PROGRESSING SUSTAINABLY ANNUAL INTEGRATED REPORT 2023
FGV HOLDINGS BERHAD PROGRESSING SUSTAINABLY Every day, we strive to advance our purpose of building a sustainable future for all, through the work that we do at FGV. As an organisation that is reliant on the natural resources of the land, we are deeply committed to nurturing a better planet for the next generation. We endeavour to achieve this by conscientiously cultivating the land, fostering an ecosystem that promotes inclusive growth for all. Additionally, we aim to develop affordable and high-quality products that are easily accessible, while also employing responsible business practices that create value. In doing so, we aim to ensure that resources are used responsibly and benefits are shared widely. The theme of this Annual Integrated Report, ‘Progressing Sustainably,’ mirrors our determination to shape the sustainable future that we envision. With this commitment, we aim to achieve equitable, prudent, and enduring growth, ensuring that we remain a force in delivering sustainable foods and agriproducts for generations to come. Our cover design for the year draws inspiration from the dynamic strokes of the FGV logo, embodying the essence of our organisation’s energy and resilience in the face of challenges. Positioned to symbolise forward momentum, these strokes encapsulate our commitment to progress, innovation, and sustainability. Reflecting the core values of FGV, the design represents simplicity, a focus on strengthening foundations, and a relentless drive for advancement through collaborative efforts and an inclusive mindset. COVER RATIONALE Scan Me Please play your part by choosing to access our Report digitally. You can download it from our corporate website or by scanning the QR code.
ANNUAL INTEGRATED REPORT 2023 WHAT’S INSIDE SETTING THE STANDARDS Basis of This Report 3 SECTION 1 OUR ACHIEVEMENTS Our Story 6 Global Presence 8 Our Approach to Sustainability 10 2023 Highlights 12 5-Year Financial Highlights 14 Our Key Businesses 15 Organisational Structure 16 SECTION 2 REFLECTIONS FROM THE TOP Chairman’s Statement 18 Group Chief Executive Officer’s Review 22 SECTION 3 DRIVING OUR STRATEGY Operating Landscape 27 Business Strategy 29 Material Matters 32 Stakeholders Engagement 34 Linking Material Matters to Risks and Strategy 38 Our Value Creation Model 40 SECTION 4 BUILDING VALUE AT OUR CORE Group Financial Review 43 Group Business Review 49 Sustainability Review 78 SECTION 5 STEERING INTEGRITY AND ACCOUNTABILITY At a Glance - Board of Director 86 Board of Directors’ Profile 88 At a Glance - Group Management Committee 96 Group Management Committee’s Profile 98 Corporate Governance Overview Statement 107 Statement on Risk Management and Internal Control 146 SECTION 6 CORPORATE GOVERNANCE AND SHAREHOLDER INFORMATION Corporate Details 155 Share Price Movement 156 Financial Calendar 157 Analysis of Shareholdings 158 Top 10 Properties of FGV Group 162 Additional Disclosure 164 SECTION 7 ANNUAL GENERAL MEETING Thursday, 20 June 2024 https://meeting.boardroomlimited.my (virtual meeting platform) 11:00 a.m.
SETTING THE STANDARDS SEC 1 2 SECTION ONE SETTING THE STANDARDS Basis of This Report 3
FGV HOLDINGS BERHAD | ANNUAL INTEGRATED REPORT 2023 3 www.fgvholdings.com 2023 REPORTING SUITE To provide a comprehensive overview of our performance and future prospects, this Report should be read in conjunction with the accompanying reports in our Reporting Suite and other information accessible on our website. As per usual practice, FGV will produce a Sustainability Report every two years, offering stakeholders comprehensive insights into our sustainability initiatives, performance, and progress. The Sustainability Report serves as a valuable tool for stakeholders to assess our Environmental, Social, and Governance (ESG) efforts, understand our impact on sustainability matters, as well as our commitment to responsible business practices. BASIS OF THIS REPORT REPORTING FRAMEWORKS AND STANDARDS FGV adheres to various reporting guidelines, including the Malaysian Code on Corporate Governance 2021 and Bursa Malaysia Securities Berhad’s (Bursa Securities) Main Market Listing Requirements, in producing this AIR. We also strive to meet the Global Reporting Initiative Standards (GRI) 2021 in our sustainability reporting. REPORTING PERIOD, SCOPE, AND BOUNDARIES This AIR covers our value-generating activities from 1 January 2023 to 31 December 2023. Unless stated otherwise, it includes all of FGV’s businesses in Malaysia and other countries involving operations in subsidiaries and joint ventures. Within this Report, you will find insightful commentary, evaluations, and future prospects for our primary business sectors within these Divisions: Plantation, Sugar, Logistics and Support, Consumer Products, and Integrated Farming. We also report on developments that may extend beyond our immediate reporting boundaries but are material to the Group’s overall performance. It is important to note that while some sections of the Report will reflect the new organisational structure effective as of 1 January 2024, the Group Business Review section from pages 49 to 77 will maintain the previous structure. This approach ensures continuity and clarity, allowing us to present a cohesive analysis of our past performance and achievements. However, for discussion on our outlook and strategies for the future, we will align with the latest organisational structure. This will enable us to provide insights into how the new structure will shape our future direction, initiatives, and goals. By structuring the Report in this manner, we aim to provide stakeholders with a comprehensive overview of FGV’s current state, as well as insights into our vision and strategies moving forward under the new structure. This approach ensures transparency and clarity in communicating FGV’s trajectory and aspirations. This AIR has been thoughtfully developed to present information in a comparative format, making it easier for our readers to review. We have incorporated sustainability disclosures throughout the Report, demonstrating our commitment to integrating sustainability as a fundamental aspect of our value creation process. The FGV Holdings Berhad (FGV) 2023 Annual Integrated Report (AIR) offers a comprehensive view of our efforts towards creating sustainable value and is aligned with the principles of the International Integrated Reporting Framework. The Report aims to communicate our accomplishments, challenges, and strategies in a transparent and integrated manner, reflecting our commitment to fostering sustainable growth and shared prosperity. We strive to continually improve our reporting disclosures to ensure that our stakeholders are able to gain a better understanding of how FGV creates and sustains value. Our primary goal is to communicate effectively with all stakeholders and enable them to make informed assessments of our performance and future prospects. ALIGNMENT TO THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS We align our sustainability strategies and initiatives with 13 of the United Nations Sustainable Development Goals (UN SDGs) as below in our efforts to contribute to a more sustainable future. Annual Integrated Report 2023 Sustainability Report 2022/2023 Audited Financial Statements 2023 More information about How We Contribute to UN SDGs can be found in the Sustainability Report 2022/2023.
SETTING THE STANDARDS SEC 1 4 MATERIALITY In 2023, with the assistance of an independent consultant, we conducted a Materiality Assessment, engaging both internal and external stakeholders to gather insights on the Group’s Material Matters. This process included a review of our previous Material Matters in determining factors impacting our value delivery. This AIR was prepared based on the determination of our Material Matters. It offers a fair, accurate, and comprehensive overview of our strategy, performance, and prospects, that takes into account the Material Matters that influence our ability to create and preserve value across the ESG aspects of our business. In developing this Report, we considered both qualitative and quantitative factors that could impact our strategic objectives and the sustainability of our business. This includes issues discussed in reports to our Board of Directors, identified risks, and the interests of our stakeholders. BASIS OF THIS REPORT More information can be found in Material Matters on pages 32 to 33. REPORTING INTEGRITY We have taken rigorous measures to ensure the accuracy, consistency, and comprehensiveness of the information presented to maintain the Report’s integrity. The reviewing process of this Report is overseen by the Reporting Committee to ensure alignment with the International Integrated Reporting Council Framework and to ensure a fair representation of FGV’s performance and operations. The Report was also reviewed by the Audit Committee and submitted to the Board for final approval together with the Audited Financial Statements, in accordance with our stringent governance practices. Our external auditors conducted an assurance review of our Audited Financial Statements and provided a limited assurance review of our Statement on Risk Management and Internal Control. In compliance with the new requirement by Bursa Securities, we have undergone an Independent Limited Assurance process conducted by an independent party on the selected sustainability information disclosed in our Sustainability Report 2022/2023, which we aim to improve upon progressively. The Independent Limited Assurance Report is available within the Sustainability Report 2022/2023. FORWARD-LOOKING STATEMENTS In this AIR, we include forward-looking statements about our Group’s plans, objectives, strategies, future operations, and performance. However, these statements should not be considered as guarantees of future operating, financial or other results as we remain subject to risks, uncertainties, and assumptions. The Group makes no express or implied representation or warranty that the results targeted by these forward-looking statements will be achieved. Actual results and outcomes may significantly differ from forward-looking statements, whether expressed or implied. We are under no obligation to update these forward-looking statements or the historical information included in this AIR. OPPORTUNITIES FOR FEEDBACK We understand that enhancing our reporting disclosures and standards requires ongoing engagement with our stakeholders throughout the year. This engagement is crucial not only for building trust but also for improving our strategy’s effectiveness. It allows us to make timely and relevant disclosures in response to new developments in our operating environment. In line with this commitment, we welcome feedback and inquiries about our reporting from our stakeholders and the public. For any questions or comments, please contact our Investor Relations Department at: 03-2789 0000 fgv.investors@fgvholdings.com NAVIGATING THIS REPORT All icons featured here are Navigation Icons that will be consistently featured within our Report as a guide towards better integration and presentation of information. SIX CAPITALS Natural Intellectual Social & Relationship Financial Manufactured Human TOP RISKS Market Risk Trading Risk Cyber Security Risk Sustainability Risk Climate Risk Labour Risk Sugar Risk MATERIAL MATTERS STRATEGIC THRUSTS Climate Change Waste Management Anti-Corruption & Anti-Bribery Upholding Human Rights & Labour Standards Occupational Health & Safety Talent Development Regulatory Compliance & Sustainability Certifications Business Development & Product Quality Environment Economic Social New Growth Areas Financial & Capability Building Product & Market Penetration Operational Improvement NAVIGATION ICON
FGV HOLDINGS BERHAD | ANNUAL INTEGRATED REPORT 2023 5 OUR ACHIEVEMENTS Our Story 6 Global Presence 8 Our Approach to Sustainability 10 2023 Highlights 12 5-Year Financial Highlights 14 Our Key Businesses 15 Organisational Structure 16 SECTION TWO
OUR ACHIEVEMENTS SEC 2 6 OUR MISSION OUR PRIDE VALUES Best solutions and ideas come from working with both internal and external parties. Our sustained success and achievements can only come from respect for people as well as the environment, which is the main source of our business. It means being responsible and accountable for one’s own actions and behaviours. Each employee is responsible for the Group’s success and business reputation. Strive to discover, create ideas, and identify growth potential from uncharted opportunities and beyond traditional boundaries, all done in the best interest of our stakeholders. We are enthusiastic about what we do, committed to the growth and future of our agribusinesses, while propagating sustainable development around the world. FGV is an agribusiness based in Malaysia and one of the world’s largest producers of Crude Palm Oil (CPO), accounting for 3% of global and 14% of Malaysian CPO production. Since its listing on the Main Market of Bursa Malaysia Securities Berhad in 2012, FGV has remained committed to achieve its strategic goals and leveraging synergies to create value for its stakeholders. OUR STORY 1 Developing and producing high-quality products sustainably that are both good for the people and the environment 2 Practicing a healthy and innovative working environment and culture within the Group whilst promoting the same to our suppliers 3 Establishing an integrated value chain business ecosystem 4 The embodiment of governance and compliance 5 Cultivating diversification in products and geographies PARTNERSHIP RESPECT INTEGRITY DYNAMISM ENTHUSIASM Delivering Sustainable Foods and Agriproducts to the World OUR VISION
FGV HOLDINGS BERHAD | ANNUAL INTEGRATED REPORT 2023 7 OUR STORY Total Landbank (including Malaysia and Indonesia) 438,867 Ha CPO Production 2.62 million MT FFB Processed 12.69 million MT FGV Estates: 28% (3.59 million MT) Third Parties: 30% (3.79 million MT) FELDA Settlers: 42% (5.31 million MT) Planted Area 344,472 Ha Unplanted 94,395 Ha Oil palm: 333,765 Ha Rubber: 7,203 Ha Other crops: 3,504 Ha Mills 66 MSPO-certified: 100% RSPO-certified: 45% Research & Development (R&D) of palm oil plantations for R&D purposes >12,000 Ha Producer of award-winning Yangambi ML161 seed with 39.4% domestic market share Malaysia’s leading fertiliser manufacturer with >700,000 MT annual production capacity highly qualified researchers 71 agronomists 22 The Plantation Division is at the core of our operations, encompassing the entire supply chain from Upstream to Downstream activities. It also covers Research & Development (R&D), Marketing & Trading, Rubber, and Renewable Energy. Plantation Consumer Products & Integrated Farming leverage on synergies within FGV to diversify into other forms of agriculture products, thereby bringing additional revenue to the Group. Consumer Products & Integrated Farming The Logistics and Support Division fortifies the core of FGV’s business entities with the nation’s largest liquid bulking installation and dedicated fleets, driving growth in logistics through innovation and technology. Other supporting businesses within this Divison encompasses Information Technology and Hospitality. Logistics and Support Total Storage Capacity (including Malaysia and Pakistan) 1.10 million MT Liquid: 974,490 MT Dry Cargo: 123,000 MT Mixed Fleet Vehicles >600 units The Sugar Division, operated through FGV’s 51% subsidiary, MSM Malaysia Holdings Berhad (MSM), is Malaysia's leading refined sugar producer and among the largest in Asia. Listed on Bursa Malaysia Securities in 2011, MSM offers a diverse range of products, including refined sugars and healthier alternatives such as sucralose and stevia mix, catering to a broad spectrum of consumer health preferences. Gula Prai >60% domestic refined sugar market share Sugar Refining Capacity 2.05 million MT Sugar Brands #1 refined cooking oil in Malaysia, with 44.7% market share #1 margarine brand in Malaysia, with 49.0% market share
OUR ACHIEVEMENTS SEC 2 8 GLOBAL PRESENCE United States We operate in seven countries across North America, Europe and Asia. Spain France FGV’S ASSETS More information on the assets owned by FGV can be found on our website, www.fgvholdings.com 214 Estates 66 Mills 6 Vegetable oil refineries (2 are JVs)* 7 Rubber processing facilities 4 Kernel crushing plants 3 R&D centres 3 Seed production centres 3 Fertiliser manufacturing plants 3 Trading offices* 2 Oleochemical plants (1 is JV)* 1 Biodiesel plant Plantation 2 Sugar refineries 1 Refined sugar warehouse Sugar 12 Bulking terminals (2 are JVs)* 10 Transportation hub and spoke 11 Warehouses (1 is JV)* 4 Transportation depots 2 Jetty operations (1 is JV)* 1 Hotel Logistics & Support * Joint Venture 2 Collection, Processing, and Packaging Centres (CPCC) 1 Chuping agro food valley 6 Paddy farming 3 Animal feed plants 1 Fresh milk processing facility 1 Integrated cattle dairy farm Integrated Farming FGV Employees 84% 16% 16,781 FGV’s Total Workforce1 85% 15% 49,723 Operational Labour 32,942 14% 86% Male Female 1 FGV’s total workforce as at 31 December 2023 includes FGV Employees (Malaysia, its overseas operations, and MSM) and Operational Labour.
FGV HOLDINGS BERHAD | ANNUAL INTEGRATED REPORT 2023 9 Malaysia Cambodia Thailand Pakistan 1 Biodiesel plant 1 Oleochemical plant* 2 Sugar refineries 1 Refined sugar warehouse 10 Bulking terminals 10 Transportation hub and spoke 10 Warehouses (located in three different locations) 4 Transportation depots 1 Jetty operation 1 Hotel 2 Collection, Processing, and Packaging Centres (CPCC) 1 Fresh milk processing facility 1 Chuping agro food valley 3 Animal feed plants 6 Paddy farming 1 Integrated cattle dairy farm Cambodia 1 Rubber processing facility Thailand 1 Rubber processing facility ASIA France 1 Trading office* Spain 1 Trading office* EUROPE NORTH AMERICA United States 1 Oleochemical plant Malaysia 214 Estates 66 Mills 5 Vegetable oil refineries (1 is JV)* 5 Rubber processing facilities (two are located in the same location) 4 Kernel crushing plants 3 R&D centres 3 Seed production centres 3 Fertiliser manufacturing plants Pakistan 1 Vegetable oil refinery* 1 Trading office* 2 Bulking terminals* 1 Jetty operation* 1 Warehouse* Indonesia# # The Indonesian operation was divested in November 2023. LOCATIONS
OUR ACHIEVEMENTS SEC 2 10 FGV’s GSP was introduced in 2016 and aligns with Global Sustainability Standards to positively impact economic, environment, and social aspects. The GSP’s three pillars focus on Promoting Economic Growth, Respecting Human Rights, and Protecting the Environment. This policy guides FGV’s sustainability initiatives across all its entities, including listed and non-listed subsidiaries under its management control. Moreover, the GSP extends to contractors, suppliers, and other third parties working with FGV, ensuring a comprehensive and inclusive approach to sustainability. Profitability and economic growth as the main output of a holistic sustainability approach. Economic Growth SUSTAINABILITY FRAMEWORK FGV’s Sustainability Framework aligns our sustainability efforts with Environmental, Social and Governance (ESG) principles. The Framework guides the integration of sustainable practices into our business management and operations serving as a blueprint for sustainable development to generate long-term value for all stakeholders. Our sustainability endeavours priortise human rights and compliance with labour standards while aiming to foster positive environmental and social impacts. We are committed to this approach to strive for sustainable and holistic business growth. SUSTAINABILITY GOVERNANCE The Board at FGV takes a top-down approach to leading the Group’s sustainability efforts. This oversight sets the tone from the top to ensure sustainability is a key organisational priority. Supported by the Board Sustainability Committee (BSC) and the Sustainability Steering Committee (SSC), the Board oversees the strategic development and implementation of the Group Sustainability Policy (GSP). The BSC receives detailed reports from the Group Management Committee, and the SSC informing the Board’s decisions on sustainability matters. Furthermore the Board holds the responsibility for approving public disclosures regarding the Group’s sustainability efforts, ensuring that sustainability initiatives are well-coordinated and transparently communicated to all stakeholders. SUSTAINABILITY SCOPE AND BOUNDARIES FOR SUSTAINABILITY REVIEW This sustainability review in this report covers only FGV’s operations and its subsidiaries in Malaysia, excludes subsidiaries, joint ventures, and associates outside of Malaysia for the period of 1 January 2023 to 31 December 2023. More information on Sustainability Governance can be found in the Corporate Governance Overview Statement on pages 107 to 145. OUR APPROACH TO SUSTAINABILITY Transformation Innovation Social Environment Governance Our comprehensive sustainability approach is structured into three phases: Rethink, Repurpose, and Redesign, being executed from 2022 to 2024. This three-phased structured approach aims to generate significant positive impacts across economic, environmental, and social aspects. The strategy’s phased approach allows for focused and sequential implementation, ensuring thorough addressing and integration of each aspect of sustainability into the Group’s overall framework.
FGV HOLDINGS BERHAD | ANNUAL INTEGRATED REPORT 2023 11 GROUP SUSTAINABILITY POLICY • Addressing climate change • No deforestation and planting on peat • Protect High Biodiversity Value (HBV) and High Conservation Value (HCV) areas • Limitations on the use of hazardous chemicals and agrochemicals • Water management and waste management • Efficient use of natural resources Protecting the Environment • Equality and non-discrimination • Upholding labour standards • Respecting the rights of indigenous peoples and local communities • Health and safety • Preventing harassment and abuse Respecting Human Rights • Responsible sourcing - support for suppliers, and smallholders. • Responsible production - obligation of value chain partners through traceability and certification Promoting Economic Growth WHICH ARE SUPPORTED BY OUR SUSTAINABILITY POLICIES OUR SUSTAINABILITY FRAMEWORK GUIDES THE WAY WE APPROACH ESG ASPECTS Integration of sustainability objectives and targets into the Company’s core business strategy, model and governance structure. Integration of a responsible approach to social and human rights issues. Integration of environmental protection and sustainable food production in becoming a zero environmental impact business. Linking innovation and transformation to promote incremental and disruptive sustainability-oriented innovations and progress. Governance Social Environment Innovation & Transformation AND PROVIDES THE CATALYST FOR OUR SUSTAINABILITY STRATEGY RETHINK CROSSING THE CHASM 2022 • Revision of policies and standards • Resolving resistance and lack of integration • Feasibility study and re-assessment of existing and new business strategies • Enhancement of existing sustainability programmes • Strengthening governance for a holistic approach • Promoting sustainability-related innovation management BRIDGING AT PEAK 2024 • Redesign processes and products to close the loop • Full and continuous compliance with sustainability regulations and standards at national and global levels • Continuous engagement and materiality assessment • Continuous improvement in policies and internal standards • Branding of FGV as a sustainabilitybased commerce REDESIGN • Adoption and integration of a holistic sustainability approach at the operational level • Management of negative impacts throughout operations • Building a culture that integrates sustainability principles into improving profitability and livelihood • Commitment to zero-impact business operations through circularity (closedloop) • Full ethical investment and sourcing TAKING THE LEAP 2023 REPURPOSE OUR APPROACH TO SUSTAINABILITY
OUR ACHIEVEMENTS SEC 2 12 2023 HIGHLIGHTS Clinched the Gold Award and Best Invention Award for Research Institutions at the 34th International Invention, Innovation, and Technology Exhibition in 2023 Undertook two R&D studies, focusing on value-added fertiliser and planting materials with improved high oil yield, aimed at enhancing efficiency and productivity Conducted a tree planting programme in Gerik, Perak, covering a 300 Ha HCV management area to promote sustainable land management practices Completed 16,547 Ha of felling and 19,862 Ha of replanting work Applied 275,570 MT of fertiliser, covering 90% of our annual manuring programme NATURAL CAPITAL INTELLECTUAL CAPITAL Invested approximately RM392.6 million in constructing new housing, renovating facilities, and ensuring uninterrupted electricity and water supplies for our migrant workers, energy management system, sustainability certifications, and other initiatives Launched the Saji Seikhlas Hati campaign, aimed at supporting deserving Malaysians through various programmes, particularly focusing on the Asnaf and underprivileged groups Completed the reimbursement of recruitment fees to 20,153 active migrant workers, totalling RM72.2 million Allocated around RM2.6 million to various initiatives as part of our Corporate Social Responsibility efforts Completed the GHG emissions inventory for Scope 1 and Scope 2 in both the Forest, Land, and Agriculture (FLAG) sectors and Non-FLAG sectors Received the ESG Positive Impact Awards 2022 in the Environment: Renewable Energy category, organised by The Star Media Group Berhad Conducted nine series of Independent Smallholders Consultation Programmes to enhance their understanding of FGV’s sustainability commitment and foster collaboration toward sustainable practices SOCIAL & RELATIONSHIP CAPITAL
FGV HOLDINGS BERHAD | ANNUAL INTEGRATED REPORT 2023 13 2023 HIGHLIGHTS Launched an upsized Sukuk Murabahah programme of RM3.0 billion Contributed around RM34 million for Zakat Assigned as an investment grade corporate rating of AA- by Malaysian Rating Corporation Berhad, with a stable outlook Saji has been recognised with multiple awards, including: • Top Outstanding Brand with The Most Incremental Shoppers in 2022 by KANTAR • BrandLaureate Sustainable Business & Brand Inspiring Achievement Award for 2022-2023 • Gold Award for Best Bahasa Malaysia Copywriting, Content Writing, and Scriptwriting at Kancil Awards Saji cooking oil retains its position as Malaysia’s top brand with a market share of 44.7%, while Seri Pelangi margarine increased its market share to 49.0% Bursa Securities has approved Sahabat Bulking Installation to manage the Port Tank Installation for CPO Constructed a new warehouse in MSM Johor with a capacity of 10,000 MT to support the plant ramp-up Increased bulking and storage capacity by 25,500 MT through local expansion at our facilities across Malaysia Completed the third phase of renovation, which included 32 rooms and two meeting rooms, at Hotel Seri Costa in Melaka Purchased 54 units of Euro 5 engine emissions Prime Movers to increase capacity and enhance sustainability compliance MSM introduced its first 100% Electric Vehicle (EV) van for last-mile delivery in Klang Valley as part of its ongoing ESG initiatives Launched 15 new Stock Keeping Units (SKUs) in the market: • Single greek yoghurt in mango peach, mixberries, and strawberry flavours, Acerola yoghurt in pineapple and coconut gula melaka, and UHT milk in full cream and chocolate flavour, in various sizes • Premium Gula Super • Krimer pekat in various sizes, coconut cream reformulation, and ketupat mini • Ayam kampung and ready-todrink real fruit juices in various flavours FINANCIAL CAPITAL HUMAN CAPITAL MANUFACTURED CAPITAL Conducted 281,109 hours of training across all levels to upskill employees Introduced the ‘L&D Reconnect’ platform to facilitate learning and cultivate a culture centred around respect, enthusiasm, and teamwork Achieved multiple awards and recognitions, including: • Malaysia Best Employer Brand Awards 2023, Malaysia Brand Leadership Awards 2023, and Top Most HR Leaders Malaysia by World HRD Congress • Malaysia’s Most Preferred Employer under the Conglomerate Sector by GRADUAN Brand Awards 2023
OUR ACHIEVEMENTS SEC 2 14 5-YEAR FINANCIAL HIGHLIGHTS 2023 2022 2021 2020 2019 Operating Results (RM Million) Revenue 19,359 25,562 19,566 14,076 13,259 Operating profit/(loss) 403 1,907 1,779 445 (194) Profit/(Loss) before taxation and zakat 336 1,955 1,714 346 (339) Profit/(Loss) after tax and minority interest 102 1,329 1,168 146 (246) Key Balance Sheet Data (RM Million) Property, plant and equipment 7,908 7,728 7,674 7,810 8,190 Total assets 17,283 18,111 17,956 17,180 17,702 Total borrowings 3,433 3,059 3,998 4,293 4,907 Total liabilities 9,701 10,226 10,770 11,079 11,601 Shareholders’ equity 5,972 6,232 5,421 4,262 4,173 Share Information Earnings per share (sen) 2.8 36.4 32.0 4.0 (6.7) Dividend per share (sen) 3.0 15.0 8.0 3.0 2.0 Net asset per share (RM) 1.64 1.71 1.49 1.17 1.14 Share price as at 31 December (RM) 1.38 1.32 1.48 1.28 1.52 Return on shareholders’ fund (%) 1.70 21.33 21.55 3.43 (5.90) 1.14 Revenue (RM Million) 2023 2022 2020 2021 2019 19,359 25,562 14,076 19,566 13,259 Profit/(Loss) After Tax and Minority Interest (RM Million) 102 1,329 146 1,168 (246) 2023 2022 2020 2021 2019 Earnings Per Share (sen) 2.8 36.4 4.0 32.0 (6.7) 2023 2022 2020 2021 2019 Return On Shareholders’ Fund (%) 1.70 21.33 3.43 21.55 (5.90) 2023 2022 2020 2021 2019 Net Asset Per Share (RM) 1.64 1.71 1.17 1.49 2023 2022 2020 2021 2019 Dividend Per Share (sen) 3.0 15.0 3.0 8.0 2.0 2023 2022 2020 2021 2019
FGV HOLDINGS BERHAD | ANNUAL INTEGRATED REPORT 2023 15 OUR KEY BUSINESSES Scan the QR code to view our Audited Financial Statements. More information can be found in the Audited Financial Statements 2023. Subsidiaries Joint Ventures PLANTATION Rubber FGV-CVC (Cambodia) Co Ltd FGV Rubber Industries Sdn Bhd Feltex Co Ltd Research & Development FGV Fertiliser Sdn Bhd FGV Agri Services Sdn Bhd FGV R&D Sdn Bhd Marketing & Trading FGV Trading Sdn Bhd FGV Marketing Services Sdn Bhd Downstream Delima Oil Products Sdn Bhd FGV Kernel Products Sdn Bhd FGV Refineries Sdn Bhd FGV Biotechnologies Sdn Bhd Twin Rivers Technologies Holdings Inc FGV IFFCO Sdn Bhd FPG Oleochemicals Sdn Bhd Upstream FGV Plantations (Malaysia) Sdn Bhd Pontian United Plantations Berhad Asian Plantations Limited FGV Security Services Sdn Bhd FGV Palm Industries Sdn Bhd INTEGRATED FARMING FGV Integrated Farming Holdings Sdn Bhd FGV Dairy Farm Sdn Bhd FGV Dairy Industries Sdn Bhd FGV Chuping Agro Valley Sdn Bhd SUGAR MSM Malaysia Holdings Berhad MSM Prai Berhad MSM Sugar Refinery (Johor) Sdn Bhd MSM Logistics Sdn Bhd MSM Trading & Distribution Sdn Bhd LOGISTICS & SUPPORT Support FGV Prodata Systems Sdn Bhd Felda Travel Sdn Bhd Malaysia Pakistan Venture Sdn Bhd (MAPAK) Logistics FGV Johor Bulkers Sdn Bhd FGV Bulkers Sdn Bhd FGV Grains Terminal Sdn Bhd Langsat Bulkers Sdn Bhd FGV Transport Services Sdn Bhd F.W.Q. Enterprises (Pvt) Ltd
OUR ACHIEVEMENTS SEC 2 16 ORGANISATIONAL STRUCTURE Business Division Support Division Board of Directors FGV Holdings Berhad Group Risk Management Group Secretarial Group Governance Management Group Internal Audit Plantation Marketing Dairy Sugar Logistics Support Group Finance Group Procurement Group Information Technology Group Human Capital Group Health, Safety, & Environment Group Strategy Group Transformation Group Strategic Communication Group Sustainability Bulk Commodity Edible Oils Chemicals Mills Rubber Cash Crop R&D Renewable Energy Operational Excellence Estates Peninsular 1 Peninsular 2 Sabah/ Sarawak Consumer Products Integrated Farming Logistics & Support Oils & Fats Sugar Finance & Corporate Services Board Governance & Risk Management Committee Audit Committee Board Sustainability Committee Nomination & Remuneration Committee Investment Committee Group Chief Executive Officer Group Tax Group Legal Group Treasury BGRMC IC NRC BSC AC
FGV HOLDINGS BERHAD | ANNUAL INTEGRATED REPORT 2023 17 SECTION THREE REFLECTIONS FROM THE TOP Chairman’s Statement 18 Group Chief Executive Officer’s Review 22
REFLECTIONS FROM THE TOP SEC 3 18 DEAR STAKEHOLDERS, Stepping into the role of Chairman at FGV is a great honour and a deep responsibility to undertake. In my inaugural statement, I wish to emphasise FGV’s commitment in making sustainability a core part of the Company’s strategy. While we draw lessons from our past, we focus firmly on the future to drive sustainable growth and create social and economic value. The year 2023 saw progress in our Business Plan 2023-2025 (BP25), steering us towards delivering sustainable foods and agriproducts to the world with greater commitment and vigour. WEATHERING A YEAR OF CHALLENGES In the agricultural commodities sector, global economic conditions, population growth, and changing dietary preferences significantly influence market demand. Compounding this dynamic environment are the ongoing challenges of price fluctuations and foreign exchange rate volatility. In addition, human rights, biodiversity conservation, and compliance with sustainability certifications have gained such importance and prominence to the extent that the industry has faced greater scrutiny than ever. Crude palm oil (CPO) prices fell in 2023 from their peak in 2022, influenced by stiffer competition from other edible oils as the supply improved. Furthermore, the rising costs of raw materials such as sugar and other crucial items such as fertiliser and high energy costs add to these challenges, impacting our production and financial outcomes. CHAIRMAN’S STATEMENT Over the past year, FGV has navigated through a complex and dynamic business landscape. With resilience and determination, we have adapted to the environment to address challenges and carved a path for strategic progress. Our commitment to sustainability and responsible growth has been fruitful, particularly in supporting FELDA settlers and independent smallholders, who are the primary suppliers of FFB that form the backbone of our supply chain. Our efforts extend beyond business and are also aimed at empowering these communities, while integrating sustainable practices into our operations. FGV remains steadfast in our pursuit to align our business practices with innovative social change to ensure progress, growth, and sustainability. More information can be found in Operating Landscape on pages 27 to 28. Tan Sri Rastam Mohd Isa Chairman
FGV HOLDINGS BERHAD | ANNUAL INTEGRATED REPORT 2023 19 CHAIRMAN’S STATEMENT Given that we face some challenges that are quite distinct from other major plantation companies, our financial considerations necessitate a different approach. Following a thorough review, the Board has approved and declared a final dividend of 3 sen per share for a total dividend payout of RM109.4 million for the year. BP25 ADVANCING RESPONSIBLE GROWTH We aim to advance responsibly while focusing on developing strategies that align with our goal of creating sustainable, long-term value for our shareholders. The Business Plan aims to expand FGV’s reach beyond its traditional business. It was developed following an extensive evaluation of our current position, recognising existing and upcoming challenges, and identifying immediate and future opportunities. Our Business Plan prioritises operational efficiency across divisions and business units through Key Strategic Initiatives (KSIs). We allocate strong emphasis on modernising and mechanising operations, along with a focus on fertilisation and replanting efforts. We are reinforcing process controls in our mills and refineries, aimed at optimising utilisation factor and plant capacities to advance product development and market penetration. We are exploring growth opportunities through a new logistics business arm and distribution centre. Diversification of our portfolio and expansion of our markets are being achieved through More information can be found in Business Plan on pages 10 to 11. the development of high-value products. These are complemented by strategic marketing initiatives to enhance brand equity and presence for long-term value creation. Underpinning these efforts is our focus on reinforcing sustainability through intensifying our Environmental, Social and Governance (ESG) initiatives. We prioritise human rights, fair labour practices, as well as governance and risk management. We are also looking into renewable energy and waste-to-wealth initiatives to maximise opportunities for sustainable energy use and material management. PROGRESSING TOWARDS SUSTAINABLE PRACTICES FGV’s business strategy centres around sustainability. For us, success is defined by achieving financial growth and meeting our social obligations. This means ensuring the prosperity of smallholders and our community, and building a future where economic advancement and environmental responsibility and sensitivity go hand-in-hand. In 2023, we progressed into the second stage of our three-year Sustainability Strategy that focused on integrating sustainability practices at the operational level. We established a Sustainability Steering Committee, led by the Group Chief Executive Officer, to ensure identified initiatives are cascaded effectively throughout the organisation. We have also set up a Withhold Release Order (WRO) Task Force aimed at overseeing sustainability issues and working towards lifting the WRO suspension imposed by the United States (US) Customs and Border Protection (CPB). We are committed to aligning our labour practices with industry and global standards. With the Minister of Plantation and Commodities at the launch of the MSPO certification sticker on our Saji cooking oil label. Within this context, FGV’s core business model operates rather distinctively, given its unique blend of commercial objectives and social obligations. FGV’s role as Malaysia’s largest off-taker of smallholders’ Fresh Fruit Bunch (FFB) sets it apart from other plantation companies. We procure FFB primarily from Federal Land Development Authority (FELDA) settlers and independent smallholders. These account for over 70% of FGV’s total processed FFB. FGV’s performance in 2023, therefore, cannot be evaluated solely on commercial metrics. To understand the success of our model, we must also consider its impact on local communities, its social enterprise role in supporting smallholder livelihoods, and its contribution to the national economy. Despite facing the same market volatility and environmental challenges that impact the broader agricultural sector, FGV has to focus more on balancing commercial success with social responsibility. Total Dividend 3 sen per share
REFLECTIONS FROM THE TOP SEC 3 20 CHAIRMAN’S STATEMENT We are realigning, adjusting, and advancing our operations to embrace the circular economy. Our waste-to-wealth initiatives, which includes converting palm oil mill effluent into biogas and selling used materials as feedstock, demonstrate this aim. In our drive towards carbon neutrality, we conducted a Greenhouse Gas (GHG) emissions inventory exercise to establish our baseline, set reduction targets and form a reduction strategy. Having completed our Scope 1 and Scope 2 emissions inventory, we are now focused on the more complex Scope 3, which involves numerous suppliers. The inventory exercise extends to waste and water conservation. To facilitate the transition to a low-carbon economy, we are installing grid-connected photovoltaic systems on the rooftops of selected business operations. We have also conducted a tree planting event in Gerik, Perak, covering a 300 Ha High Conservation Value (HCV) area to promote sustainable land management practices. This initiative aligns with our efforts to enhance environmental stewardship and biodiversity conservation, demonstrating our commitment to corporate social responsibility and sustainable development goals. Environment Stakeholder engagement has been crucial in aligning our business with social expectations. In 2023, we have conducted nine series of Independent Smallholders Consultation Programmes to communicate FGV’s sustainability commitments and gather insights from this stakeholder group. The interactions has proven particularly insightful in highlighting the need for technical support, estate management training and financial assistance for certification costs. To strengthen our efforts in promoting ethical sourcing across our value chain and mitigate negative impacts across our operations, we have enhanced our end-to-end Responsible Recruitment Programme to ensure ethical practices are upheld from pre-sourcing assessments to ongoing monitoring. Recruitment processes for migrant workers have also been improved by reinforcing the principle of no recruitment fee and strengthening recruitment agencies’ due diligence and selection process. We do not tolerate unethical practices and we have demonstrated this by suspending recruitment agencies for not meeting our sustainability standards. As part of our initiative to promote diversity and inclusion in the workplace, we collaborated with organisations, including LeadWomen and the Malaysian Palm Oil Council (MPOC) to organise various workshops and panel sessions on Women’s Empowerment and Gender Equality in the Palm Oil Sector. This initiative reflects our commitment to fostering a more equitable and inclusive work environment, where all individuals have equal opportunities for growth and advancement. Social In 2023, we implemented several governance initiatives to enhance transparency, accountability and operational efficiency. Key measures included establishing formal procedures for addressing breaches of the Directors’ Code of Ethics and Conduct (COEC), Directors’ Code of Business Practice (COBP), and a comprehensive Group Grievance Management Policy. A new Grievance Channel was introduced to allow migrant workers to have their concerns and grievances addressed promptly and effectively by the Company. We established a Tax Corporate Governance Framework (TCGF), comprising a comprehensive set of technical guidelines and associated documents governing tax management and processes within the Group. FGV is pleased to be among the early adopters of the TCGF internally, as recommended by the Inland Revenue Board of Malaysia. We strengthened compliance and monitoring functions, and deliberated on strategic issues such as whistleblowing and anti-bribery strategies at the board level. We also collaborated with the Malaysian Anti-Corruption Commission (MACC) and conducted sessions with Senior Management to reinforce our anti-corruption stance. We are addressing our public shareholding spread to meet the minimum requirements and are committed to transparently communicating our efforts to comply with the listing requirements. In promoting fair labour practices, we are working together with LRQA (formerly known as ELEVATE), an independent third-party assessor, to execute a remediation plan necessary under the WRO that focuses on 12 key areas. This includes improving recruitment processes and enhancing agency selection. In 2023, we spent around 1.08 million man-hours to these activities. Additionally, we have reimbursed RM72.2 million in recruitment costs to 20,153 active migrant workers and initiated a three-year project valued at RM605.0 million to improve worker accommodation. To date, we have invested around RM392.6 million in constructing new housing, renovating facilities, and ensuring uninterrupted electricity and water supplies for our migrant workers; developing an energy management system, and facilitating sustainability certifications and initiatives, among others. We aim to ensure our workers are not forced into debt bondage or exposed to poor living conditions. These actions target all 11 indicators of forced labour identified in the WRO and will be part of our submission to the US CBP. Governance More information on Corporate Governance Overview Statement can be found on page 107. More information on sustainability initiatives can be found in the Sustainability Report 2022/2023.
FGV HOLDINGS BERHAD | ANNUAL INTEGRATED REPORT 2023 21 CHAIRMAN’S STATEMENT THE ROAD AHEAD We anticipate ongoing challenges from global market uncertainties that include geopolitical conflicts and trade disruptions. These could impact market demand, increase freight costs, and contribute to inflation. At the same time, unpredictable weather due to climate change, volatility in the CPO market, together with instability in the food industry, are expected to remain as major factors influencing our operations. Our steadfast commitment to strengthening our sustainability will guide our path forward. We are diligently working on meeting the WRO remediation plan and actively addressing climate change through sustainable business models. Our strategy also includes expanding our product range, nurturing employee growth, and strengthening community connections, especially with FELDA settlers and independent smallholders. These strategies are central to driving our growth and ensuring our resilience. APPRECIATION I thank my fellow Directors on the Board for their invaluable support and insightful contributions. My appreciation is extended to Dato’ Shahrol Anuwar Sarman for his interim leadership prior to my appointment. The Board joins me in thanking Dato’ Dzulkifli Abd Wahab, Dato’ Nonee Ashirin Dato’ Mohd Radzi, Encik Kasmuri Sukardi, Encik Azmin Che Yusoff and Dato’ Amiruddin Abdul Satar for their valuable contributions throughout their tenure. The Board is grateful to our Management team for their dedication and commitment towards excellence. The steadfast commitment of our employees at all levels has been essential in building, expanding, and ensuring the sustainability of our business. FGV’s partnership with FELDA and the hard work of settlers and independent smallholders have been invaluable for us. This has significantly contributed to our collective growth and success. Equally, the continuous support from all our stakeholders has been crucial in our journey towards sustainable and inclusive growth. Tan Sri Rastam Mohd Isa Chairman More information can be found in Operating Landscape on pages 27 to 28. AWARDS AND ACHIEVEMENTS We are honoured and appreciative of the awards we have received for our ESG initiatives, particularly those acknowledging our efforts to grow responsibly. These accolades affirm our commitment to sustainable practices and motivate us to continue striving for excellence. Social Governance Environment ESG Positive Impact Awards 2022 by The Star Media Group Berhad Gold Award for Environment: Renewable Energy category GRADUAN Brand Awards 2023 Malaysia’s Most Preferred Employer (Conglomerate Sector) The Malaysia Anti-Corruption Commission (MACC) re-rated FGV as MODERATE for 2020-2023, a change from the initial HIGH rating in 2019 Successfully underwent the re-certification of the ISO 37001 Anti-Bribery Management Systems (ABMS) with extended scope World HRD Congress 41st Malaysian Society for Occupational Safety and Health (MSOSH) Awards 2023 • Grand Award • Gold Merit Award • Gold Class I Award • Gold Class II Award • Silver Award Anugerah Integriti, Governans dan Anti-Rasuah (AIGA) 2023 by The Malaysian Institute of Integrity (IIM) Silver and Bronze 34th International Invention, Innovation & Technology Exhibition 2023 (ITEX’23) Silver Award for: • FGV QUICKCapt app digitises breeding data collection for better traceability • FGV N-Gro biofertiliser that reduces chemicalbased fertilisers • FGV Semantan Bamboo for bamboo ramet propagation Gold Award and Best Invention Award (Research Institutions) • Malaysia’s Best Employer Brand Awards 2023 • Malaysia Brand Leadership Awards 2023 for FGV Biotechnologies Sdn Bhd
REFLECTIONS FROM THE TOP SEC 3 22 DEAR STAKEHOLDERS, In sharing my perspective on FGV’s performance for 2023, it is essential that we frame it within our broader role in economic and social development. As one of the world’s largest producers of CPO, we account for about 3% of global and 14% of Malaysia’s total annual CPO production. We operate globally in seven countries, managing extensive landbank and numerous palm oil mills, with a diversified portfolio from Plantation, Oils and Fats, Sugar, Logistics and Support, Consumer Products as well as Integrated Farming, making FGV a significant player in the global agribusiness sector. Our business is anchored on the concept of linked prosperity, reflecting our belief in agribusiness as a catalyst for progressive social change by supporting the FELDA settlers and independent smallholders. This support contributes to rural economic development and sustains the livelihoods of many families. We also play a role in national food security by committing to providing quality and affordable food options through our various brands of consumer goods. Evaluating our commodity-based company requires a long-term perspective. This approach is vital to understanding the impact of our operations on financial returns, sustainability efforts, social obligations and stakeholder expectations over time. Considering the challenges and opportunities we faced this past year, taking a long-term view is even more important to see the big picture ahead. In facing these varied circumstances, I am pleased to report that the Group has demonstrated tenacity and adaptability. Our response to these situations has been in line with the strategic direction set in our Business Plan. GROUP CHIEF EXECUTIVE OFFICER’S REVIEW FGV executed its strategic actions based on its Business Plan for the year under review. This plan serves as a roadmap, emphasising the importance of sustainability in our approach towards improvement and operational effectiveness. Our business strategy, supported by the team’s effort, has enabled us to address various challenges in a complex and dynamic business environment as we continue to strive for sustainable progress. Dato’ Mohd Nazrul Izam Mansor Group Chief Executive Officer
FGV HOLDINGS BERHAD | ANNUAL INTEGRATED REPORT 2023 23 GROUP CHIEF EXECUTIVE OFFICER’S REVIEW MEASURED APPROACH TO DRIVING PERFORMANCE In 2023, market volatility and fluctuating CPO prices presented significant challenges to the financial performance of our main plantation business. These put pressure on the margin for palm products as the realised average CPO prices decreased to RM3,901 from RM4,832 recorded in 2022. This challenge was further amplified by rising production and operational costs, particularly in the Plantation and Sugar Divisions, fuelled by increasing prices for raw materials such as fertiliser and sugar, higher energy and labour costs, as well as fluctuating foreign exchange rates. Our FFB yield was also impacted by a decline in the average bunch weight, due to lower fertiliser application over several years amid labour shortages and the Movement Control Order (MCO) during the pandemic. This was exacerbated by an extended dry spell, particularly in the peninsular area during the first half of 2023. During the review period, we observed a decrease in crops received from external parties. This decline can be attributed to FGV’s rigorous adherence to sustainability standards for external parties, resulting in a lower volume of FFB received. As external crops constitute over 70% of our total FFB supplies, this reduction led to an overall 11% decrease in FFB processed, impacting our margins within the Plantation Division. Despite the market challenges, we maintained a profitable performance for 2023. Our revenue was registered at RM19,359 million against RM25,562 million in 2022. Profit After Taxation and Minority Interest (PATAMI) for 2023 was recorded at RM102 million, compared to RM1,329 million in 2022. BP25 KEY STRATEGIC INITIATIVES FUELLING PROGRESS Against the challenging operating landscape, we stayed on course in implementing our BP25, a comprehensive strategy aimed at achieving our business objectives. The three-years BP25 combines organic and inorganic growth measures and focuses on KSIs under its four Strategic Thrusts of Operational Improvement, Product and Market Penetration, New Growth Areas, and Financial and Capability Building. These KSIs were instrumental in our 2023 achievements and helped to steer FGV’s future direction. We addressed division-specific challenges by merging KSIs with Key Operational Initiatives (KOIs), ensuring alignment and efficiency throughout our operations. This connects long-term strategic goals with daily activities for cohesive execution and optimised resource allocation. Our commitment to Good Agricultural Practices (GAP) was reinforced with enhancements to estate and mill practices. We identified approximately 13,000 Ha of underproductive areas affected by worker shortages in previous years, with limited accessibility for harvesting and successfully rehabilitated 7,487 Ha to boost productivity in these areas. We also undertook several initiatives to improve the FFB yield which included standardisation of the tasking system, implementation of 1 Cutter, 2 Carrier (C1R2) harvesting method, and increasing our footprint to maximise our presence in the field. Additionally, our oil extraction rate (OER) improved to 20.68% from 20.35% recorded in 2022 as a result of better crop quality received and improved mill performance from our OER programme. To increase mechanisation, we continued the Mechanical Assisted Infield Collection (MAIC) using power barrows for FFB evacuation across approximately 20,000 Ha of hilly terrain. Initiated in 2022, this five-year programme has successfully covered around 24,309 Ha out of the targeted 104,244 Ha. During the year, we completed the felling of 16,547 Ha and planted 19,862 Ha, with a fertiliser application of 275,570 MT, covering 90% of our annual manuring programme. At the end of the year, our labour shortage stood at 16% due to a temporary halt in recruitment activities. This pause was aimed at enhancing recruitment processes to align with the highest sustainability standards. Notably, we have observed a decline in abscondments and repatriations, which has significantly contributed to achieving sufficient labour strength in Peninsular Malaysia. Various initiatives were also undertaken including the construction of housing, facility upgrades, and ensuring essential utilities for our migrant workers. We have also collaborated with FFB suppliers, dealers and smallholders to conduct sustainability awareness programmes and promote traceability. Operational Improvement REVENUE RM19,359 million PATAMI RM102 million TOTAL ASSETS RM17,283 million
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