FGV Holdings Bhd newly appointed group chief executive officer Fakhrunniam Othman has a stellar track record to propel the agri-business group to a higher level.
However, he has a huge task ahead to steer the group and food company amid the challenges ahead and will have a massive workload cut out for him.
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Maintaining FGV's profitability
Top of the list is maintaining profitability and shareholders value.
FGV is one of the world's largest crude palm oil producers and it will be a tremendous task for him to maintain profitabily as crude palm oil is extremely volatile.
"Fakhrunniam is an accountant by training and not a planter. So he has got a lot of learning to do on the entire spectrum of the oil palm industry," a FGV source told DagangNews.
Agribusiness and food company FGV reported a net profit of RM86.3 million for the second quarter of 2024, a turnaround from a net loss of RM12.8 million in the same quarter of the previous year.
Revenue increased by 22.7 per cent, rising from RM4.5 billion to RM5.1 billion.
FGV's profit hinges very much on crude palm oil prices which are extremely unpredictable skyrocketing one minute and then dive bombing the next.
"FGV's financial performance is in the pink of health right now because crude palm oil prices are at RM4,000 a tonne.
The situation will be tricky and challenging when crude palm oil prices drop as low as RM1,000 a tonne and this is when Fakhrunniam must prove his mettle.
Grappling with high operational cost
Among the challenges facing Fakhrunniam include high operational cost in planting, growing and harvesting plantations.
"Malaysians do not like to work at plantations anymore. So FGV has to fork out more money to employ foreign workers, pay minimum salary, buy fertilisers and others.
"FGV needs to put in more effort and investment in building more oil palm mills and create value-added downstream products.
MSM bringing down FGV?
FGV new CEO also has to manage its 51 percent subsidiary MSM Malaysia Holdings Berhad which continues to bleed financially.
Fakhrunniam is all well too aware of the situation as he was former acting CEO of the sugar refiner.
"If MSM continues to register losses, it will also bring down FGV's profitability or losses," said the FGV source.
FGV parent would want its return on investment
Naturally, any shareholder would want its return on investments.
FGV parent which is the government-owned Felda or Federal Land Development Agency would want its FGV dividends.
"When crude palm oil prices are high, it should not be a problem for the new FGV CEO. But when prices are low, he has to explain to the Felda board of directors," said the source.
Therefore FGV need to manage its cashflow well.
Beef up plantation operations
FGV is already one of the world's top plantation firms.
But the new CEO needs to have a very strong plantation team as he himself, is not a planter.
Fakhrunniam needs to strengthen FGV's replanting efforts as most of its oil palm trees owned by smallholders are aging and mature at over 25 years old.
Fakhrunniam also needs to address anti palm oil campaigns in the West such as "palm oil destroy orangutans and their habitats" which sometimes accuse FGV as being responsible.
FGV shares are not liquid enough
The new FGV CEO must also address the insufficient public spread of its shares listed on Bursa Malaysia.
As at March this year, only 13 percent of its shares are available to the public which is well below the required 25 percent making it as one of the most illiquid companies on the stock market.
As a public listed firm, FGV must float more of its shares to investors to promote transparency, good corporate governance as well as share the cake of the profit.
FGV must negotiate with its parent Felda to "let go" more of its shares or risk being delisted by Bursa Malaysia which has reprimanded the group 6 times already.
Strengthen downstream and non core biz
Other than its palm oil estates of more than 800,000ha, FGV is also known for its downstream products such as Saji cooking oil.
One way to boost income is to bolster sales of its downstream activities such as produce more cooking oil and develop new palm oil-based products such as detergents, soap, ice cream and others.
FGV must innovate
Another age old problem at FGV is its over dependence on foreign labour.
The company CEO must aggressively use automated machines and new plantation methods to keep up with the latesr tecjnologies.
It was the late US President John F. Kennedy who set the 100 days benchmark to see whether a leader or CEO performs or not in office.
So is Fakhrunniam up to the challenge?
We will see in the next 100 days. - DagangNews.com
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