FGV looks to traditional markets for CPO demand, says chairman

FGV Holdings Bhd will be looking to traditional markets to assess the impact on demand of crude palm oil (CPO) as production picks up. — Picture courtesy of FGV
FGV Holdings Bhd will be looking to traditional markets to assess the impact on demand of crude palm oil (CPO) as production picks up. — Picture courtesy of FGV

KUALA LUMPUR, April 30 — FGV Holdings Bhd will be looking to traditional markets to assess the impact on demand of crude palm oil (CPO) as production picks up due to the Covid-19 pandemic, said its chairman Datuk Wira Azhar Abdul Hamid.

He said the expectations are that the longer-term outlook for the traditional uses of palm will stabilise although most analysts are bearish on the sector in the shorter term.

“Questions will remain on the biodiesel sector, though FGV’s exposure in this area is minimal, with 2.6 per cent of total production used for biodiesel in 2019,” he said in a filing to Bursa Malaysia today.

Azhar said in the first quarter of 2020 (1Q 2020), crude palm oil (CPO) production was adversely affected, particularly in Sabah due to a number of factors including dry weather from August to October in 2018 and again in Q1 and Q3 of 2019. 

In 1Q 2020, he said, total CPO production was about 514,000 million tonnes, 30 per cent lower compared with 762,000 million tonnes in 2019, while at national level production declined by about 20 per cent.

“January and February were the toughest months, but as the trend started correcting in March, the impact of the Covid-19 pandemic affected operations and productivity, again more in Sabah than elsewhere.

“In Sabah, FGV closed five mills in March and April, purely as a precautionary measure and to ensure the well-being of those employees who would need to come into contact with outsiders.

“All our other mills throughout the country continued to operate albeit with reduced manpower,” he said.

Furthermore, he said, FGV saw CPO production pick up in April compared with January and February 2020, but disruptions from the pandemic continued to affect productivity. 

“For 2Q 2020, we expect a significant improvement against 1Q 2020, as the impact of historically poor weather abates.

“However, the impact on demand remains uncertain as several traditional markets remain closed or partially closed at this time,” he said.

Meanwhile, Azhar emphasised on going back to the basics, with the business focus on ensuring the palm oil operations perform at optimal levels and using current resources differently to extract more value.

He added that FGV must ensure that smallholders are supported so that it can continue to successfully link them to international markets.

“FGV must  mobilise our existing supply chain and help our smallholders to produce more than palm oil, to capitalise on domestic demand for fresh food,” he said.

Besides, he said, expanding the focus beyond oil and sugar would be pertinent to grow new revenue streams as well as identify ways and means to produce quality food crops for Malaysians at more affordable prices and to help reduce the country’s food import bill. — Bernama

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