FGV to sell stake in Axa Affin, mulls disposal of other non-performing assets

KUALA LUMPUR – Felda Global Ventures Holdings Bhd (FGV), which posted a 35% jump in earnings for the second quarter ended June 30, 2016, is mulling the disposal of its non-core and non-performing assets, including its 16% stake in Axa Affin General Insurance Bhd.

“We’ve identified a few, one of them is Axa Affin which is not related to our business. We try to conclude some deals this year,” FGV group president and CEO Datuk Zakaria Arshad (pix) told a results briefing here yesterday.

He said for other disposals, he is looking at reducing the stake to a minimum level.

According to filings with the Companies Commission of Malaysia, FGV, through Felda Marketing Services Sdn Bhd, owns a 16% stake in Axa Affin General Insurance.

Axa and Affin Holdings Bhd hold 42.7% and 33.8% equity interests respectively, in Axa Affin General Insurance.

FGV’s net profit soared 35% to RM62.21 million from RM46.09 million in the previous corresponding period, driven by lower administration cost and higher crude palm oil (CPO) prices.

Revenue for the quarter under review was flat at RM4.14 billion against RM4.19 billion in the same quarter last year.

FGV recorded higher average CPO prices realised of RM2,446 per tonne in the first half against RM2,263 per tonne realised last year.

The group’s administration cost went down 12% in Q2 compared with the same period last year.

Zakaria expects second-half performance to be better in anticipation of low production due to the El Nino phenomenon.

“As the market demand is on the rise and production is slowing down, I see (that) the price will be firm,” he said, noting that its average CPO prices projection for 2016 is maintained at RM2,400 to RM2,600 per tonne.

For the first half of the year, FGV swung to the red registering a net loss of RM3.33 million versus a net profit of RM49.66 million. This was on the back of a 14.4% rise in revenue from RM6.9 billion to RM7.9 billion.

While FGV was only able to save some 15% to 20% in cost for the first half of the year, Zakaria said the group is still on track to achieve its cost savings target of RM100 million for 2016.

He was also confident that they would be able to meet their replanting target over 16,000ha by the end of the year, after El Nino weather allowed for only 2,000ha to be replanted thus far.

Commenting on impact of the haze on production, Zakaria is of the view that it will be minimal, with a 15% to 16% reduction currently, and an overall impact of 10% cut in production by the end of the year.

On a separate note, Zakaria said he is unfazed by dairy giant Fonterra’s plan to only purchase sustainable palm oil products by 2018.

“Most of our products are exported to Europe, especially Germany, they are not FGV’s customer,” he said, adding that there is still demand for non-certified palm products due to relatively low prices.

Zakaria reiterated that FGV will strive to obtain the Roundtable on Sustainable Palm Oil (RSPO) certification for its 70 palm oil mills after voluntarily withdrawing it for 58 mills throughout the country, effective May 3. – Sundaily