangi brand. Meanwhile, we also upgraded the dust collector system for kernel crushing to improve the safety and health of our workers as well as enhance the air quality within the factory compound and neighbouring area. This is in line with SDG 3: Good health and well-being. The Group registered a significant increase of 37% in the sales volume of PME and by-products, reaching 62,743 MT in 2018. The exceptional results followed the Group’s efforts to implement various customer relationship management activities and participate in collaborations with oil and gas companies to obtain greater sales volume. In addition, we participated in activities to advocate for the B10 transport and B7 industrial mandate through the Malaysian Biodiesel Association. PALMMETHYL ESTER AND BY-PRODUCTS SALES VOLUME (MT) 20,000 40,000 60,000 80,000 70,000 50,000 30,000 10,000 2016 2017 2018 45,774 45,743 62,743 In collaboration with the Malaysian Palm Oil Board (MPOB), we have achieved impressive results in biodiesel testing using B10 in our logistics, plantations and mill operations. The B10 usage test reflects our support for government efforts to increase the current B7 usage mandate to B10 and to scientifically prove that an increase of 3% PME does not negatively impact the performance and safety of transport and industrial machinery. This was demonstrated by the results of the six-month trial which ended in October 2018, where the consistent use of B10 in three tankers registered 125,580 litres used over a distance of 210,627 km. Our US operations, TRT-US, operates two kosher-certified production lines. While kosher-certified products are a niche market, we seek to further expand this business as we attempt to capture the premium from offering such products to boost Downstream revenue. OILS AND FATS SALES VOLUME* (MILLION MT) 0.10 0.20 0.30 0.35 0.25 0.15 0.05 0.40 2016 2017 2018 0.36 0.34 0.33 * inclusive of FMCG and bulk oil sales volume For further details on the production of Palm Methyl Ester, please refer to the Natural Capital in this MD&A. MANUFACTURED CAPITAL