Busy days ahead for new FGV CEO, say analysts

Datuk Haris Fadzilah Hassan was previously a director at MRT Corp. ― Picture by Ida Lim
Datuk Haris Fadzilah Hassan was previously a director at MRT Corp. ― Picture by Ida Lim

, Jan 30 — Analysts reckoned that the newly appointed FGV Holdings Bhd’s chief executive officer Datuk Haris Fadzilah Hassan will be very busy as he indulges in the housekeeping effort of the plantation giant, in an effort to set its house in order.

In doing so, the former director at Mass Rapid Transit Corporation Sdn Bhd (MRT Corp), might jeopardise his popularity in the new firm but at the end of the day it is for the good of FGV.

“FGV is in a much needed reform especially in terms of debt management. Prevailing low commodity prices is not helping the situation either.

“At best we reckon the main priority for the new management is to pare down its debt levels and bring the company back to financial health,” a plantation analyst told Bernama.

He noted that currently, the yield produced at most of FGV estates, was one of the lowest in the country.

“While replanting exercise will require more fund, we are of the view that a round of capital raising in the market is needed.

“In regards to the two-year turnaround timeline, we think it would be sufficient if external factors remained supportive,” the analyst explained.

He elaborated further that crude palm oil (CPO) prices had declined substantially of late and with the negative publicity affecting palm oil demand sentiment in European countries, it could hamper the recovery efforts.

This current predicament has prompted CPO producers like FGV to search for new markets.

“Overall, we believed with Datuk Haris at the helm with his vast experience in the industry, he could contribute to the plantations giant amid mounting challenges”.

Prior to MRT Corp, Haris had also worked in the plantation industry with leadership roles including as head of strategy and business development at Golden Hope Plantations Bhd and head of downstream operations at Sime Darby Plantation Bhd.

Meanwhile, a senior trader at Interband Group of Companies Jim Teh said the new CEO might need to downsize the number of its employees whose positions seemed to be redundant.

“I think there are so many staff working in the organisation. It doesn’t mean if you are working in an organisation for too long you are considered good it could be because you know all the loopholes.

“And some have earned more than what they’re supposed to, like RM150,000 per month salary,  which is more than the salary of a prime minister,” he stressed.

He added that redundancy in the job scope especially in the marketing department could be eliminated which in turn means a lot of saving for FGV.

“Time is of the essence. Of course people will want to see quick results but they also honour integrity.

“Therefore, begin the belt tightening process now and we shall see its increasing again,” he added.

Last week, FGV, via its filing to Bursa announced the appointment of Haris as the new CEO effective Jan 22.

Prior to that, FGV also appointed Datuk Mohd Hairul Abdul Hamid as the group chief financial officer from Jan 2, Mazri Abdul Rahim as chief human resources officer (Nov 19, 2018) and Dr Christina Ooi Su Siang as chief procurement officer (Jan 15).

Last year the plantation giant hogged the limelight for the wrong reasons, with its shares hardly picked by investors following the bad publicity surrounding the company..

Its Chairman Datuk Azhar Abdul Hamid took over as interim CEO after the post was vacated by Datuk Zakaria Arshad, who resigned on Sept 18, just six days after he was suspended and stripped of all his duties following the conclusion of FGV’s internal investigations into 10 critical issues.

It was Zakaria’s second suspension in 15 months.

FGV saw its shares dropped for most of 2018 following the controversy, forcing it to come out with a turnaround plan.

As at Jan 16 last year, FGV counter stood at RM2.05 per share and had plunged 66.97 per cent to its lowest of 71.5 sen as at Dec 28.

Its shares rebounded to 94.5 sen on Jan 16 this year after Azhar issued a letter updating  shareholders on the status of the company and its plans to move forward.

Yesterday (Jan 29) its shares ended at RM1.01.

Azhar’s letter, among others, had highlighted FGV’s fresh fruit bunches target of 16.9 tonnes per hectare (ha) in 2018 and 19.43 tonnes per ha this year as well as an estimated pre-tax profit of RM1 billion per year at an average CPO price of RM2,500 per tonne.

Research analysts concurred that the worst is over for FGV.

The loss-making plantation giant in “cleaning its house”, has embarked on a turnaround plan which would be monitored by two independent directors and a transformation officer.

They expect the company to emerge profitable again within the targeted plan.

However, a renowned plantation industry veteran when contacted by Bernama, disputed the rosy predictions by saying that it was impossible for FGV to meet the (two year) target, given the age profile of its oil palms.

“The problem with FGV is probably they have a high rate of replanting in the past, so some of the trees are still not producing and some of them are still needing to be replanted, meaning old palms.

“So with the old palms they cannot have high yield yet, so it will take some time to rationalise back the young palms to be producing and the old palms to be replanted,” he explained.

The company, he said, might need more than two years to see the turnaround plan realised.

Overall, he expressed hope that the plantation industry would see a rebound in 2019, hence giving a boost to prices of local stocks under the sector. — Bernama

Source: The Malay Mail Online

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